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Additional Details
Cajun: But what's so common about common sense if only a mere 2% out of all stock investors actually know how to invest? If this was common sense then I would ... |
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The Office Slave | $700 Bail Out explained in "kindergarten" terms.? |
So Ok... My question... Can someone please explain the $700 bail out to someone like me who knows nothing about Wall St, Stocks, Investments, Banking, the Economy....yadda yadda...???
What is the pros and cons of it?
And what happens if it's left alone all screwed up?
Just trying to learn something here so I don't look stupid around my friends.
Additional Details
I love the total "talking like a baby" thing... Kind of insulting, but hey, I can take a joke as long as you EVENTUALLY get to a point. (which you finally did, thank you) |
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Donny Fauzan
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Here is how everything happens.
1) You, your parents, grandparents and everyone else must have a stake in finance industry; that is saving and investing in them. This includes saving money in a bank, buying bank bonds, their derivatives, etc.
2) In the other side, you must desire a house of your own, right? So you buy a house with a mortgage agreement from a bank.
3) Only people can afford the mortgage should be able to get a house correct? The thing is, in the current administration, deregulation applied. Bankers have so much room in playing the market. They become greed and then start creating this āsubprimeā mortgages. Subprime mortgages refer to risky mortgages, when the bank lends people mortgages they canāt afford; it is generally accompanied by higher interest rate charges. Did the banks worry? No. They think if the creditor canāt fulfill their mortgage, they can just get the creditorās house, by doing foreclosures. They think the housing price always going up.
4) Then the āhousing bubbleā happens. Thereās too many foreclosures, lead to crash in housing market because too many house foreclosed and sold to the market. The bank surprised to see that the foreclosed houses worth far less than the money lent. It begins crushing the bankās balance, making great losses with more debts than assets. Remember, they finance the mortgage using your savings!
5) The banks in big loss, and begin reluctant to lending people money, either to business, mortgages, etc. Interest rates risen. Good mortgages also gets the impact, and in risk being foreclosed. Many of the banks fall already.
6) The āsnowball effectā comes, the finance market freezes, stock & goods market that really depend on the finance market also in jeopardy. The value of many type of assets & securities plunged down, as investors scared of loosing their assetsā value. People loss their homes, businesses blown by the risen interests closed, jobs lost. Banks go bankrupt; securities go worthless; money & investments lost; retirement & pension funds shrink. If it continues, the risk of financial melt down and a deep crisis is very likely to happen.
7) The government asked to save the day, by:
1.Buying bad mortgages & loans from the banks, so that they can balance their condition.
2.Making banks able to start lending people money, and reduce interests.
3.Giving a psychology stimulant to securities market, giving investorsā trust back.
8) Pros:
1.The risk is too big to do nothing.
2.If the bailout is done smart enough, taxpayer could be profit from the deal, in case of recovery in housing and finance market.
9) Cons:
1.It may not be working.
2.$700 billion is a very large sum of money, and the government will have to work hard to reduce spending as much as possible, āadjustā your tax to balance their budget, and stimulate the economic growth.
10) If it let alone all screwed up:
1.The next āgreat depressionā might happen again.
2.You/your parents/your grandparents might lose your home, investment, retirement/pensions funds, and even your jobs.
3.The world economy might be also dragged down. This already happened in the past few weeks.
Sorry if my explanation is not ākindergartenā enough.
Donny |
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Randy
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Basically, stupid banks manipulated loan terms and made all of these crazy piggyback loans and adjustable rate mortgages so people could purchase or refinance a house with a VERY high chance they would end up not being able to afford it.
Well, then all of those "subprime" loans were bundled up with all kinds of other good debts over time. Well, when housing prices started to fall and interest rates went up, people couldn't refinance out of their adjustable rate mortgages because they owed more than the house was worth. Their houses were foreclosed on. This happened SO much that banks couldn't handle it anymore. So who's fault is it. The financially ignorant people that got into the loans or the lenders that allowed it?
This bailout is targeted at the lenders. The government will buy up all of these bundles of debt that have bad (and good) mortages in them. This will free the banks from having to worry about more foreclosures so they can go back to lending people money. There are two big things to consider:
1.) The bailout will not really cost the $700+ billion that everybody is focusing on. The biggest part of the debts that they would buy are good debts that will get paid. People with mortgages or car loans that are responsible and will pay them. The government can filter these off and even sell them at a profit. Estimates put the actual cost to taxpayers if no profit is made at around $100 billion.
2.) There is no real direct help to those people in homes they can't afford being offered by the bailout. This is basically to bailout the banks. There is an indirect effect on all Americans in that we are forced to save the banks if we want to keep our money, jobs, and credit. |
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E. F. Hutton
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That would be $700 billion.
Here's how it works. You just put in about 3 hours of heavy duty 'trick-or-treating' and brought home a big bag of candy. Then, the government takes 20% of it and gives it to other people that didn't collect any. Then they take another 20% claiming they are putting that away so you'll have candy in your old age, but actually grandpa is going to eat that. They take another 10% and trade it for one single submarine sandwich. Then then take 20% to pay for your doctor visit for eating the candy you had left.
Now, the pizza parlor isn't selling any pizza. Everyone spent their money on candy. So they say they need help from the government. But they don't have anything to help them with. The candy they had is already gone. And yours is already eaten. So the government has decided to borrow candy from you and your children's future candy bags, again.
Government mandated that banks accept bad mortgage loans. The banks went broke. So government is trying force us all to pay for their mistake. |
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Eric, RI
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(700 billion dollars) / (300 million people) = 2333 dollars.
http://en.wikipedia.org/wiki/Bailout_of_U.S._financial_system_(2008)
Some people bought some overpriced housed they could not afford.
Then they stopped paying their mortgages.
Then the banks that they borrowed money from had less money coming in so they could not provide as many new mortgage loans.
Then the home prices started to drop because people could not get loans as easily.
Also the banks cannot provide loans for other things like cars, vacations, furniture, etc.
When people cannot borrow money businesses cannot sell things as easily.
Then production and prices are reduced until the price drops enough for people to pay without having to borrow money. |
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kanjoos makhichoos
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banks give people munny and make the people give it back or else the bank monster comes and takes their house. The houses arent worth ennything ennymore and people dont want to give the munny back to the banks. That makes the bank loose munny and then the bank cries to its mommy called the US goverment. Mommy took 700 billion dollars and told the bank that it can buy the bad money lending from the bank so that mommy goverment can absorb the loss so banks will not fail. But now uncle congress didnt let mommy buy the bad mortgages so now the banks cry and mommy cant do anything now. |
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ā²ĆĆ»ŠŠŃ vÅ ĆĆØÄÅŃā¼
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daddy mommy's portfolio hurt, baby jessica and john will not be going to kollege. daddy mommy may be out of job soon, this year no christmas present, piggy Bank places won't give out loan and everyone will be sad :(
that was kindergarten terms,
real explanation see below |
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C o n f u c i a n
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$700,000,000,000****NOT $700
The banker people gave the broke persons houses they clearly couldn't afford. The banker people gave loans to stupid head people who couldn't pay them back.
The banker people were really greedy and thought the loans would be paid back but many of the stupid head people defaulted on their loans.
The housing market nearly collapsed, I mean the big houses are worth as much as the little houses and the little houses are worth nothing.
The banker people did not billions of dollars in loans by the stupid head people. The banker people don't want to give out loans to anybody anymore. That means people with good credit and businesses too.
Big brother (government) want to buy all these billions of dollars in bad debts so that the economy can breathe. They want to use our tax payer dollars to pay for it and when everything returns back to normal, big brother (government) pays tax payer people back. |
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Alex S
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http://www.radaronline.com/exclusives/2008/09/the-fannie-mae-and-freddie-mac-bailout-explained.php |
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TruthSeeker
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Wall Street heavy weights who got an average of $300,000.00 for Christmas bonuses last year really screwed up an they want your money to make it better for them. They are trying to scare you into believing that if you don't, the world will end. When the bill was looking like it would pass, they were calculating their profits and lobbying for their firms to score big in the bailout. One of their biggest concerns was how would the bailout affect their bonus this year? Now they are going to pout and try to punish us for opposing it. The system is really fatally screwed up and we need someone, anyone with the huevos and courage to find a better way. If we let them fail, we can sooner create a better more fair system that does not rely on enslaving most people under enormous debt while 1% live in total comfort. Watch the youtube video Money As Debt. To get a better understanding of how our system is built. |
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BlaQice
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My Uncle Sam who "loves" me (we americans) knows I'm a crackhead (addicted to consumption and debt) so he takes me to rehab. (recession) after I sell everything to get the drug (Anheuser Bush, Chrysler Building in NY, etc, etc)
But, I have violent withdrawals. But, instead of letting me get better he gives me more crack (debt by printing money... uh 700billion worth this time) every-time I have seizures.
The doctors inform him that any more crack and I will die... my uncle just game me a half an ounce (700 billion)... I'm on my way to smoke it unless someone stops me.
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CD
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For all those who believe that the bailout is designed to help " fat-cat" Wall St execs, please read:
You are embarrassingly stupid, or gullible. The bill was not designed to bail out Wall St execs. It has absolutely nothing to do with that at all. To be satisfied believing an over-simplified and incredibly idiotic misinterpretation is the exact reason we are in this mess to begin with
THE $700 BILLION is for the purchase of a bunch of loans that nobody will buy. Because the banks have to mark these loans to market (record a value today) and because there are no buyers, the banks are forced to record a number that is not truly representative of the value of the loans. Therefore, their numbers prevent them from lending money. The money that they lend is the money that companies use to employ people, pay salaries, etc. No money=nojobs=you are all screwed!!! The purchase of these loans allows the banks to record a better number, which will infuse the market with capital that is about 20X the valuation of the assets. The will likely receive most of the $700 B back in the end, and may even turn a small profit. The alternative is catastrophe.
Any congressman that voted against this bill was placing more value on their congressional seat than on the health of the world economy. Shame on everyone of them....and shame on any of you that don't care enough to read a damn newspaper for yourself and stop looking for sound bites to steal for you own opinions. |
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tonymci2
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"$700 Bail Out explained in "kindergarten" terms.?"
President Bush, is that you? |
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copwannabe14
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i totally respect your question, because i also do not understand it all. so as soon as someone can put up an honest answer, i would love to read it also. |
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j
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Basically, you have a bunch of greedy fat cat ceos who only care about what is best for themselves and not what is best for their companies/others and they have run their companies and the markets into the ground and now want a bailout so they can keep on corrupting the markets. |
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muneepenee
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take 6,000$ from evree persun in USA. Giv it tu bilyunaer bankers. |
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