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Home > Wall-Street-Bailout
Wall St. Bailout
September 29, 2008
In reaction to the growing crisis in the credit markets, Washington has proposed a bailout of financial institutions to try inject money into the illiquid credit markets. The difficulty in obtaining a home loan, credit card, car loan etc. has increased dramatically in the last 12 months due to the meltdown with lenders across America, Europe and Asia. In the last year banks, lenders and Wall Street investment companies have lost more than 500 billion dollars because of the bad loans the made.
California Home Loan Term: Agency relationship is a relationship based on trust by which one person is authorized to conduct business and act on the behalf of their client. The pact is established with an agreement between two parties.
The initial bailout was a blank check for 700 billion dollars that gave the Treasury unlimited powers in how that money was used. The proposal lacked oversight, safe guards and set the tax payer up for huge losses down the road. The recent failures of Fannie Mae, Freddie Mac, Lehman Brothers, AIG and Washington Mutual had spooked not only the market but regulators as well. Banks stopped lending to each other and interest rates went sky high. The Treasury believed if they were given 700 billion dollars the could remove all the bad mortgages from the market place, banks would be stronger and thus willing to lend. Since their would be more money to lend, interest rates would drop.
Congress and the tax payer were not impressed with what was brought to them as many feel the Treasury's plan was bailing out Wall Street. The proposal went before committee and Treasury Secretary Hank Paulson spent days answering questions and molding his plan to ensure Congress would pass a bill. After several days of testimony, several Democrat and Republican leaders announced they had a deal. However that quickly changed the following day when House Republicans announced they would oppose the deal and thus party leaders and Hank Paulson went back to the drawing board. Over the weekend, a deal was reached and even the House Republican leaders supported the new bill.
The house leadership brought the bill to a vote expecting the bill to pass. To the surprise of many, the bill did not pass and sent the stock market down 777 points. What happened? That's the million dollar question as house leaders were only going to bring a vote on the bill if they new it would pass. Support of the bill at the "Main Street" level is minimal at best. Some representatives claimed for every one call in support of the bill they were receiving 40-50 calls against the bill. In an election year, it's very hard to vote for a bill that so many people dislike.
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