As much as people seem to think otherwise, we're not giving a free $700B to the financial industry. We're loaning money that needs to be re-payed. Why do we nee

As much as people seem to think otherwise, we're not giving a free $700B to the financial industry. We're loaning money that needs to be re-payed. Why do we need to loan money? Because credit has shored up and many a company's credit rating has dropped, which makes it very difficult to get credit. This is all caused by a set of bad bets placed on mortgages. The large majority of these businesses are very sound, and there is still a huge amount of underlying value there. You can be quick to point fingers at the wall st trader types for placing bad bets, but everybody was complicit in this, even (surprise surprise) the government, by lowering mortgage requirements. Certain companies just can't go out of business. AIG, for example. AIG is connected to almost every company in the US -- they provide all forms of insurance. If AIG went out of business, all of that insurance would be worthless, and almost every company in the US's credit rating would plummet, thereby rendering their corporate paper (bonds) worthless. There are a lot of reasons for depending on operational debt through bonds, even in the most financially sound companies. We could let other companies fail, but as they do, the market conditions significantly worsen. As that happens, - Retirement accounts will be worthless, making retirement difficult or impossible for many Americans - You won't be able to get a mortgage to buy a new house - Student loans won't be available, making it much more difficult to attend college - A very significant amount of jobs will be lost as big corporations go out of business, and small businesses are unable to meet their operational expenses (payroll) Ultimately, that means a very, very rough ride for the average American (on main street, although I hate that term). If you're not going to be affected by this (you're working at a funded startup, or you're a tenured professor, for example), it's very easy to take the "let the market sort itself out approach". But the average American will be hit hard, if no action is taken. In that sense, nobody wants to give money to the people who caused the problem. And we're not -- there are provisions (however imperfect) in the bills that restrict executive compensation for participating companies. Ultimately, it's also helpful to remember that this is a loan, and that it's not a net $700B expense. In fact, when the economy stabilizes and credit ratings return to normal, the equity position that the government has received in AIG (80%) and participating companies should be very valuable -- these are sound business, with one black spot (mortgage backed securities). EDIT: A couple other points of clarification: - As a matter of fact, the rich pay the majority of taxes (top 1% earners constitute 40% of total income tax, while top 10% earners constitute 70% of total income tax) -- if anything, it's the rich paying for the bailout. - Check out http://news.ycombinator.com/item?id=318690 http://news.ycombinator.com/item?id=318690 for explanation on the title of the house bill