4 ms·

Sure. I agree with you. But the problem is that it takes two to tango. As an earlier poster pointed out, both parties are at fault -- the consumers for being fr

Sure. I agree with you. But the problem is that it takes two to tango. As an earlier poster pointed out, both parties are at fault -- the consumers for being frivolous and the banks for allowing it. With that in mind, why are all the bailouts going to banks? Id rather we bail out no one, but if we are going to do it, there seem to be more efficient and effective means out there. Again, I'm not really making a statement as much as I am looking for a logical reason why banks are preferable to consumers. Are you sailing the consumer bailout was the prequel to the whole situation?

jcl 18y ago
My admittedly limited understanding of the situation is: Banks (and consumers!) made some dubious mortgages. Then financial services companies packaged up the mortgages into derivatives that were bought and sold on the market as investments. Suddenly, someone realized that the component mortgages were not as sure as they thought; word gets around, and everyone tries to sell off the derivatives at once. This ordinarily would not be a big problem -- investments are expected to fluctuate in value -- except a lot of banks were holding the derivatives as assets. Banks are only allowed to lend out a fraction of their assets, and the assets are valued based on the price they can be sold. When the derivative market crashed, suddenly these banks couldn't lend out any money at all. At this point, the $700 billion plan made sense to me: they'd buy up the derivatives, propping up the market so that the banks could lend money again. But now I don't know what's going on... It sounds like they're just giving the money directly to the banks. Which by some arguments might make more sense than giving it directly to consumers: banks make loans to businesses. If the money is given to consumers, it might eventually find its way to banks and businesses through consumer spending, but it would take a lot longer, and banks and businesses might fail in the meantime. But it does feel like a big pie-grab, now.

jcl 18y ago

My admittedly limited understanding of the situation is: Banks (and consumers!) made some dubious mortgages. Then financial services companies packaged up the mortgages into derivatives that were bought and sold on the market as investments. Suddenly, someone realized that the component mortgages were not as sure as they thought; word gets around, and everyone tries to sell off the derivatives at once. This ordinarily would not be a big problem -- investments are expected to fluctuate in value -- except a lot of banks were holding the derivatives as assets. Banks are only allowed to lend out a fraction of their assets, and the assets are valued based on the price they can be sold. When the derivative market crashed, suddenly these banks couldn't lend out any money at all. At this point, the $700 billion plan made sense to me: they'd buy up the derivatives, propping up the market so that the banks could lend money again. But now I don't know what's going on... It sounds like they're just giving the money directly to the banks. Which by some arguments might make more sense than giving it directly to consumers: banks make loans to businesses. If the money is given to consumers, it might eventually find its way to banks and businesses through consumer spending, but it would take a lot longer, and banks and businesses might fail in the meantime. But it does feel like a big pie-grab, now.