The Truth About the Bailout

Millions of Americans were against the idea of a ‘bailout plan.’ Millions more were in favor of the plan. Once the bailout plan was passed, it seemed as though Americans counted on this as the way to save the economy.

The bailout plan was passed in a matter of only 10 days. The bailout plan was passed to treat symptoms, not the disease. The bailout plan is merely a way for the government to apply band-aids to a large, open wound.

The government promised that the bailout plan would remove the cancer caused by the failure of Fannie Mae, Freddie Mac and the insurance-giant, AIG. However, all it did was prolong the illness.

Billions of dollars will be spent fixing the balance sheets of banks around the country. However, this does not fix the root of the problem. The root of the problem is that millions of homes around the nation are worth a considerable amount less than the outstanding balance of the homeowner’s mortgage.

These billions of dollars are “destroying Main Street’s balance sheet.” This money is obliterating the value of home-based securities that American Taxpayers are about to start purchasing.

Simply put…the government is trying to fight home foreclosures with an extremely inefficient tool. The tool? Loan modification programs that cover up the problem instead of treating it. As long as the problem is masked instead of fixed, foreclosures will continue to set record numbers.

Todd Harrison of MSN.com wrote, “Defaults become delinquencies, which become foreclosures, which become evictions, which become repossessions, which flood the market, depressing prices as supply outstrips demand.”

It used to be that home prices only went up. Not in this market. Home prices have plummeted and the bailout plan really isn’t doing anything to treat the problem.

Here are a few things for the government to keep in mind…

Teach the American people to simply live within their means. Less is more. Simplistic living could solve this crisis better and faster than the bailout plan ever could. Bigger is not necessarily better.

These principles may be the only way to get America out of the mess it has created…not the bailout plan.

This entry was posted on Tuesday, January 13th, 2009 at 1:59 pm and is filed under Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.