I've been reading the articles in the paper and watching the news for the past few days, and I just can't seem to come to terms with this. My inner conspiracy theorist doesn't have a lot of faith that Hank Paulson is working in the best interests of the common man vs. his Wall Street friends. This program came out of nowhere, and deliberately intrudes into (and saves) the arena that constantly calls out for less government intervention.
Additionally, I would rather see how the market works itself out and see how things are in another month or two before adding this kind of debt to our already outrageous deficit. A typical recession is 17 months, and this bailout could take decades to pay off. I think that people in Washington have the mindset that "worst case, this breaks this down to only $3,500 per person, and we will sell it in the future and make a profit on it, so it really won't cost anything". When does the government ever turn a profit? Additionally, more government employees will be required to oversee and administer this mess, adding to the cost.
I love the provision for "steep taxes" against compensation over $500,000 to top executives of participating firms. have great faith that the folks that managed to magically tranch risky sub-prime mortgages into AAA paper can come up with a workaround for that one.
I'm fortunate to be in an area of the country that has not been as hard-hit from the economy as others, and also fortunate that I make a decent living and have some money in the bank. But while I understand that if the government had not stepped in things could have gotten worse, I also wonder what would have happened if they had never even suggested this bailout. Now everyone is counting on the government to bail them out instead of finding a solution. 95% of the banks in the country are in no danger of failing, so would they have stopped lending altogether? Or would they have just stopped lending to those that were poor credit risks, bringing some reason and sanity back to the equation of lending?
I've done a lot of cold-calling for business in the past 5 years in several different cities, and I've met people in the mortgage industry that should be selling used cars while wearing loud polyester suits or hawking junk on late-night infomercials, but not providing mortgage services. There have been a lot of "band-waggoners" in the past few years trying to ride the real estate wave, and many of them need to scurry back down their holes, so I don't know that a mild recession is necessarily a bad thing from a long-term perspective. For the record, there are a lot of appraisers out there as well who made a lot of money inflating values for sub-prime mortgages, and it would not hurt our profession much to lose those people.
Anyway, it looks like it is going to happen, so it will be interesting to see whether the government just saved a lot of wealthy people from selling their ski lodges by using our money, or if things really open up again and people start buying houses. I'm expecting the former, but ever hopeful for the latter.