Quote:
Originally Posted by Xellos-_^
The reason why the banks are making less of these loans are because they are hard time borrowing money themselves form fund companies and instutation investors. Who are scare silly of making loans.
Money = grease
Banks/investment companies = gears
No money = gears grind to a halt = economy collaspe.
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Replace money with credit. There's plenty of money out there to write loans, but people aren't willing to take the risk that credits will be repayed. Investors are worried they won't see returns, and it all chain reacts from there.
The problem is still the bad loans written on homes that are losing owners and value. The bailout plan should address that, imo. The effect would give banks reassurance that they'll get paid for those loans, and investors will have reassurance that they'll get paid from the bank. Address it from the ground up monetarily, and revamp the regulation system from the top down.
I'd rather Congress not rush this. If it means delaying recess, good. People are worried that the big banks failing will mean the end of the economy, I can see that viewpoint but we have laws to buffer the market for that. We call it Bankruptcy. Under Bankruptcy law, businesses and individuals are given opportunities to restructure their finances or sell assets to handle the debt load. They are allowed to operate during this procedure under the protection of law while working out methods of repaying the debt.
Bankruptcy is a bad thing, because it's a last resort before giving up. But it does work. Is that any different than a last resort bailout that no one knows will even help?
I've already admitted that my understanding of all of this is limited, so be gentle on my most likely naive views here.
But from my perspective, spending billions of dollars to hold up failing companies hasn't helped, so why would even
more money that effectively broadens that scope do the trick now? I'm just not convinced that this trickle down effect will work.