American Money Overseas Flowing Back Into The U.S We Bailed Out the Wall Street Banks – Should We Have Bailed Out the Consumer Instead?

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We Bailed Out the Wall Street Banks – Should We Have Bailed Out the Consumer Instead?

Ok so the question has been asked; Why not bail out consumers instead of banks? Well, that’s on a lot of people’s minds, and who can blame them? Well, let’s discuss this, shall we? You see, bailing out the banking system was very important for two reasons;

Stability of money flow and credit is a major factor. Unfortunately, even bailing out the banks, which looks like the government will get their money back with interest from Citigroup, Goldman Sachs, Bank of America (Nationwide), etc. – but it still doesn’t work out well.

Now, we can also say that getting bailed out by AIG is probably over the top, however AIG was underwriting all those CDOs and mortgage bundles using insurance. Many of those mortgage bundles were bought by pension funds, huge lobbying power (for example the Carlyle Group) and hedge funds well connected by banks. Like General Motors and Chrysler, AIG looks set to repay the government with interest.

Do I agree with all of this, no, I am very troubled, because once you start guaranteeing that the federal government is a lender of last resort, you change the behavior of risk and reward in the market. Indeed, this is somewhat of a problem with Freddie and Fanny – why the game went so far.

We should not let rating agencies off the hook either. Also, we shouldn’t let consumers off the hook who duly co-signed their names to loans they couldn’t afford, as many bought multiple homes hoping to flip them for a profit. Now unraveling this massive fraud, and the $10 trillion exposure with Freddie and Fannie, some say 14 trillion, depending on market valuations, will take some time.

If the federal government had paid consumers to spend there, the job losses might not have occurred, however it seems that when consumers are paid, they buy products made in other countries, and that money only stays in the United States for a short time. Transactions and ends abroad inflating that other country’s economy.

What would consumers buy if they had more money? While some may have mortgaged the holders’ homes for a long period of time, Intel eventually lost their homes. Some would have bought new cars, which would have certainly helped American workers, and many would have bought electronic devices; For example iPhones, iPads, flat-panel TVs to watch the Super Bowl game.

If you’re a Christian, I’ve probably discussed the philosophy of “don’t feed a man a fish, teach him to fish” and in that context paying customers is like giving fish, I guess. Both can agree, less is more than trying.

See that point?

I hope you do and I hope you will please consider and consider all of this.

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