Currently browsing obama bailout plan

It was heralded to be the absolute solution to the financial woes of the US, and probably the boldest move the US government has ever made in terms of financial matters, but has the Obama Bailout really delivered so far on what it was supposedly touted to do? Has it even begun rolling and building steam? Are there positive markers somewhere out there to suggest that it is, indeed, what the US economy is waiting for?

Some may answer all these questions with a resounding NO.

The new administration has made it quite clear that it intends to push spending back up to levels before the financial crash and to fill the entire credit void that has disappeared into the black hole of the U.S. financial system. Economists, however, contend that credit, rather than savings, is the central figure in the economic equation. Therefore, US Treasury Secretary Timothy Geithner sees anything that tends to ease the process of lending to be an effective economic policy. With this in mind, the main crux of Geithner’s plan is the commitment of at least $1 trillion to revive the collapsed market for securitized debt. It is worth remembering, however, that just before the recent economic crash, it was securitization that permitted Americans to borrow more than they had ever borrowed before.

Securitization permitted loans of all types to be packaged into investment-ready securities, and this worked quite well, fueling unprecedented levels of lending in various sectors, such as home, auto, student, and credit-card. In the lest few years, however, as the collateral supporting these securities collapsed in value, the trillions of dollars of securitized debt now in circulation has become the death spikes lining the bottom of the US financial pit. It appears that Secretary Geithner is making the false assumption that cleaning up and rebuilding the securitization market is the much-needed prerequisite for a strong economy.

The United States’ experience with wide securitization has proven that the process can lead to massive mispricing of assets and risks. Should the securitization market be artificially rebuilt, and then propped up by the commitment of taxpayer funds as collateral, the U.S. economy is expected to be pushed even farther out onto a limb, until such time as no amount of damage control can prevent a total economic collapse.

So, is this the underlining idea behind the great Obama bailout plan? Is it really this cut out and dried for the movers and planners controlling the financial strings of the country? How long will it be before an actual resolution, which will be irrefutably seen by the public be arrived at? It seems, only time will tell.

Following the whirlwind of being elected to the highest position in the country, and the all the pomp and glamour that comes with the office, some people have woken up one day and asked themselves: “what happens to us now?  Where will the Obama Bailout plan take us now that he is in power?”

While these people ponder the ultimate effect the much-vaunted bailout plan will have on them and their lives, some people decided to go back and contemplate US President Barack Obama’s supposed “promise” last year just before he got the Presidency.  A look back to October of last year reveals that President Obama said his chief priority, if elected, would be protecting tax dollars, and that he would demand a full review of the $700 billion rescue plan to make sure that it is working for taxpayers.

The bottomline here being his promise to review the plan if he becomes president and pledge that taxpayers would never again have to put their money on the line to pay for the irresponsibility of Wall Street executives.

President Obama issued this statement at a crowd of more than 15,000 all huddled during a chilly October morning last year in La Crosse, just near Wisconsin’s border with Minnesota:  “If you, the American taxpayer, are not getting your money back, then we will change how this program is being managed. If need be, we will send new legislation to Congress to make sure that taxpayers are protected in line with the principles that I have put forward”.

President Obama mentioned the apparent need to reign in spending in Washington, to be done in part by increasing government efficiency and ending the war in Iraq.  The president also emphasized that the idea he proposed, raising the FDIC cap to $250,000 from $100,000 proposal, was included in the bailout plan and again called on members of both parties to support the legislation “even if it’s not popular” for the good of the country.

So in all of this, where does the Obama Bailout Plan stand now?  And where does that put the greater American public that is in dire financial straits because of the recession?  Right now, it put everyone and everything in limbo, because the wheels have just barely started turning, and it remains to be seen if the greater American public is set to sleep inside refrigerator boxes and under bridges, or if they stand to retain whatever little roof they have over their heads.  Let us all hope it is the latter rather than the former.