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.

Tags: obama bailout, obama bailout bill, obama bailout plan, obama housing bailout plan