“Financial independence and security are goals that many share in the United States. Not living from paycheck to paycheck and being able to sustain oneself comfortably are certainly appealing things to have. As college students, however, they’re just a bit out of reach.””
Financial independence and security are goals that many share in the United States. Not living from paycheck to paycheck and being able to sustain oneself comfortably are certainly appealing things to have. As college students, however, they’re just a bit out of reach.
Now imagine you had $700 billion. Suddenly your wildest dreams are possible. What would you do? Buy your favorite sports team? Feed all of the homeless? Build an impenetrable fortress on your own island?
What about buying $700 billion worth of bad debt? Doesn’t sound like a very smart investment, but that’s exactly what the government wants to do. Keep in mind it’s not their money; as a taxpayer, it’s yours.
The federal bailout of several large financial institutions is a complex issue. In order to keep these companies solvent and maintain their ability to lend money to individuals and other businesses, they must first have money. The debt they incurred largely through subprime mortgages proved to be largely uncollectible, and now they’re in trouble, even if they already managed to sell that debt to other companies around the world. People owe the banks money and they’re not paying it, so the federal government feels a need to step in to pay them off so they can avoid bankruptcy and continue operating. The proposal was shot down on Monday Sept. 29, but only by 12 votes, but was approved Friday Oct. 3.
Advocates of the proposal say we need it to sustain the economy and avoid a depression.
It’s that dire.
However, looking at what helped to cause this situation begs the question of whether it’s the right thing to do. Predatory lenders offered subprime mortgages, and those buying a home took advantage of the temporarily low rate without considering the consequences. More loans were issued in hopes of making up some of the bad debt, and more bad debt was created. Debt was subdivided and sold around the world, making the problem much more widespread. Now the banks can’t collect on what was a risky investment in the first place. Why not let them eat their losses?
A combination of capitalistic greed and consumer ignorance has led to the government spending hundreds of billions of dollars to save the economy. Essentially, the American dream has led us to a potential catastrophe, and nobody is exactly sure how to remedy it.
There’s also nothing to prevent the exact same thing from happening again once the banks are no longer in trouble and the economy is back on its feet. With confidence that Big Government is there to back them up in case business goes awry, what’s to stop the banks from continuing their practice?
Is it okay for the federal government to help a private business?Most of the time, if you start a business and it fails then you’re out of luck. And money. As an entrepreneur, you assume the risk, and you get the profit or loss. This bailout cuts out part of that system, resulting in something very un-capitalistic.
What’s basically happening is the profit is being kept in the hands of the banks, entrepreneurial risk is being ignored and the debt is being paid for by the public.
In Canada, you pay more taxes but you actually get something in return.
Maybe it’s time for a change.