Recent news has been buzzing about Treasury Secretary Henry Paulson proposed Troubled Asset Relief Program(TARP) that has the government bailing out the financial sector for $700,000,000,000 of the taxpayers money. Lets take a look at some numbers.
The US resident population is currently at 305,262,958 as of today at 1:50 PM. [CENSUS Population Clock]
The US housing units estimate is currently approximately 130,000,000 homes. [CENSUS Housing Spreadsheet]
This means that they could be giving each household in the the US $5,384.61. Now while that does not look like much in the overall scheme of things, I sure could use the extra $5,400 for a lot of things such as bills, however on the other side of the coin, that means that every household would now share the debt of $5,400 a piece to "try" and bail out the financial services industry.
Colin Barr, a senior writer for Fortune Magazine said the following:
With the bailout proposal, Paulson seems to have abandoned hope of holding financial-sector players responsible for their mortgage-related missteps and is instead intent on distributing those losses to taxpayers.
Marc Heilweil, manager of the Marathon Value mutual fund in Atlanta, responded to this with:
"Paulson should have appeared for his 10 a.m. press conference in a Santa Claus suit. But these gifts aren't going to underprivileged children."
I agree that something needs to be done. I do not agree that we need to hand over $5,400 a household to the financial sector free of charge. We already have a huge debt and this is a chunk that should be paid back or come with huge penalties to those that caused the problem.
Ultimately, Paulson's assurance that "the ultimate taxpayer protection will be the stability this... program provides," does not confince me of the need to go into more debt. Spreading out the financial sector's mistakes to the rest of America will just add to the financial strain already felt by many Americans.
On the plus side, a very savvy and fun to listen to Money Guru had the following to say about the current situation.
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4 comments:
I wouldn't mind 5400 or .001 percent of the 700 billion which ever is more
Personally, I don't think giving money to the people is wise. A lot of people are in trouble financially, but a lot of it is due to their own poor choices when it comes to spending their money. Why give money to people who don't manage money wisely in the first place? Sure, they might get themselves out of debt temporarily, but they'll get themselves right back in it down the road. It's like that saying about not giving a man a fish but teach him how to fish.
On the same note, I don't think the government should bail out companies who prove to not manage money wisely either.
Joe wanted to put his two cents in - he says that people who are a lot smarter than us (meaning everyday people) have decided that this should be done because of the effect on the credit market that could occur. So this decision is what's best for the economy.
I would agree with Joe except for the fact that this time it is basically without penalties that have been levied in the past.
As an addendum to this story, Clark Howard added the following:
When all is said and done, our collective responsibility for the bailout mania of 2008 will be in the trillions of dollars. But what does that mean for you? Simple -- for every dollar you pay to the government in taxes, less will go to government programs (whether you support them or not) and more will go to service the trillions of dollars of debt the bailout creates!
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