Government Bailout Benefits

Stephanie N. Herr
November 30, 2008

The Government Bailout, Who Benefits?

The big three American automobile companies are showing considerable operating loses. GM is losing $1 billion or more a month. How does a capital injection help? The companies will just burn through the cash (using it to pay labor or pay off debts, old and new, until it is gone). The banks, on the other hand, that are receiving bailout funds have operating profits, they can borrow low and lend high, but suffer from capital requirement issues, which limits what they can lend. A capital infusion helps meet capital requirements, frees up lending and the banks can make a profit. Auto companies are not similar. Unless the auto companies can build and sell a
They should be liquidated. The United States has been debating what to do concerning the foreclosure and banking crisis, with the answer being the consideration of a 700 billion dollar bailout. This bailout would benefit the middle class who have enough money and credit to buy a house, but give little benefit to the rich who may already own several houses, nor the lower classes, who are not typically able to afford a house. The current focus seems to be on helping only those middle-class people who made financially foolish decisions. Our nation 's working poor most likely cannot get access to bank loans, and must resolve on check cashing stores that loan money at over 14 percent interest. These working class and poor most likely do not have enough credit to qualify for a loan, so the bailout to the middle class will give little or no benefit to this specific group. The bailout is for the moderately rich who were careless with the use of their strong credit and ability to borrow cheaply on an almost continuous basis. According to the U.S. Dept of labor, the number of workers in June 2008, among working class, as defined as construction and manufacturing non-farm employment was 21,565 thousand workers; retail trade
"The helicopters are hovering and the first cash is making it through the seams. Soon, a door may be opened." Rogers states her biggest fear is not hyperinflation and the social unrest it could unleash. "I 'm more worried about a lot of federal dollars being committed and not having much to show for it. My worst fear is we are leaving our children with a huge debt burden and not much left to pay it back." Key dates in the federal government 's campaign to alleviate the economic crisis from the San Francisco Chronicle:
March 11: The Federal Reserve announces a rescue package to provide up to $200 billion in loans to banks and investment houses and let them put up risky mortgage-backed securities as collateral.
March 16: The Fed provides a $29 billion loan to JPMorgan Chase & Co. as part of its purchase of investment bank Bear Stearns.
July 30: President Bush signs a housing bill including $300 billion in new loan authority for the government to back cheaper mortgages for troubled homeowners.
Sept. 7: The Treasury takes over mortgage giants Fannie Mae and Freddie Mac, putting them into a conservatorship and pledging up to $200 billion to back their