Financial Bailout Plan

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The emergency Economic Stabilization Act of 2008, more commonly known as the bailout of the U.S. financial system, is a law which was signed into power that gives the United States Secretary of Treasury up to 700 billion dollars with which it can purchase assets and mortgage-backed securities from banks which are facing issues. This bill, an idea which was originally brought to the table by President George W. Bush and the Secretary of Treasury Henry Paulson, was designed to inject new life into the struggling financial sector of the U.S. during the financial crisis of September-October 2008.

This type of plan, otherwise known as a bailout, would plant new life into the economic sector by giving liquidity to bankrupt or near bankrupted entities, which could be corporations or banks, which would then need to meet a set of short-term obligations in order to qualify for the assistance. More often than not, a bailout is proposed as a sort of resolution in order to fix some kind of cash flow problem, such as a cash flow crunch, and is needed to tide entities over. These entities, given the aid of a bailout plan, can then continue to survive until the short-term problems which have caused the crunch are resolved. This kind of plan is usually only offered when the entity or entities in question have sufficient assets and are usually offered by either a government or by another group of investors. Often, the cost of a private bailout includes turning over control of the company or entity in return for the aid.

You can probably understand why so many people were against the bill quite easily. A bailout of this magnitude by the government can spell the beginning stages of a complete government takeover of the financial sector, hailing the beginning of the socialization of a financial system which is supposed to be entirely based on free trade and capitalism. But then, on the other hand, you had investors and money holders who were concerned that the banks would lose the money in the fall. Since money in the bank used to only be insured up to the first $100,000 (this was temporarily increased, however, to $250,000), those who had $200,000 or more in the bank were probably more than a little worried if they believed that their money might be in jeopardy.

There is also the argument that perhaps the government should have let the banks fall, if in fact a fall was coming at all. In this case, the flaws of the current system could fix themselves instead of the government spending billions of dollars in order to protect the system which got the banks in trouble in the first place.

So what are the repercussions of this massive government bailout of the financial system? Some believe that the money can indeed jumpstart the failing U.S. banks and can help put an end to what has been one of the most serious financial problems in U.S. history. And there are those who believe that the problems caused by this bailout will carry far into the future. Government control of the banks, the fall of capitalism in the U.S. and a merging of our current system and a system of socialistic ideologies are all on the minds of the pessimistic. However, there is one thing we can all agree on, and that is the fact that change is needed if the U.S. is going to continue to be the thriving, successful country it has always been. While the bailout could have global repercussions, we can look towards the future in a positive light, believing and hoping that this bailout might indeed be the solution which starts a world of changes in the economic world, which could lead us into a brighter and more successful tomorrow.

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