By now I’m sure that most of you have heard of the recent government bailout plan that is being worked up. At first it was a limited condition plan for over $700 billion, well that has died and is now being worked up in a revised version. So how will this affect you?
Well, first you have to understand the reason why…why is the government spending $700 billion right now when our economy is hurting? Well the simplest answer is that if they don’t step in, we would see a complete destruction of the economy, even from its current state.
As it stands right now, lenders are (out of necessity) tightening up there guidelines on their loan programs. I’m sure you have experienced this if you have tried to qualify for a home recently. This is one of the main reasons for the government’s actions; plus they need to bailout these companies and get some bad “paper” off there books. Therefore taking the pressure off of the companies and opening up the market to encourage growth.
Now, don’t think that the government is just paying some money to get companies back on their feet…oh no, they are taking over assets as a result. The biggest assets will be existing home loans. They are taking over current homes that may be in default. Now how they treat these defaulted loans is yet to be seen…and will determine the future direction of the economy.
So for now, it would appear that this will help benefit our economy (as seen from today’s stock market gains). The most important thing is that it should free up some lenders to start lending money…but you can be sure the guidelines will still be tight. Not as tight as they have been over the last 12 months, but tighter than they have been in the distant past.
I want to let you in on a secret…actually I have completely run out of space, so I will have to let you know next week. Sorry ;)
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