Tags: bailout | impact

What the Bailout Really Means to You

Monday, 08 Sep 2008 11:09 AM

First the Fed and Treasury backed the Bear Stearns bailout by JPMorgan Chase.

Then they okayed the Freddie and Fannie rescue. Now Congress is contemplating a plan to help General Motors, Ford, and Chrysler out of the financial hole they've dug for themselves.

Both presidential contenders Obama and McCain have given a thumbs up to the idea.

Easy for them to greenlight. You and I will have pay the tab.

"Philosophically, if the Freddie Mac and Fannie Mae debacles teach us any lesson, it is that subsidizing private profits with public risk is a terrible idea," writes auto industry reporter Paul Ingrassia in an op-ed piece in The Wall Street Journal.

So, how will the Freddie and Fannie bailout impact you and me? Here's a rundown on the near-term impact from The New York Times:

• Fixed mortgage rates will remain unchanged

• New rates could fall 25 basis points

• Home prices could stabilize

• You might be able to make a new deal on an old loan

• New rules will be imposed, however, on new loans

• Investors in Freddie and Fannie could take a big hit, if not get wiped out entirely

Notes the Times, taxpayers (that's you and me) can be excused for feeling a bit of "righteous indignation" as we foot the bill for other borrowers' mistakes. That's isn't likely to stop Congress, though.

Last year's energy bill, for instance, earmarked $25 billion in low-interest loans to "high-risk borrowers" in the Motor City. Detroit says it needs the cash to develop fuel-efficient autos.

Will airlines be the next industry to seek government help? Possibly.

Congress helped the airline business with cash infusions and various breaks after Sept. 11. The precedent has been established. If consumer spending tanks, don't be surprised to hear an airline rescue package is next.

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First the Fed and Treasury backed the Bear Stearns bailout by JPMorgan Chase. Then they okayed the Freddie and Fannie rescue. Now Congress is contemplating a plan to help General Motors, Ford, and Chrysler out of the financial hole they've dug for themselves.Both...
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