Bailout, bailout, bailout…..where’s ours?

Alright, alright.  Before you start laughing at the title of this, let me start by saying:  “Economic credit bailout recession sub-prime mortgage bank crisis”.  Did this sentence make sense to you?  Did you have to read it a few times over to get all the words?  Well, that’s how this whole economic downturn looks to me every time I crack a newspaper or turn on the television.  It’s an incredible blur of information—according to our politicians and the media, we went from “Everything’s doing just fine” to “We’re screwed” in a very short amount of time.  Even as the economy of the United States of America tanks, our own leaders at home were saying that we wouldn’t feel it as bad, if at all.

            Doesn’t feel like it.  We’re even in the middle of a political crisis stemming from the economic crisis.  Sounds like we’re screwed?  I have a bad feeling about it, but I still can’t gleam enough solid evidence out of the ambiguous statements on both sides of the border to conclusively answer that.

            Once we dragged out of our leaders just how serious the situation is, we started talking about a financial bailout.  In the US, this amounts to $700 billion dollars—so far.  In Canada, we’ll have to wait until January 27^th to find out what the Conservative government wants to do about the problems, and even then, if the newly formed coalition government votes it down, we’ll still have to wait to find out what their plan is.  (I don’t trust a coalition to be able to multitask efficiently—right now their limited resources are all aimed at bringing down Stephen Harper’s government).

            Stateside, the abridged version of the story is that Wall Street loaned out too much money to people who probably had no hope of paying it back, so the United States government was going ot spend a truckload of money shoring up financial institutions to make sure they didn’t collapse.  This is fascinating, especially seeing as a city in Nevada had set up a tent city for people who were losing their homes in record numbers.  This scared other financial institutions who immediately stopped giving out credit to both the average consumer and each other (banks lend each other staggering amounts every year).

            In a nut shell:  The average person doesn’t make enough money to really afford much more than bills, but nobody’s offering any credit except to those with incomes who don’t need credit, so the vast majority of us aren’t buying…..well, anything.  Stores worldwide are telling us how the crowds are NOT coming out in droves during the holiday season, Circuit City has filed for Chapter 11 and it’s Canadian equivalent.

            Looks very bad, right?  So where’s OUR bailout?

            The forthcoming Obama government has a solution for the average person with a huge mortgage in the States—lower their annual interest one percentage point.  So the solution for all the families teetering on the edge, the ones thinking that bankruptcy might just be a good idea, is to say “We’re going to cut you a little slack.”  Trouble is, the payments themselves won’t change, it’ll just help them pay off their overblown mortgage faster.  Doesn’t help Joe Blow right this very moment when the bills are piling up.

            Don’t get me wrong.  I can’t completely fault the financial institutions for this.  We live in a consumerist, must-have society.  Joe didn’t wake up one morning with a mortgage, he signed up for it, just like he walked into a Future Shop and landed that 46” inch super-high-definition TV by buying into the whole “don’t pay for a year” idea.  They offered credit like mad to us, and we snapped it up because we had to have that house, that TV, that car, whatever.  Trouble is, if the banks can screw up and get written a cheque by the government, why can’t the government take a couple grand and write Joe a cheque?  “Here, Joe, it’s okay, we all created this situation.  Rather than go bankrupt, here’s a government-guaranteed consolidation loan.  You still have to pay everything, but we’re going to make things easier.”  So now, Joe isn’t staring at a pile of bills.  We assume (and I’m making a stretch here) that Joe has learned his lesson and isn’t going to run out and rack up more credit.  He saves a couple paycheques and goes out and buys that TV outright.  At least Joe is buying something.  And isn’t that the starting point of a consumer-based economy—the ability of the average consumer to buy stuff?  If we’re not buying stuff, what good is $700 billion if the financial institutions are still unwilling to lend Joe a helping hand?

            There’s a lot of “help the people out” talk bantered around in the news these days, but most of the solutions are carefully suggested so as not to upset the financial institutions, who are getting money from the government but still want Joe to make his payments on time, exactly as before.  I like the idea of the government lending their good name to consolidation loans for the average consumer.  The rules are simple: 

·         You cannot claim bankruptcy on it.  If your consolidation loan goes into default, the government can take your tax refunds or whatever other measures the government normally uses to collect government debts to get the money back.  (A good incentive not to screw up on it.)

·         All of your debts have to be included in the loan, even ones that are in good standing.

·         The loan legally forces all creditors to list in your credit rating as paid in full but does not erase the actual credit history like a bankruptcy would.

·         You are not allowed to seek any credit for a predetermined period of time except for a single credit card with a maximum limit of $500.  (Let’s face it, you have to have one to do some things like rent a car).

Fine, if you fail to make those payments, well, lie in the bed you made.  You were given a chance.  It would depend on two things—the recognition that the average Canadian and American family is suffering, the fact that without direct help, individuals will still claim bankruptcy in record numbers, which helps no one, and the faith that the majority of people given this option will actually learn their lesson and start buying stuff with money they have instead of money they don’t.

            Common sense?

            I’m glad I could give you a good laugh.

~ by jason m norwood on December 7, 2008.