December 3rd
Fundamentally Flawed
I’m not the first person to say this, but I’m in a frustrated mood today, so I’ll say it anyways. We’re paying the banks billions of dollars, but it’s just going to get worse as unemployment increases and people can’t pay off their debt. Why aren’t we just directly paying off people’s debt? Taxpayer money helping taxpayers. Sure, it was their irresponsibility for taking on too much debt, but I don’t see how it’s any more irresponsible than what the banks did to get bailed out.
We’re basically paying banks so that they can keep charging people interest on their debt. I don’t see how that can possibly work out.
This already feels like a stupid, futile post before I even hit the “Create post” button. Sorry to waste your time.
I could be wrong, but from what I understand there are two big reasons:
1) Paying off a person’s debt doesn’t fix the bank’s issue of not being able to create new loans for consumers and businesses (i.e. a credit freeze).
2) When a government bails out a bank, the bank doesn’t have a ‘get out of jail free’ card. The banks have to pay all that money back at a high interest rate. It makes more sense for the government to bail out a bank, rather than a person, because they’ll get more of a return on it over time. After the great depression, the government actually made a profit off interest payments from the institutions that were bailed out.
Applying the reason in #2 to an individual home loan, one can quickly see why it wouldn’t be very nice. To a person with a mortgage, all that would change is who they’re writing the check to (the US government), and a much higher interest rate (13-15% instead of 4-6%)
One of Obama’s campaign points was to get a bit of that interest money from banks back into the pockets of taxpayers, since they’re the ones funding the bailout
