The Bailout-What's in it for me?

Now that the bailout has passed, what changes for the average American? Aside from the economy being “saved” from various bad things.

If I have a non-finance sector job, a regular mortgage, and no intent to buy or sell a house anytime soon, does the new law have any impact on my life?

Well, your FDIC-insured accounts are now protected up to $250,000 instead of $100,000, and your grandchildren will be paying taxes to meet the interest requirements on $700,000,000,000 worth of brand new treasury securities.

Something I have no use for and something else I don’t want. It’s just like Christmas.

The value of your house will probably drop a lot less than it would otherwise have. Your employer may be more likely to stay in business.

There’s a lot of “perhaps” and very little “certainly” here. The only way we’d know for certain what effect passing on a bailout would have would be to try it. We’re in somewhat uncharted territory here.

Do you live in a city? Cities need continual loans in order to do capital projects. A new prison, or hospital, or roadwork, or sewers, or any of the million things cities do are funded through the capital market. Without the plan, either those projects would have to be canceled, postponed, or would become so expensive that something else in the budget would have to go. Birmingham, AL, was facing literal bankruptcy.

Do you work for a company? Any size. Large businesses and small businesses all live by loans. They need loans to buy raw materials, to buy machine tools, to by component parts, to buy supplies, to buy the material they’re going to sell. And they have capital needs as well. Without easy access to credit, it’s likely that some businesses would close, others would lay off workers, some would cut down hours. There would be more unemployment, lower wages, fewer stores, less shopping.

Do you use a non-profit agency? They have uneven cash flow and normally depend on loans to smooth their payments across the year. Without those loans either they raise funds every day or they close their doors.

My point is that every facet of the economy, and I mean every facet, public, private, and non-profit, depends on loans and access to credit to do everyday business and to survive. Dry up the credit market and you’ll find out in a hurry what keeps business going.

The rescue plan wasn’t about them, it was about us.