The House passed a $700 billion-bailout package this past Friday. The bailout package came, as “their only hope to avoid a market meltdown.” We are told that it will “take time for the bailout to reach its greatest potential” and cannot be rushed. It could take a long, long time before that happens though.
Which brings me to the price of oil, which has dropped below $90.00 a barrel. http://www.oil-price.net says, “Although oil prices seem high today, they are kept artificially low because many oil-producing nations such as Saudi Arabia peg their currencies to the U.S. dollar. When the dollar is devaluated, these countries currencies and national economies are threatened by inflation and this is an incentive for them to let their currencies float and appreciate.” Countries like Kuwait have moved away from pegging their economy from the U.S., causing our oil prices to rise. As more countries follow suit, we should expect energy prices to rise. With prices rising, one would think US oil companies would be hurting as well. Not so says the New York Times. After a great deal of work and litigation, companies like Exxon and Texaco have agreed to pay millions of dollars back – almost 900 million dollars – back to the government due to “shifty business matters.” Before you feel bad for the big oil people, consider Clarence P. Cazalot – CEO/President/Director of Marathon Oil Corporation. His salary is $1,294,000.00 with a bonus of $3,864,000.00. With stock options and other “options,” his total compensation is $19,470,725.00. Yeah. I feel bad for him too…
Which brings me to the stock market since the bailout was passed this past Friday. The New York Times said, “At its worst point, the Dow was down more than 800 points, an intraday record. The stock market rallied during the final 90 minutes of the trading day, and the Dow finished down about 370 points at 9,955.50.” The Dow has not closed below 10,000.00 since 2004 and there seems to be no end to the potential drop of the Dow in the upcoming weeks.
Which brings me to our Banks. Banks like Commerce Bank and the 5th largest bank in the US, Wachovia. Wachovia Bank has been bought by Citigroup, which the New York Times states, “Federal regulators worked around the clock this weekend to orchestrate the sale, finally reaching an agreement at 4 a.m. on Monday morning. In the end, the government agreed to provide Citigroup with a financial guarantee on Wachovia’s most risky assets.” For $1.00 a share, or about $2.2 billion, Citigroup was given ownership. Commerce bank also has had its financial hardships. I guess Regis and Kelly couldn’t provide enough financial backing to keep Commerce from being sold as well. TD Bank Financial Group will be buying Commerce for a cool $8.5 billion. Don’t worry folks – the “Big C” will still remain outside of Commerce, I mean TD – Toronto-based TD Bank – a Canadian Bank. Commerce Chairman Dennis DiFlorio told Philadelphia Business Journal that owning Commerce Bank “opens the door to tremendous new growth opportunities. Combining T.D.’s broad array of sophisticated retail and commercial products with our unparalleled banking convenience is truly exciting.”
Which brings me back to the bailout package that was signed last Friday. In this bailout package, the FDIC of banks will rise to 250,000.00. Its previous 100,000.00 FDIC was raised in efforts of saving small businesses from filing chapter 11. This 250,000.00 FDIC will only remain at this level till December 2009.
Which brings me to one of the biggest issues that brought all of this on in the first place; Mortgage loans. Many reasons why banks have failed is because they have given out loans to well-meaning families who have attempted to “beat the system” and buy a house they could not afford in hopes of turning (flipping) the house in a year or two in order to make a return. For example, one family I heard about wanted to buy a $589,000.00 house but when their assets and financial abilities were thrown together, they could really only afford a house that was $340,000.00. Thinking only good thoughts about the housing markets, this family attempted to cut down on their spending and even live off credit cards if needed so that they could earn an increase on the value of their house. As the housing market started to fail, they didn’t consider the cost of what would happen and did not seek any advice about what they should do. When it was time to “sell the house,” their house was worth less then what they had bought it for. They began to panic and used their safety net of their credit cards to stay a float. When they had reached their credit card limits, they had no choice but to sell a house that was bought for $589,000.00 for $420,000.00. That’s $169,000.00-house depression and no one was more depressed than our couple that thought they could beat the system and buy a house they really could not afford. With high credit card balances and a loss of money, this family, like many others, is in a bad way.
Which brings me to another issue that seems to grow faster than the weeds in my backyard: Credit card debt. Don’t worry – I have some too. In fact, according MSN Money, “About 43 percent of Americans spend more than they earn each year and average households carry some $8,000.00 in credit card debt.” What is absolutely mind-boggling though is how much debt the U.S. Consumers owe. As a total, Americans carry more than $700 billion in revolving debt like bank credit cards and retail cards.
Which brings me back to that $700 billion bailout package that was signed last Friday. I have a few questions that we really need to ask ourselves as Americans: What has/does this $700 billion bailout deal really help or hurt? Will it really help our economy or have we just wasted another $700 billion? Why did banks like Wachovia really get bought out? Why do we always need to buy above our means? Why does it seem like the “American Dream” is a carrot hung on a string above our heads just out of reach? Why can’t we pay for things with the money we have rather than “hoping” we will have the money needed at the end of the month? Why aren’t the people who have faulted on their loans taking real responsibility for all of this? Why do we have to bail everyone else out because they screwed everyone else over and if I am that American family member, why did I buy that house when I knew I really couldn’t afford it? Has the DOW grown too fast for our own good? Was it inevitable that it would drop as it has?
These are some of my questions I have to ask myself and I hope you will ask yourselves. I have been apart of the problem – having credit card debt, though not as much as the average American – it is now time to be apart of the solution and pay off my credit card debt as fast as I am able and cut up the credit cards I have. This will ultimately raise my credit score and give me a better shot at buying a house one day that I can afford. I am not sure that the $700 billion bailout package will really help the American economy. I think people taking responsibility for their debts and learning how to save will. I guess we will just have to wait and see.