Wednesday, September 24, 2008

$700 Billion Wall Street bailout

The US Congress is currently discussing whether or not to authorize a $700 Billion bailout of Wall Street banks due to a crisis caused by the banks' own greed (and stupidity).

This crisis (as I understand it) was caused by the banks lending money to people to buy houses that they couldn't afford; which drove up house prices; which enabled these same people to borrow more money against that equity (on top of the loans they already couldn't afford).

During this time of lunacy, the managers and officers of these banks were getting bonuses based on how many loans they could make.

And now that housing prices have gone down in most parts of the US, these loans are all going bad...with people defaulting on the loans because the amount they owe on a house is substantially more than the house is worth (and besides, they can't afford to pay the monthly payments anyway).

And now Wall Street is asking the US Government to help fix this mess; but the managers and officers of the banks are not being asked to give back their bonuses. Gordon Gekko would be proud.

There is some urgency to this bailout, so President Bush is asking Congress to authorize it with no debate. But Congress is nervous about that, because $700-Billion is a lot of money.

$700-Billion is approximately 5 times the amount Canada spent on Health Care in 2006. It is about 65% of Canada's 2006 GDP. It is about 50% more than the 2007 US Defense budget.

And it could buy (get ready for this) 1-Trillion Fancy Feasts...which is about 250-Billion pounds of Fancy Feast (which would weigh the same as 12,500 Eiffel Towers). That is a lot.


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