The air of an economic crisis has been looming over the American financial sector for awhile now. It was only this week that three major corporations, Lehman Brothers Holdings Inc., Merrill Lynch, and American International Group (AIG), were under the fiscal gun. The government managed to bailout AIG to the tune of $85 billion before it could collapse and Merrill Lynch agreed to be bought by Bank of America for $50 billion. Lehman Brothers Holdings Inc. wasn’t so lucky, however, and filed for bankruptcy protection after the government decided that no financial help would be given to the company.
Congress is now in the process of passing a $700 billion fund which would be aimed at preventing the worst economic catastrophe since the Great Depression. This money would be used to purchase “toxic” mortgages and other debts which are being held by banks in the United States. By doing this, Congress believes that the banks of America will be more inclined to make loans for homes, cars, etc. available once again. It is also believed that once banks resume making home loans, the housing market will stabilize and the U.S. economy will make a sharp recovery from this disaster.
The catch is that this is only a hypothetical solution – there is no guarantee that this will work. As one can see, these figures are nothing to laugh about. The national debt is already nearing $10 trillion. If this congressional plan fails altogether, the nation is in for a serious economic and financial meltdown. This has left many people asking the question, “Where is this money going to come from?” The answer? The American people are still waiting for one.
This is a Government class homework assignment I just managed to pull out of my brain in the last ten minutes. Not too bad, I’d say. Really gives the one-two punch.