Author's Note: Wrtitten on September 25, 2008, one day before Washington Mutual failed and was bought up by JPMorgan and Chase for $1.9 billion.
Edit: As of 6:30 PST... FDIC has seized all of Washington Mutual stocks
and assets and has been sold to JPMorgan for $1.9 billion. One part of
my conclusion comes true... and so soon.
So I have studied
closely financial turmoil hitting Wall Street. I have gone as far as
taking a daily venture to get involved in a realistic Fantasy Stock
Market based off of real time stocks from Wall Street here on Facebook.
I've
seen the Senate Banking Committee meeting with all the heads of the
government financial department testifying in front of Congress. McCain
suspending his campaign to head back to Washington D.C. and Obama
wanted to continue to debate on Friday. The President's speech last
night, plus a multitude of varying opinions throughout internet.
I've
seen financial giants Lehman Brothers, Bank of America, Washington
Mutual, Goldman Sach, JPMorgan Chase, and Morgan Stanley heavily suffer
in this mess. I saw American International Group, the world's biggest
financial insurer collapse and get loaned $85 billion by the government.
Fannie Mae and Freddie Mac, the biggest mortgage companies collapsing
earlier in September and consequently taken over by the US Treasury.
So what does mean for everyone? A lot of things... consequences that will last for a long, long time.
Analysis:
As President Bush stated last night, "The entire economy is in
danger." But why pass a $700 billion bailout... wait... bailout isn't
the right word, more like loan. So its a $700 billion loan. The reason
for it is quite obvious, to prevent a total, sudden collapse of the
American financial market.
Before summer, I watched people,
including myself, on the Fantasy Stock Market short Lehman Brothers.
The interpret that, shorting a stock is to bet that certain stock is
going to fall and one profits from a company's failure. Shorting Lehman
Brothers back in April, I knew that its days were numbers, and here we
are in September, Lehman Brothers is bankrupt, being sold in pieces to
the highest bidder. If I had real money, I would have been quite rich
from that.
The trouble signs of the current problems span more
than a year ago, and the long-term road paved for this moment spans back
when President Bush first came into office.
So big whoop, right, we're bailing out the financial fat cats on Wall Street? Wrong!
The
situation is much larger then that now. The failure of not passing out
$700 billion is resigning to the immediate Day of Reckoning that faces
America. A total collapse of the American financial market is quite an
immense consequence. So what would happen?
1. The United States faces the biggest depression since 1929 arrives on our doorstep.
2. Hundreds of American banks nationwide closed their door as they default.
3. Thousands lose their jobs as companies go bankrupt
4. Housing foreclosures increase rapidly as banks call in all loans
5. Little or no credit is issued, preventing the purchasing of houses, cars, attending college, and other 'big purchase' items.
6. The country loses more than $700 billion as the full effect of the collapse ensues.
7. The American problems now becomes the Global problem as the effects of the depression spreads.
8. Commodities skyrocket
That's some of the reasons... so the problem is that big and bad... time to fret, yes? No.
So greed has come to roost... and to 'continue' this almighty road to 'American Prosperity' is through this aid package. Maybe
its time to let the chips fall as they may, which I assure you that
letting the chips fall would result in a depression. But who am I
kidding with... nobody wants to suffer a global depression, including
myself. Seriously though, lessons in complete failure is much more a
learning experience than experiencing success. Isn't that what we all
been taught that personal failure is a much better learning experience
than success... just now, that same possible lesson could be implied
upon an entire nation.
Conclusion:
This $700 billion bailout
is a sure thing. It definitely won't solve any long term problems as
the housing/credit crisis continues. Its there to cushion the fall so
that everyone doesn't feel the fallout up their butt at once.
If
this bailout doesn't pass... or doesn't work, everybody should hold on,
things are going to take a turn for the worst and pray they get through
this. And consider this as a big government hedge fund... this $700
billion and with Secretary Paulson being the ex-Goldman Sach bigshot
money maker, the government might make out of this thing some sort of
profit if it goes well.
The $85 billion to AIG isn't going to make
it big again... and when its all said and done, there probably won't be
much of an AIG left in a couple years since this crippled it
permanently. Selling parts of it is highly likely
Washington Mutual is definitely headed to be sold off in its entirety or in parts to another bank like JPMorgan. There
is definitely a long-shot hope that Goldman Sach and Morgan Stanley
survive but as commercial banks instead of investment banks, more so for
Goldman since Warren Buffet injected $5 billion in capital into that
business. Out of all the financial bigshots, JPMorgan and Chase and
Bank of America are going to remand standing, with Goldman Sach and
Morgan Stanley being probable in survival.
Lastly, pity the soul,
either John McCain or Barrack Obama, when they truly inherit this mess.
And honestly, do not expect them to be FDR and pull a New Deal... and
the history books state how truly how much the New Deal worked... which
wasn't much. This $700 billion is the New Deal people... welcome to the
new era of America.
Oh... McCain's pledge to stop his campaign
and go back to D.C. is political showboating, a technically good cause
to go back and put up his sleeves, but he isn't God, nor is he in any
economic committees in Congress... so the debate should go on, but Obama
is doing the lame arguments to McCain... so its lame either way.
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