Saturday, September 27, 2008

Undecided about the Federal Bailout

I am not sure what to make of the proposed federal bailout. At first I thought it might be a good idea to keep the US economy from sliding into a terrible recession or even a great depression. I also thought that perhaps the bailout would boost confidence in the stock market ans I could get in on some of the deflated stocks just as they would become more valuable. Now I am not so sure.

If the bailout did not happen I am not sure how it would affect me but I am sure I would survive. The proponents of this plan say banks do not have money to lend. Well I am not planning on taking out any loans anytime soon. I have several credit cards but I pay the balance off monthly. I have a mortgage but unlike the people who got caught up in the whole subprime ARM mortgage scheme, I knew better and had a great credit score, so I got a 6% 30 year fixed mortgage. I also am not trying to keep up with anyone or impress anyone so I bought a modest pre-owned house in a good neighborhood. I have two vehicles paid off so I will not be financing a car anytime soon.

The biggest uncertainty if the bailout did not happen is how it would affect my job. I do not know anything about how their finances work. I do know that they make most of their money on government contracts. We do consulting work for the Corps of Engineers, FEMA, Border Patrol, DOD and many others. We also do work for the private sector. However, if there were a run on banks, how would they pay me? I also have my savings in banks and 401ks. what would happen to that money. Does the FDIC have enough to cover all the the banks that could possibly fail? Would I lose all the money in the 401ks? 401ks are not insured by the FDIC.

I know it is not fair to use taxpayer monies to cover greedy banks and lenders, or ignorant people who fell prey to them. People should know how much home they can afford and live below their means not above them.

Whatever happens I know that I have no control over what congress does, but I do have control over how I react. I am not panicking, I just rode out two hurricanes and did not panic, I was prepared but I was prepared long before the storms formed. I think the same logic should be applied to the economy. I should have been prepared well before the "crisis", and you can bet that next time I will be.