Saturday, September 20, 2008

Comment: Should U.S. taxpayers bail out financial companies?

The price tag is $500 billion, but many analysts think the final cost for taxpayers could end up somewhere closer to a trillion dollars.

Should the taxpayer bear this burden with interest to the lenders in order to "save" the financial system. Why didn't the government come to the rescue of millions of Americans who lost their homes in foreclosures, many obviously the victims of a predatory lending system? Now many of these same people will have to share the burden of bailing out the some of the same companies involved in their home loans.

Will the financial system "melt down" if the government doesn't step in? Unfortunately the people making the decisions are likely to be those most effected by the current crisis. They are the ones with the large and often risky stock portfolios.

As the mess was caused mainly by the bad mortgages in the first place, wouldn't saving those homeowners first have averted this situation in a more desirable fashion? Now the U.S. taxpayer is stuck with borrowing more money on top of an already record deficit to cover the bad lending practices of these deregulated institutions.

One could argue that the financial collapse of millions of American families over a short period of time is just as risky as the bankruptcy of several Wall Street firms. Aren't there other companies capable of picking up the slack?

Another thing to remember is that the quasi-governmental Federal Reserve Bank is made up of members that are commercial lending institutions and are unlikely to become any less richer whenever the government borrows money directly from the Fed.

The only lesson we seem to learn from this crisis is that financial companies will now know the government is there to rescue them if they are so large and important that they supposedly cannot be allowed to fail to avert various doomsday scenarios. The person on the street, unfortunately, is to expendable to expect similar treatment.

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