Wall street isn’t dead but it sure seems like it.
With recent government bailouts of Freddie Mac, Fannie Mae, and now recently AIG. It seems as if the economy has gone into a huge tail spin that it can’t get out of. Not to mention Merrill Lynch being bought out by Bank of America and Lehman Brothers filing bankruptcy. With all the bailouts and government take overs one can only ask what’s next?
Why is this happening?
It’s really quit simple. The foreclosure crisis is now finally starting to spill over into the other financial organizations who were backing the housing market. This is just the cause and effect of the industry. Look at the savings and loan crisis of the 1980′s.
With the latest bail out of AIG for $85 billion loaned from the U.S. Government for the bargain price of 11.5%the government is doing anything they can to save us from financial catastrophe. Though some of this has happened so quickly companies like Lehman Brothers who are over a 150 years old went out like a light. It can happen that fast. In fact this is considered the worst banking crisis since 1929.
And it must be said, there will be more bank failures.
Although the U.S. Government has stepped in to help aid in this financial emergency it has helped avoid what could have been something much worse. What are your thoughts and concerns about the current situation leave a comment and let me know.
Will this affect you?
- First and foremost it will affect the employees of these financial institutions. People will be losing there jobs over this, and there will be more to come before it’s all said and done.
- Anyone that is a shareholder will lose out. Hopefully you have already talked to your financial professional about this.
- Although if you have bad credit and are looking for some type of unconventional loan ( loans for people who have less than perfect credit) you will find that there will be tougher guidelines, possible higher down payments, and less of a chance for you to get a loan.
How will this effect the banks?
In fact the lending power of some financial institutions has been cut down severely. If a major bank loses $1 billion they will lose around $10 billion in lending power that they would have had. With less money to lend out it will mean less expansion, mortgages will be tougher to get, the home buyers will have to put more down to get a home, which means there will be less homes sold, which means home values will go down as a result. In short…
This will affect everyone!
What can you do?
At this point there are a few things I would recommend you do.
- Talk to your financial professional. He will be able to best direct you in this situation.
- Keep an ear out for the market this is not a time to ignore the situation.
- Educate yourself. Learn how you can stay out of these situations. Sign up for are RSS here at Stumble Forward and get ahead of the crowd and educate yourself.
