Do You Understand the "Bailout" Plan?

September 29, 2008

For anyone who listens to the radio, watches TV or reads blogs on the Internet, the past two weeks have been dominated by Fed Chairman Bernanke and Treasury Secretary Paulson. Even the first presidential debate failed to detract from the media's focus on the crisis in the financial markets. Seemingly spreading faster than the speed of sound, one financial institution after the other either collapsed or nearly collapsed and was bought out or bailed out. Not being an economist, I listen, I read and I look at diagrams of what is now occurring or what the plan will allow the government to do. I can say quite truthfully that I do not really comprehend the "plan"; not Paulson's nor the compromise supposedly worked out with Congress over the weekend.

What I do understand is that without banks being able to function, with depositors wanting to withdraw their funds and with those with money being unwilling to invest it, the economy would be in a bigger mess than it may already be. I saw the government's establishment of the Resolution Trust Corporation in the 1980's to alleviate the Savings and Loan crisis work over time. I am trusting that the Fed Chairman and the Treasury Secretary do understand how financial markets work and that the Congress will recognize that it, too, may have to place some trust in those schooled in economic issues.

This is no time for grandstanding. Rather it is a time to work together to stabilize the economy.