Last time, I gave some background on the financial system bailout. This column I will go into a little more detail.
First of all, I think that whoever coined the term "bailout" to describe the plan did the entire country a huge disservice. When you say bailout, I picture a government giveaway program - and judging from the response of a majority of Americans, I am not alone - but that is not an accurate description of the plan.
Initially, the plan was for the government to buy some of these undervalued assets (primarily pools of loans) from institutions, thereby creating a market for them, and allowing the institutions to generate some much-needed cash that could be used to make new loans and strengthen their balance sheets. The government would buy the assets at a discount, then hold them until the loans paid off or resell them at a later date after other investors re-entered the market. read more
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