September 29th, 2008 by Michael Oliver

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The House failed to pass the $700 billion bailout bill intended to ease the credit markets. When news first broke, the DOW went into freefall and dropped as much as 705 points instantly and then rebounded a little. The bill will need to be rewritten and voted upon again. I’m not sure why, after all this weekend’s press about there being a “plan,” that there’s now no plan at this point. If this isn’t fixed, and the Treasury isn’t allowed to purchase all the mortgage-backed securities as the market had assumed would occur, there will be no relief for the credit markets. According to CNBC and everything I read and watch, the credit markets in the United States are in a very hazardous state. This credit freeze may be the linchpin that sets the overall economy into a serious recession or worse.

It is difficult to say what will happen from here. The consensus is that the House will rework the bill so that they can get the votes necessary to send it to the Senate, and then on to the President and put into law. This would most likely be the best-case scenario. IF, however, no “Bailout” legislation is passed at all, then I think the economy could be in for some rough times.

According to Ben Bernanke, Senator Obama, Paulson, Warren Buffett and others, the general consensus is that this current financial crisis is the worst since the Great Depression and one that the American public does not understand at all. It is just in its initial stages. According to these experts, banks are either unwilling or unable to even lend to each other for fear that they may not get their money back. It is thought that this will spiral and other businesses will fail because they will be unable to receive the credit they need to stay in business. This could result in worker layoffs, destroy investors’ portfolios, and spiral into a much larger recession and a possible depression. Hopefully, these two scenarios don’t play out, but I do think that the average person who is against “The Bailout” does not understand all the issues at play here. The public thinks this problem is not their problem, but Wall Street’s problem alone. I think they must realize that this will soon, if not addressed, become a problem for all, not just “Wall Street.”