Yesterday the Fed gave a sweetheart deal to banks, and you and I are now bearing the risk of it.
The Fed has decided to lend out to banks $200 billion dollars to keep them solvent. For collateral, the banks give the government all of the bad mortgage loans they have made, transferring the risk to all of us.
This has the effect of lowering the value of the dollar even further, even though the majority of this money will likely go to pay investors for their asset-backed securities as they mature.
I am both angry and concerned for this move, even though it is not a direct bail out. These companies played in the deregulated 'free market' free-for-all and they lost. The truth is that NOTHING is going to save these loans from going bad. Which means not only are the banks going to get a next-to-nothing interest rate on this government loan to cover their insolvency, they are also going to write off all these bad loans and reduce the tax revenue we need to run the country by the same amount.
In addition, what is the incentive for the banks to pay back the loan as the collateral mortgages sink? If they don't pay it back, will the Bush administration even do anything about it?
If there is no protection for consumers, there should be no protection for multinational corporations either.