WHO WINS, WHO LOSES UNDER PROPOSED BAILOUT PLAN?: Financial industry big winner, but not so troubled homeowners.





The proposal to bail out U.S. financial markets to the tune of up to $700 billion creates a lot of potential short-term winners, as well as some losers.
Wall Street and the banking industry are perhaps the biggest winners. Scores of banks and other financial institutions faced with going under stand to gain a lifeline that should allow them to start making loans again.

Under the plan that congressional aide sought to put into final form Sunday, the Treasury Department can start buying up troubled mortgage-related securities now held by these institutions.

These securities are clogging balance sheets, leaving banks without the required capital to make new loans and putting the banks dangerously close to insolvency.

Banks not only have slowed lending to individuals and businesses, they have stopped making loans to each other. The rescue plan should help restore confidence to financial markets.

There are other winners, too, if the bailout works as intended: anyone soon trying to borrow money — for cars, student loans, even to open new credit card accounts.

Top executives at troubled financial institutions, on the other hand, are in the losing column because the proposal would limit their compensation and rules out "golden parachutes."

Of course, these executives may take solace in knowing their jobs still exist.

Investors, including the millions of people who hold stock in their 401(k) and pension plans, should benefit. Failure to reach a deal over the weekend could have sent stock markets around the world tumbling on Monday.

Homeowners faced with foreclosure or those who have lost their homes get little help from the agreement. Nor will it help people whose houses are worth less than what they owe get refinancing or take out equity loans.

It would do little to halt the slide in home values that are one of the root causes of the current economic slowdown.

"It doesn't deal with the fundamental problems that gave rise to the problem — or alleviate the credit crisis," said Peter Morici, an economist and business professor at the University of Maryland.

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I woke up today to the news on CNN of Congress rejecting the deal. CSPAN showed out of 435 members in the house, 205 voted yah and 230 votes nay. None undecided. Seems like the Republicans had only 65 yah and 140 for the Dems.

I know this plan wouldnt have corrected the issues fully but I think it would have helped it some. Wonder what is next?

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i say let the market correct itself.. there's always cycles... up n down... this is one of the stronger down cycles... but everything will be okay in time... we jus gotta sit in n enjoy the ride...

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I agree with this as well.

Why don't the mortgage companies just not make all these people pay the high interest rates, I understand it like this...a person buys a house and they get theis low interest rate and then after a time the interest rate goes up and cause the economy is bad the people cant afford the payment so they get forclosed on...so why doesn't the mortgage company let the people keep paying the lower interest rate for a time like an amnesty..until the economy gets better so they don't have all these foreclosures....cound't it be better for the mortgage companies to just make lee money than foreclosing and making no money? I don't know that much about it, but it seems that if they were to find a way to offer people lower mortgage payment at least for a period of time they might not have so many foreclosures....

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"Blessed are ye, when men shall revile you, and persecute you, and shall say all manner of evil against you falsely, for my sake." - Matthew 5 v11 KJV

Very waggish indeed.

Because these mortgage companies have been trading the mortgages like equity. People can't pay the mortgage, the company that "purchased" the mortgage looses a ton load of money. They won't let it go like that.

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"Blessed are ye, when men shall revile you, and persecute you, and shall say all manner of evil against you falsely, for my sake." - Matthew 5 v11 KJV

Very waggish indeed.