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Federal Bailout - Research Paper Example

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Federal Bailout

As a way to intervene in the matter, the federal government would seek to purchase existing debt from major banks, in the hopes of creating more room for new growth. Like anything else the government seeks to do, their plan for the banking industry would have its supporters, along with its vocal naysayers. With a considerable amount at stake going into the Presidential election of 2008, it would become important for both candidates to respond in their own ways, to the legislation that was being proposed by their fellow elected representatives and such legislation, that would be signed into law by the very man that each candidate was hoping to replace come November 2008.
At the beginning of debate towards the end of the third quarter in 2008, the initial proposers of such action, would be then-Treasury Secretary Henry Paulson and current Federal Reserve Chairman Ben Bernanke. This action would see support from both men, the White House, along with both Presidential candidates and the Democratic leaders on Capitol Hill. Considerable opposition to the plan itself, would come from many Republicans, who felt it would be too much government control. In this case, "The first proposal for a sweeping bailout of financial institutions came at the height of the panic in mid-September, 2008. Mr. Paulson, with the backing of Mr. Bernanke, asked Congress for $700 billion to use to buy up mortgage-backed securities whose value had dropped sharply or had become impossible to sell, in what he called the Trouble Asset Relief Program, or TARP. As originally outlined, the government would have bought up toxic mortgage-backed securities at a premium over their current deflated values," ("Credit Crisis", para. 5). By doing so, the banks themselves would be able to reconcile the existing debt itself, thus wiping it out and would in turn, have the available capital to offer more loans to more people if so needed.
While the plan itself would come to formation under the previous White House administration, the further implementation of the plan and the resulting ramifications, if any, would be most present for those individuals that who assume office in January 2009. "President Bush signed the $700 billion financial bailout package into law Friday afternoon after the House voted 263-171 in favor of the legislation," (Hoover, p.1). While not a clear and decisive vote in favor of the plan, the majority of the US House of Representatives, would conquer with the President that, with the health of the economy as it was, something would in fact need to be done in order to bring life back to it.
In considering the old cliche of people needing to spend money so that they can make money in business, this would ultimately be the idea for those behind the bailout plan. While the end result would only be assumed from the onset, the hope for a positive outcome would undeniable. The plan which would have garnered passage by the House, would not have been the first draft but rather, the second draft that would have been formulated after consideration being given by all ...Show more

Summary

In these times of great economic uncertainty, it becomes imperative for the government to seek solutions, that will hopefully assist their ailing national economic systems. For the United States, this will have been of the utmost concern. By the end of 2007, according to most accounts, the United States economy was entering into a period of very low economic performance that would translate into, among other things, considerably high unemployment numbers.
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Federal Bailout essay example
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