Tuesday, August 4, 2009
The last eighteen months or so have been a torrid time in the financial markets, but it never fails to amaze me the amount of apathy I see from the general population towards this subject as I walk around. I have come to the conclusion that this apathy is born out of the main stream media's mediocre coverage of what has been unfolding in front of us. So with that in mind I thought today I would do a Sidewalker synopsis of the TARP program; hopefully this will bring some clarity to what can be a very difficult subject.
1) The banks became insolvent because they made too many poor performing real estate loans.
2) TARP was then created to float the banks. "Your money" (as a taxpayer) was given to the banks via the Treasury and Federal Reserve at very favorable rates ~0% to 0.25%.
3) The banks then lend "your money" back to you via credit cards, mortgages, loans etc. at rates ranging from 6% to 30% depending on your credit worthiness!
Are you still having a great day!? I'm not an activist, I will not be organizing any "Tea Parties" and the like. My goal writing about this subject is to provoke thought from the guy/gal in the street on what I consider to be a very important issue. This issue thus far appears to have fallen through the cracks somewhere between American Idol and their new iPhone.
I understand that my summary above is very brief, and laid out in the simplest of terms. If it is well received I will consider doing more posts like this to shine the Sidewalker flashlight of clarity on the murky world of finance. I leave you with this question, if you lent someone $10 interest free, how happy would you be if you went to borrow it back and they charged you 18% for the privilege? Now think in billions...
-Current balance $15.59