With everyone keeping an eye on the banking industry and the government's roll in it, it seems like a good time to take a closer look. In the past few weeks banks, investment firms, and even those that insure investments have failed. Some have closed their doors permanently while others have turned to the government so that they can stay open.
The government, bailing out these companies, is what has a lot of the population worrying. This is due to the fact that these are not simple bail outs that are in the hundreds of thousands or even the millions, but are in fact in the billions. In fact the amount to bail out the current crisis of Wall Street is around $700 billion. With this country already in a great deal of debt, the fact that it is taking on more, is of great concern.
However, what people need to see is that in the short term the federal government is taking on a large debt, but in the long run they could actually be gaining a large sum. What the U.S. is doing is not paying off these banking companies debt, but assuming the loans as their own. In other words, the government is becoming a part of the bank. In the future, as the economy stabilizes, the government will come out of this with an enormous amount of loans, including interest, that will be due to the U.S. The government will be paid back for their help plus interest, when they are able to sell off the loans in a more stable economy at a profit.
It really isn't a bad idea on the U.S.'s part when you think about it. They are helping in the present by contributing to the stabilization of the banking industry, and will earn their money back plus more in the long run. So those that are worrying about the added debt that is being incurred by the U.S. government really shouldn't stress too much. They should be glad that they are stepping in to keep us from going into another depression. Once the economy is back on its feet, the government will be able to reduce this debt along with a bit more.
