Yesterday the House of Representatives voted down the $700 billion bailout package. In retaliation, Wall Street investors went on a selling spree and bloodied the stock market.

Today, the Senate has vowed to resuscitate the bill in an attempt to pass the thing. Both presidential candidates are calling for plans to aid in the bailout, and giddy capitalists everywhere are hoping that the bill doesn’t pass the Senate.

So where does that leave post of us? Honestly, pretty much where we were before. Our FDIC deposited money is still safe, statement shock is still afflicting our retirement accounts and the housing market is still in a slump.

But I’m not sure that throwing $700 billion at the problem is really going to change much, either.

After all of the drama last week, members of both parties in Congress, along with the the Bush Administration, have come to an agreement on the proposed $700 billion bailout. While those banks that are "rescued" with an influx of capital will likely benefit, it is unlikely that the liquidity is going to "trickle down" to more ordinary folks with home mortgage payments they can’t make.

Indeed, while the bailout may keep the current economic status quo for the most part, it does precious little for the average American in a way that directly impacts him or her. BloggingStocks reports on why the bailout is unlikely to have a direct benefit on individual Americans with home mortgage payments:

Banks which get bailout money may be no more likely to grant or
refinance mortgages than they were before. When these banks could
borrow tens of billion of dollars from the Fed, they put the capital
toward reserves. They did not want the risk of putting more capital
into the housing market.

The truth is that the bailout does almost nothing for the person
struggling with mortgage payments. The systems does not want to give
him money because the value of his home may drop another 10%, or maybe
more.

Enjoy this great mash-up of a scene from The Dark Knight and President Bush’s economic bailout speech.

Happy Friday!

Enjoy this great mash-up of a scene from The Dark Knight and President Bush’s economic bailout speech.

Happy Friday!

Last night, President Bush addressed the nation about the financial crisis. And the speech was not really designed to give real confidence. He did, however, point out that a $700 billion bailout is part of "decisive action" to "inspire confidence."

Of course, I am worried that he emphasized the inability to borrow as much. This is a good thing, not a bad thing as in implied. We need to stop relying on debt so much as an economic engine. We need a complete overhaul of thought in order to fix this problem long term. Also, he skated over his Administration’s push to allow deregulation that allowed credit derivatives that led to bank greed.

Sure, consumers deserve some of the blame. But the speechwriters put a little too much emphasis on the consumers. At any rate, full points for a succinct description of most of what happened. Although, technically, the market is — in fact — working properly.

At least he is compromising to a certain degree.

Right now, with all the news about the economy, many people are concerned about their household budgets and their finances. And with the large debt load in this country, it is no surprise. After all, most people carry quite a bit of consumer debt, and many people have been taking out home equity loans.

Now that the good times are over, all the debt is starting to look overwhelming. Not to mention adding in the stress of inflation and possibly losing a job. So the question for many becomes this: Which bill should I pay when it comes right down to it?

Paying the mortgage first

Obviously, it is better if you can meet all of your obligations. But if a choice has to be made, it is important to make sure that you pay your mortgage first. Unsecured debts — like credit cards — may seem more urgent, but you won’t lose your house because you haven’t paid your credit card.

Prioritize your spending and your bills, and work out a plan to make all your obligations. But until you get to that point, make sure that you pay the mortgage first.

For some helpful advice on getting through the economic crisis, I suggest this list from Free Money Finance.

One of the big issues right now with getting the housing market moving is the fact that many would-be home buyers can’t get home mortgage loans. The reason is that many mortgage lenders have toughened lending standards to the point where it is very difficult to qualify. It is, basically, an overreaction to the results of have lending standards that were too loose.

Heading the other direction, and making it practically impossible for most people to get home mortgage loans doesn’t really help the situation, either. But that may be changing. With the planned $700 billion bailout, stability in the market and guarantees may help encourage mortgage lenders to loosen up a bit. At least that’s the hope, reports CNN Money:

James Lockhart, the head of that agency, suggested Tuesday that mortgage finance companies Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500)
could loosen lending standards to help more homebuyers qualify for a
loan and stabilize the market. The government took control of Fannie
and Freddie earlier this month.

Another idea that could help home owners and buyers is to provide a way for current borrowers to have their loans taken over by the government. This could also loosen things up in the housing market and get the ball rolling. BloggingStocks offers this idea:

[I]nstead of buying distressed mortgages from the banks for 25 cents on
the dollar, why not offer distressed home owners the opportunity to buy
out their mortgages for 25 cents on the dollar with a guaranteed loan
from the government. Everyone wins: the cost to the taxpayers is the
same, the banks get the crap off their balance sheets and we can add a
claw back provision so that if the homes appreciate in value, Uncle Sam
gets a hefty chunk when the home is sold.

I actually really, really like it. It’s much better than bailing out the banks wholesale, and it helps nearly everyone involved — while at the same time providing a way for the government to recoup some of its costs.

Over the weekend, all sorts of goodness blew up. Most of it in the form of the announcement of a $700 billion bailout for Wall Street financial firms. Of course, there are some main questions that many are asking:

1. How are homeowners being helped by this bailout plan?
2. What is the value of the assets to be bought out?

This second question is addressed by National Mortgage News:

"The biggest outstanding question is how the price of purchased assets
will be determined," said Merrill Lynch analyst Akiva J. Dickstein in a
new research report.

This is important because if the government is going to buy mortgage backed bad assets, it is going to become necessary to figure out how much they are "worth" and then figure out how much the government is willing to pay for them. And, down the road, they will need to be sold by the government — if anyone still wants to buy them at that point.

Rage on Main Street

This help for the investors and CEOs, though, is prompting some outrage outside the confines of Wall Street. After all, the ordinary people with tanking retirement accounts and homes in foreclosure are not seeing the same kind of help. This is causing some unrest amongst those that think this bailout is too generous to the Wall Street "fat cats" that basically orchestrated this mess to begin with.

What do you think of the government’s $700 billion bailout plan?

This is Important Stuff this morning. So while it may not be "fun" all the analysis following it will be. Enjoy these two videos about the economic crisis:

This is Important Stuff this morning. So while it may not be "fun" all the analysis following it will be. Enjoy these two videos about the economic crisis: