Video Story
Watch VideoBailout bill: what it means for you
Story By: David Tauchen
Source: KOAA
Published Fri Oct 03, 2008, 10:34 PM MDT
Updated Sat Oct 04, 2008, 06:42 PM MDT
After heated debate in Washington, it's official. The U.S. Government will spend $700 Billion to bail out Wall Street. But what does it mean for everyone else?
"I'm very encouraged by it," said Ed Sauer, CEO of Bank at Broadmoor in Colorado Springs. Sauer says he reluctantly believes the bailout was the right thing to do for the overall economy, even though it rescues those who created the toxic mortgages at the heart of the problem.
"I liken it to having a very bad cold and you have to take the worst cough syrup you've ever thought of, but you needed to do that to get better."
Sauer says in a matter of months the bill will free up credit, something consumers in Colorado Springs may see directly. He says it will be easier to get a car loan or a home loan.
"It will start putting oil back in the financial engine to get credit flowing again," said Sauer. He also says an increase in the FDIC insurance to $250,000 per customer will aid in getting credit flowing. Customers will keep more of their money at one institution rather than spreading it out over several, providing more liquidity at the bank, thus more money to lend.
However, some say these improvements will come at a cost. Fred Crowley, Economist at UCCS, says consumers won't see the effects of the bailout for 6 months to a year. At that point, consumers can expect higher interest rates on loans. Furthermore, the government will have to barrow the $700 billion from overseas. The lending countries will charge interest until it is paid back, which the tax payer would have to pay for. "It's adding about 150 dollars to each persons tax bill," said Crowley.
"For that small amount that we pay , it means job security, full employment, and income growth," Crowley said.
Others say the government will be able to turn a profit by buying up these assets at rock bottom prices then reselling them at a higher value, benefiting the taxpayer.
