Why is the bailout unpopular (polling) to avg Joe?
It doesn't loosen the credit market if you are talking about lending which is the real problem here.
Too much lending to risky homeowners is what got us here since many of them ended up defaulting so the banks lent out billions that they never got back. Now they are tightening up big so it doesn't happen again, so even not so risky owners could have some difficulty getting loans. This bailout does not change that. So the money will go to the banks who for the most part just hold on to the money without lending much of it.
They are forcing us to pay hundreds of billions to bail out banks who were regulated into giving loans to risky borrowers (this is not headline news). It is a bunch of BS in my opinion and I understand why so many are not happy about the "investment" of our tax $ and lots of debt to fix a problem that should never have happened.
But they won't be giving it away as often. Of course they will lend some that is not the issue. The issue is how much will they lend... Obviously they need to cut lending to people who are risky borrowers, but it may spill over into even lower risk borrowers.
Making money is probably not as high on the list as preserving the billions banks are about to get for free. Who needs to earn it when it's being given to you? They will lend some, but probably will raise their standards too high. Too loose to too tight, that's just the way we do things.
Banks will not lend if there is a risk of not getting the money back. There is too much bad debt and increasing bad debt. It needs to be excised from the system. The gov wants to do that by buying it and taking out of the system. We will not see a return on bad debt it is bad debt. There might be some vaule in that debt but it will never be repaid to anywhere close to $700b and we will be paying $35b in interest on that debt for the next 50 years.
The other way is to just let the vultures feed off that bad debt.