Weâve all been seeing in the news lately that the federal government is trying to pass a $700 billion proposal bill to rescue the financial companies and markets. This proposed government bailout would be using $700 billion in Americanâs tax dollars to primarily buy up bad mortgages that are currently owned by various investment firms and banks.
These bad loans have also been termed âtoxic mortgages.â Toxic mortgages have been so named because their value has been severely discounted due to how badly they perform. Many of them end up in foreclosure and all or much of the value of the loan is lost. The government is trying to persuade the politicians to vote this proposed bill into law. If passed, it will allow our federal government to use up to $700 billion of American tax dollars to buy a lot of these loans from various private investment firms; thus, it will remove a lot of these bad loans off the investment firmsâ books. This will potentially help strengthen the investment companies that currently own these bad loans.
Obviously, the cost of this proposed bailout is not free. This bailout proposal, coupled with the Fannie/Freddie & AIG bailouts of the last couple of weeks, will add approximately $1 trillion dollars to the national debt. That extra debt will be required to be paid back by our children and grandchildren, with interest.
The bill is set to be voted on either late this week or early next week. Whether you choose to support this bill or not, you may want to consider letting your elected officials know how you feel about the proposal.
Nick Sivertsen, Summit Mortgage nick@nicksivertsen.com
