Bay Area reacts to government bailouts

September 21, 2008 8:00:47 PM PDT
Many people in the Bay Area are unsure what the $700 billion bailout means to them. Some financial experts say the bailout could save Wall Street from collapse. But, people on Main Street believe that it's a bailout for the rich that will cost the poor more money they don't have.

So, what do people here at home think about the bailout?

Many people in the Bay Area are unsure what the $700 billion bailout means to them. Some financial experts say the bailout could save Wall Street from collapse. But, people on Main Street believe that it's a bailout for the rich that will cost the poor more money they don't have.

"I think it's unfortunate that it's needed, but I think the effect on the economy would be much worse if we didn't," says Hayward resident Larry Mace.

"I don't think it's a good idea. These companies got themselves into this kind of position by frivolous spending," says Glen DeVries, business owner.

Some people we spoke to here in Hayward don't understand what happened on Wall Street to the banks or lending institutions that necessitates this kind of massive $700 billion bailout. Noel Winn says he needs a buyout too. He's losing one of his investment properties.

"Nobody is bailing me out of nothing. I tried to talk to the bank about it and they told me 'of course everybody has bills'. I had too many bills going out. They couldn't do anything for me."

Lending institutions and banks also have bad debts in the form of securities tied to subprime loans. It's these loans that the government says it's going to buy. They may sell them off later as bonds in an attempt to recover some of the bailout funds.

"We can't tell right now whether this is a good idea or a bad idea cause we don't know the details but it's not necessarily a bad idea," says Jonathan Berk, Professor of finance at Stanford.

Jonathan Berk is a professor of finance at Stanford University. He says it's tough to tell if a complete bailout of these institutions is necessary.

"If we try to get the institutions to share in the buyout, than it might not be enough and we would not be able to stop what's called contagion," says Berk.

Contagion means that if one bank were to fail a run on that bank might be unavoidable, other banks could be affected by the ensuing panic.

The government's offer to buy that debt could stabilize the markets and the value of those securities. Professor Berk says the exact details of this buyout are unavailable to the general public.

"I don't see why you can report to Congress and you can't report to the American people. There's no state secret involved in this,"

Berk does say this bailout could provide some liquidity for institutions that offer home loans. That could bring some stability back to that market. Real estate agent Michael Hughey hopes that's true.

"If it goes through and the confidence of the average buyer is higher I think it will help," says Hughey.


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