It's not just cars and homes. In the business world, companies use credit to purchase capital machinery, buy inventory, invest in research and development, etc. The credit crisis is going to effect us all. Don't think you will be immune.

In the last 3 days 5 banks worldwide have failed. The panic is GLOBAL, and something must be done to help shore up confidence. European countries have been stepping in and injecting money into their banking system. The US, the largest economy, unfortunately is going to have to as well.

Small example:

My company sells capital machinery in the chemical and plastics industry. The companies that buy from us use credit to buy the machines (most companies don't have $100,000 laying around not being used). With banks not lending money, few capital expenditures will be made. My company will go under; I, and my co-employees will lose our jobs. The companies we represent will be unable to sell their product, they will go under, hundreds will lose their jobs.

This is not just a "bail out" of Wall Street fat cats, this is a problem for us all. It's just a matter of time when you, your family, your neighbors will be hit. I wish so much it weren't so, but it is and we'll be paying for it for a long time, one way or another.

This has been a long time coming. There have been warning signs for years, and our government (and we) have kept our heads in the sand, writing checks that we couldn't afford to cash.

I thought the AIG deal already went through separately.

And can you take me through how you get from AIG to FDIC failing completely?

ETA: This link is a little old considering what's happened between then and now, but it explains how the FDIC would meet it's obligations even if more banks did fail. http://biz.yahoo.com/ap/080916/bank_...ts_safety.html

I'm certainly not feeling good about things, but a real doomsday scenario seems a little further off than your post implies.

FDIC insures bank deposits in the event that a bank fails, like AIG, WaMu, etc... its the govt. basically protecting you in case your bank can't pay you your money. Well, with all these banks going under, it is putting more strain on the FDIC to insure all deposits, etc... Essentially, this is another way AIG's collapse directly effects the government, and therefor you... Secondly, AIG, WaMu, etc are not just small time banks, oh no, these are the banks that have given loans to other banks, etc...

Right, the FDIC is likely to experience more strain, but I don't think it's in any danger of failing to meet its obligation because it has other resources at its disposal if it needs them, like you and me and our tax dollars.

I have no doubt that we're all going to be affected, but I don't think that we need to worry about our FDIC insured funds particularly.

That is a stretch, the FDIC is ultimately funded by the US government. (crossposted with UGAalum)

AIG has already been propped up by the government. The failure of AIG, being a global insurer, would have had worldwide implications. That is why the G7 pressured the US government into the bailout.

The government tried to stop the bleeding by capriciously bailing out some and letting others fail, but the hemoraghing continues, and this big $700 billion bailout (although the negotiated bill was better than the first draft), may or may not be the cure (or 1st step to a cure). BUT, it will get the bad debt off the books of lending institutions, thus freeing up dollars to lend as loans.

There will be more oversight, it will be harder to qualify, but at least there will be money in the market (and not in people's mattresses) to loan.

I know we're in a very different situation in Michigan than in most parts of the country, but the people that I know personally who have foreclosed on their mortgages *could* pay it back at the time that they obtained the mortgages. Some lost jobs, one lost her husband (and therefore, his income), etc. On my street, more of the people who are walking away from their homes are either unemployed or they have to move and cannot sell their house for what they owe on it, so they're walking away from it. If you bought your house for $180K and financed $140K and had a family income of $100K, that wasn't an irresponsible buy. The problem is that now the family income is $30K and the house is only worth $120K so they're screwed. I don't know anybody who was foolish enough to do the interest only loans or other crazy loans that were being offered, personally. I'd be very curious to see that breakdown with foreclosures... the "why" of it all. What percentage is due to unemployment, what percentage is due to bad loans, etc.

I own a home furnishings store. Now that people can't buy/sell their homes and many are facing foreclosure they aren't purchasing home decor items. Sales are off 55% from this time last year and I can't recall ever having seen business this bad. Now, if we do experience a credit crunch I won't be able to meet payroll within months. I could loose my business because of the free wheeling dealers on Wall Street and the mess they have created. Where is my bailout? Seriously! I understand the logic behind supporting our financial markets, but the reality is that it is the small business owners that are suffering and barely meeting their monthly obligations. The nations largest Chevy dealership closed it's doors last week, and I feel like that is just the first of many retail closures to come. Right now my financial life is at risk on so many fronts....retirement savings, stocks, my income, my insurance.....I'm pretty much hating our congress right now and hoping that the FBI prosecutes as many Wall Streeters as possible..:mad:

Man, I was up till 4 in the morning to watch the vote and see what move can make to protect mine and my client's money. Soon as the vote was in, I immediately shorted on Dow Jones future and went long on Gold. It was still a nasty fall, but I was able to recover some of the lost. Oh well, today I'm being hammered in the Asian market.

Crazy days ahead.

Good time to start looking for cheap stocks for the long term.

Thank you Democrats.

The Democrats accidentally did the right thing and the Republicans intentionally did the wrong thing, all for political reasons. My mind is bottled right now.

A good and understandable explanation of the problem.

and another talking about the consequences of a credit crunch

srmom, those were good quotes and interesting to read/think about

I feel very sorry for small business owners who are caught in the middle of this mess! My husband and I were talking this morning and I think the predatory lending/mortgage crisis was just the beginning of our economy's downward spiral. I understand both sides.

I was watching the Today show this morning and they mentioned how difficult it will be to get credit in the future not to mention credit lines could be decreased to minimize liability.

This whole thing should be a reality check for people who have always lived above their means and buy crap they don't need!

I am so glad the bailout didn't pass!

This was the first during the Bush administation that Congress finally did something right, but then again even a broken clock is right twice a day.

America will experience a significant depression, bailout or not, but a bailout can make a difference between the depression for three years (without a bailout) and three decades (with a bailout). Just let it go, let the market correct itself, and everything will come out in the wash.

Thank you Congress, especially to my own Congressman Pat Tiberi who voted against the bailout.

This is specious reasoning at best.

Some of the bailout plans will actually pay for themselves over time, and by giving the market a firm bottom backed by the (still) highest-rated credit risk in the world, both the short-term and long-term viability can be ensured.

You're putting up a false dilemma - there are more options besides "this bailout plan" and "no bailout plan." Also, it's not "short term" or "long term" - it can be both.

Besides this, there really isn't this guarantee that the market will correct itself - while I wish there were, the current US economy is not exactly run by Adam Smith's Invisible Hand. In short, we've inbred many of the economic and production factors to the point where market forces may not, in fact, correct themselves - in which case, brief nationalization may be superior to lengthy failure and relying on other nations to resuscitate the US economy through outside investment.