Thoughts On Finance

There has been a lot of press given lately to the fact that the major auto manufacturers, General Motors, Ford and Chrysler are asking for a 34 Billion dollar bailout for their companies.  As are many average Americans, I sit and wonder why it is the average American’s are struggling but the big companies can get help, and we sit completely helpless, waiting and hoping for things to turn around.

Unfortunately, I have learned that the main reasons that these bailouts are necessary is to save the overall economy of the country.  I did see that with the banking and credit industry, however it didn’t make as much sense to me when it came to the auto industry.  Sure, I could see that it was going to put the people in the auto industry out of work, which obviously would cause great economic hardship, especially in areas of the country like Michigan who rely on the auto industry to support most of the other businesses in the communities, however, I was really unaware of the ripple effect that the destruction of this industry would have across the country.  The fact that I didn’t consider and really was completely unaware of, was the fact that the US auto manufacturers are the biggest purchasers of American-made steel, aluminum, iron, copper, electronics and plastics. The decline of the American auto companies is one of, if not the most important, areas where our economy is struggling.

Expert financial analysts predict that allowing the US Auto Industry to fold would be one of the biggest hits to this country’s financial state that has ever occurred.  They feel that in order to keep the economy even remotely stable it is going to take a bail out of significant proportions of the US auto manufacturer’s.

Candidate Obama promised to make changes to the financial structure of the country, and mostly as a pro-consumer advocate and financial analysts are saying that he may in fact institute a credit card bill of rights.  What this basically means is that the industry has been ripping off people for years and they haven’t made us aware of any of the loopholes that they keep catching consumers in.

Obama, the candidate, put forth a pro-consumer platform that includes:

• Creating a credit card rating system similar to the five-star rating system used for other consumer products to assess card features. Issuers would be required to display the rating on all credit card applications and solicitation materials.
• Establishing a credit card bill of rights to ban universal default, prohibit unilateral changes to contracts and prohibit charging interest on fees.
• Reforming bankruptcy laws to allow families with huge medical bills to have their medical debts forgiven and allow homeowners filing for bankruptcy to adjust the terms of their mortgage so they can keep their homes.
• Capping interest rates on payday loans at 36 percent and requiring clear disclosure of loan terms.

Financial analysts, however, warn that these changes need to be made swiftly and in the beginning, as that is the platform that he ran on and that is what American’s are looking for.  If he waits too long, the excitement for change may be gone, and then it will be too late.  Many people believe that since this is what the people want Congress will probably try to get a consumer friendly bill signed by Bush before he leaves office, however there are others that think this is doubtful at best.

Honestly, we need something to help out the people in this country and although many people oppose Obama’s thoughts, especially those on finance, I think that overall we must do something to help the unemployed and the people who are losing their homes to foreclosure.  Something must be done to stop the madness, and the truth is doing something is better than doing nothing, so I guess we will see how this all pans out.  Things can’t get any worse than they are…or can they?

The promise of big change was the winner of the election last night, as recent polls showed that for about 75% of American’s their biggest concerns were the economy.  For most of us we realize that the economic situation is serious to say the least, and the hope of change is probably the reason for Barack Obama’s success in the election.

Many American’s remain hopeful that the economic situation can be turned around by a new President, but I think that we are all acknowledging that change will not happen overnight.  This was especially noted by the votes for Obama which came from states like Rhode Island and Michigan who have unemployment rates that are above 8.7% to date.  These people are really feeling the need for change, and are hopeful that the change to a Democratic government will provide just that.

The bottom line is that we can’t afford to keep letting the economic situation get worse, and overall as a country I don’t think that the people were impressed by the recent government bail outs.  I didn’t really know much about this, and thought like many that this seemed to be an unnecessary step.  After listening to a few financial analysts on the subject I came to realize that if we hadn’t done these bail outs we would have definitely sunk the economy into the deepest depression in our country’s history.  By injecting these monies into the banking industry, our government did not improve our financial standing, however, it did stop us from having people starving in the streets, and so from that understanding at least the whole thing makes sense.

No one knows what the future holds, however as an American, I am also hopeful that Mr. Obama can hold up his promises and make some much needed changes in our country.