Let's look back and find out what this mess is all about. First of all, pouring billions of dollars into companies not always solves the problem. It keeps these companies afloat for a while, but again these companies such as GM and Chrysler will look for another round of financing.
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Even if new product is developed such as new concept car with better fuel efficiency, that does not mean that people would start buying them right away. GM and Chrysler are new at hybrid technology and competition is heating up from Toyota as it leads is sales in comparison to American auto makers.
And what about housing market? Experts in early 09 predicted a decline of 20% by the end of this year and so far we do see some stability as well as decline is some areas. Is housing market fixable? If Obama pours another round of financing to help homeowners keep their homes through loan modification, how exactly that helps the market? Well, it doesn't! All it does is to help those who want to keep their home. But does it improve your property value? No! And how long will it take for you home to appreciate in value?
Credit Market is getting worse, there is no doubt about that. With new elected credit card law, credit card companies are having even more difficult times to find the right consumers who would be using their credit cards as most consumers have a high debt, filed for bankruptcy or simply do not want credit cards. For those with a good credit offers are pouring and it is your choice which credit card to choose.
What about credit rating? There will be a huge change in credit reporting agencies on how you score will be calculated. With all the new laws and changes, credit reporting agencies will look for more ways to calculate your credit score
There is one solution to solve the crises quicker. Nationalize major bank or banks. Otherwise, nothing will change. Let's look what is happening now. Currently all banks are private and so far borrowing billions to fix their own mistakes. All they have really done is to borrow money, made a very strict guidelines and continue buying out smaller banks. Their guidelines changes so much that majority of consumers will not get a loan or a credit card for a long time. So banks will remain as they are in hopes that they get money from government is they need to.
What can happen? If banks are nationalized and government will eventually start to take over those banks, guidelines will change quickly and allow consumers, businesses to borrow quicker. Consumers with lower credit score will be able to borrow money from banks. But on the other hand who is not happy? Wall Street! The same guys who brought all this mess do not want this. Why?
If banks are taken over by government, new rules or laws will be imposed on Wall Street how to buy and sell debt, and these guys do not really want to learn or get into a new game of rules and regulations. If something worked from the beginning, why fixing it, right? Wrong! Wall Street got us to this mess and it is dragging us deeper into more problems.
For the upcoming months, our economy will get worse. Some good news will come, but more bad news is coming.
Simple rule is to fix financial system. It is not an easy task but it should be priority number one for President Obama administration. With more credit available, consumers will be able to qualify for loans such as car loans, home loans and start buying new cars or homes.
Are we on the right track as of right now? Even though White House is staying away from banks and just simply pouring billions into them, banks do have plenty of cash to borrow, they are just afraid to borrower in the same rate as they did before. So for now all we can do is just wait until next government plan will come. Maybe another billion to banks?
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