Many people are vocal about their opposition to the "Bailout Bill" that is about to get a second chance in the House of Representatives.
The common thread of the arguments against the bill boil down to this:
"My money should not be used to line the pockets of greedy corporations that couldn't make sound decisions. Artificially proping up the economy is un-American."
I can understand that point. Three years ago, I might have had the same opinion. But since I started my careeer in Real Estate, I have learned a lot about financing and economics. This is not to say that I am an expert on the economy, or on the financial industry. I do however have a different perspective than most people, because of what I know, however. This article is intended to help people understand why I see this as a great opportunity to invest in our future.
What many people fail to realize is that this "bailout" is not a bailout at all.
It is not a handout to companies that got too greedy, although it has that initial appearance.
What it boils down to, in the final analysis, is the American People investing in their own economy.
If you could buy a 1 dollar asset for 15 cents, wouldn't you jump at that opportunity?
What the "financial market rescue bill" will do is allow the Treasury dept to purchase "at risk" mortgage assets that lenders have not been able to sell on the open market. Once the lending institutions can divest themselves of those "bad loans" they will be able to resume lending at normal levels. Don't worry -- they learned their lesson. Those high-risk loans are not likely to be seen again.
Those "bad loans" which the government will buy are not worthless.
- Not all of them will go into default and not all of those that do will go to foreclosure.
- Everyone of those "bad loans" is secured by real property.
- Real Property, unlike corporate stock, never reaches a zero value. The loans that do foreclose will give the government an asset that can be sold, potentially at a profit.
For taxpayers, this is good news, because it could eliminate a large portion of our federal deficit (or dare I suggest our debt?) down the road.
Warren Buffet once said, "If you want to go fast, go alone. If you want to go far, go together."
That is essentially what this bill will do -- bring us together, as American Taxpayers, to invest collectively in our own economy. It will be as if we created the largest mutual fund in the world, investing in assets that are backed by real estate. This could end up being seen as the largest government acquisition of land since the Louisiana Purchase.
Keep in mind that real estate over time is a sound investment.
(Since WWII, real estate has appreciated on average about 5.5% per year.)
This is definitely not about "bailing out" the corporate big-wigs that failed to see this collapse coming.
It essentially is about taking advantage of a once in a lifetime investment opportunity -- investing in the future of our country.
Remember, that any monies loaned to these corporations (like was recently done with AIG) will be repaid to the taxpayers, with interest. In addition, stock warrants will be issued, making the American People stockholders in these companies -- stockholders that stand to reap large dividends and gains when these companies stock goes back up.
The Financial Markets are treading on thin ice, wondering what will happen in the days to come. We have a great opportunity to invest in the "bottom" of the market, buy essentially defining the bottom ourselves. As soon as we take this bill goes into effect, the markets will rebound like never seen before, and the economy will be back on track -- but with American taxpayers making the biggest profit, not the Wall Street CEOs.
Investing in America's future. That seems like a patriotic act to me, and I am urging everyone I know to support it, despite the outward appearance of rewarding companies for greedy behavior. Seen from a different perspective, passing this bill should be a non-partisan no-brainer.
For more on this topic see the following articles:
- Bail or Fail (EDIT -- Kristal Kraft hit the nail on the head!)
- Bail Out Bill
- What does NAR think of the Housing Stabilization bill?
- The Bailout Bill is being called a Buy-In!
- Link for the draft of bailout bill...
- Bail out Bill Fails-Be careful what you wish for.....