OPRAH SHOW "BAIL OUT"
THE BEST EXPLANATION
Friday, October 3rd, I visited my Aunt in Birmingham. Who knew I would make it in time for a hot bowl of soup and the Oprah show? I made myself at home with a blanket draped over my lap and my soup in hand. The main topic of the show was about the “Financial Crisis—what it means to us.” Guests included financial experts: Suze Orman and Ali Velshi. This segment by far was a great testimony of what the Oprah show is about—Positive Enlightenment/Education. If anyone has been following the news, you would agree the words “BAIL OUT” have been exhausted. Even though the words were mentioned repetitively, did you have any clue as to how the “BAIL OUT” would affect you? I probably could come up with an educated guess, but I didn’t have the slightest idea as to how this all would affect me. I needed to know more about this “Bail Out.” At the end of the show, I must say I understood. Ali did a great job.
Below is the article and a video featuring Ali Velshi. I hope this helps.
ARTICLE:
Ali Velshi from CNN joined the show to talk more about the financial crisis and how it happened. To start, Ali explained that most people have 3 assumptions: 1)if you own a house it will go up in value 2)your wages will go up over time 3)your investments will increase over time. Ali explained that rarely to all 3 of these assumptions fall short at the same time, which is happening now. Because of these assumptions, Americans believed that the situation would get better and so continued to spend as usual, so now the banks, government and people of America are heavily in debt.
Ali's first explanation involved how people getting into mortgages they couldn't afford allowed an entire economy to fall apart. Ali described how when Annie, any average person, applied for a mortgage, the bank allowed her to take out more than she really could afford because of interest rates keeping payments low. As long as Annie made her payment the bank made some money, but wanted more. The banks then sold the mortgages to Wall St. who in turn bundled the bad mortgages to global investors - everyone was making more money as long as Annie made her payment with the 6% interest rate.
The trouble came when millions of Annie's could no longer make their mortgage payments and their homes were foreclosed and repossessed; the banks now owned houses that weren't work the original mortgage amount. Because of this action, the entire system fell apart and the global investors, Wall St., the banks and the Annie's lost millions upon millions of dollars, homes and the security of a stable economy.
Ali pointed out that there is plenty of blame to go around - the original problem goes back to banks telling Annie's that they could afford a bigger mortgage and Annie buying a house she couldn't afford
Ali pointed out that there is plenty of blame to go around - the original problem goes back to banks telling Annie's that they could afford a bigger mortgage and Annie buying a house she couldn't afford
The second issue Ali explained dealt with understanding credit. The banks are now scared and have lost trust in individuals, stores, suppliers, etc and have started reducing credit lines even for people who pay bills on time and have not abused their credit. This reduction in credit effects stores and suppliers who then have less business and cut jobs which drains money out of the economy; nearly 1 million jobs have been lost in 2008 which hurts the economic system. People who have their credit reduced will also see their credit score reduced even though they don't deserve it.
The benefit of the bailout for everyone is to put money back into the system so that it can trickle down allowing people in middle America to keep their jobs and credit and not make the situation worse.
VIDEO:
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