As a layman out of the U.S. can somebody in economics tell me why the U S Govt bailed out the banks ?



Was it a free lunch or were there conditions behind the bail out, is what I am interested in. I know the collapsing of the banks due to heavy loan disbursements against mortgages. They collapsed because the people having taken those loans, lost them in the Stock market etc and they cannot repay the loans and instead preferred to surrender the mortgaged property to the Banks.

4 Replies to “As a layman out of the U.S. can somebody in economics tell me why the U S Govt bailed out the banks ?”

  1. i am not from economics. still i try to answer u.

    if they dont bail out there will be a cascading effect. i.e, every thing will fail.


  2. The major reason as you have pointed out is the Credit crisis. What it means is that the people who have brought loans from these banks are unable to repay it. These banks have issued the loans without properly checking the borrowers background and their ability to repay the loan


  3. Buddy, The government started this bail out plan to help the economy recover from the sub prime mortgage crisis. to know more about this crisis check out: http://anandvijayakumar.blogspot.com/2008/10/subprime-mortgage-crisis.html

    This bail out package was aimed at stabilizing this economy. To read more about this bailout checkout: http://anandvijayakumar.blogspot.com/2008/10/emergency-economic-stabilization-act-of.html

    After the US Senate passed the $ 700 billion bail out package, we still haven’t seen any significant upside on the US Stock markets. People are wondering, “Isn’t the huge pile of money allotted by the Treasury secretary Henry Paulson supposed to solve the crisis?”

    Well its not as simple as we think… To know more check out: http://anandvijayakumar.blogspot.com/2008/11/will-700-billion-bailout-package.html

    Cheers,
    Anand
    mail me at [email protected] if you need any more details.






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