Revised Ballout Bill Passes with Minimal Promises
October 7, 2008
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WASHINGTON, D.C.–President Bush signed a revised version of the $700 billion bailout bill Friday, Oct. 3 after a week of worldwide economic turmoil following the House’s failure to pass the initial rescue plan.
When the House rejected the first bill, it resulted in plummeting stocks and the biggest single-day point loss in the history of the U.S. stock market. As stockholders watched the House struggling to pass the bill, more and more of them began to sell their stocks. Congress’s hesitancy in spending $700 billion, in essence, caused the market to lose $1.2 trillion. Markets in Japan, Belgium, France, and Germany all suffered as it became obvious that it would take some time before the U.S. debt problems were rectified. Other factors leading to the huge drop included news that Wachovia had sold its assets to Citigroup and that a number of European banks had gone under.
What caused the House to pass the revised bill? The amended bill had few revisions, including $100 million in tax breaks for businesses and the middle class, as well as raising the federal deposit insurance to $250,000. These revisions appear to be negligible in an economy that is suffering so much. Many Washington insiders feel that the bill was passed simply because something had to be done.
Although the bailout bill was signed into law, the work is not finished. The bill is the most government intervention the private market has seen since the Great Depression, and it is uncertain whether more government involvement will be issued in the future.
“It’s complicated, and we’re going to make sure whatever we do is done in a deliberative fashion,” President Bush stated after signing the bill.
According to Michael Farr, investment counselor, author, and CNBC contributor, this bill will not fix the economy. He believes that because of the economic cycle, it will be a year or so before any great improvement is noticeable. Farr and others view the bill not as a solution to the problem, but as a temporary fix to keep the economy afloat.