THE+PROS+OF+THE+BAILOUT+ASHLEYKIM

 "I proposed that the federal gov't give ,,,,,,...,, money to the banks to end this crisis  ” - George Bush



**Who agrees with the bailout?**

Minority of the tax payers, Financial institutions that have been bailed out, Some economists, Most government officials

**Why do they agree with the bailout?

,,,,, 1.  **


 * What they say**: 
 * Bailout is necessary to prevent the economy from completely sinking into recession
 * If banks are not bailed out we do not know the exact impact it will have, however we can pretty accurately speculate as to what will happen based upon basic psychology and history.
 * A bank run: If there are rumors that financial institutions are going to go under then the banks are going to be overrun with people who want to withdraw their money before the bank goes bankrupt and loses it
 * However the bank never has all the money the people put into it, and usually only have around 1 billion as cash to give out during transactions and the rest of the money is in quite illiquid investments
 * The bank cannot pay back all of its creditors
 * More people want to withdraw their money
 * If banks go bankrupt then the people will ultimately suffer because those that had an account in the bank will lose money etc.
 * The economy is hugely reliant on banks
 * Banks lend to investors and manage money
 * Banks lend money to people via credit cards
 * Will completely shatter consumer confidence - to see the impact of consumer confidence go here
 * Mass unemployment
 * The investment banks and other financial institutions employ a lot of people


 * media type="youtube" key="gX9aKDeAOz4" height="344" width="425" ||
 * This video shows how the collapse of one bank could cause a chain reaction and thus cause the bankruptcy of multiple banks - one of the main reasons why the government thought a bailout was absolutely necessary. ||


 * What others could say**:
 * Even though this speculation is based upon a lot of solid reasoning it is still speculation and no one knows what will happen to the economy in the future
 * Even though we are preventing economic collapse in the short term we are dooming the economy in the long term

Although it is not completely certain, this seems pretty likely, and an economic recession of this magnitude cannot be something which is easily recovered from, and seems as though it would have a very serious impact on the economy.
 * Strength of the first argumen**t: **9/10**

**2. <CDOs have worth> **


 * What they say**:
 * As stated here, the banks say that the CDOs are actually worth more than the market value
 * They say that they are worth something because these assets are backed by mortgages which are backed by houses
 * Even if people do not pay back there will still be houses
 * They are not worth nothing - which is basically what the market is willing to pay for them
 * The market is simply refusing to pay the real value for these assets
 * The government is not just giving money to the banks but "investing" in them
 * Eventually the government will get most of this money back and may even make a profit, because these assets are backed by real assets such as houses - how can they have "no" value


 * What others could say**:

media type="youtube" key="RkIM0Mbc8YQ" height="344" width="425"
 * The video is essentially showing how these CDOs could have no or a lot less value than the investment banks are saying they are worth
 * It is the most likely that the CDOs that they investment banks have are of the most risky sector - or at least the middle sector, which would also lose some money
 * This is because __most investors are required by law to invest in the safest investments__, only the senior CDOs are ranked AAA - which means they are the safest
 * They would be required by law to invest in them
 * The riskiest sector would have very few investors: hedge funds.
 * This would mean that the CDOs would not have much value to them:
 * A lot of people defaulted and housing prices dropped
 * The riskiest CDOs would take the hit from this

If these CDOs were worth anything close to what the banks are saying they are worth, then other companies would have bought them for this price - it is because they are completely overstating the value of these CDOs that they are not selling on the market economy - they are not selling them for market value. Furthermore, as illustrated in the video above, it is highly likely that these are the riskiest CDOs, which would be worth a lot less, if not nothing, because they took the hit from the mortgage defaults.
 * Strength of first argument**: <span style="color: rgb(255, 0, 0);">**1/10**

<span style="color: rgb(255, 0, 0); font-size: 14px; line-height: 21px;">**<span style="color: rgb(0, 0, 0);">3. <span style="color: rgb(0, 0, 0); background-color: rgb(255, 255, 0);"><Consumer Confidence> **


 * What they say**:
 * The only reason the bailout may not work is because of consumer confidence
 * If the bailout does not work, it is not because of a flaw of the plan, but because there is no confidence in the plan
 * Because of all the opposing voices Americans are beginning to doubt the bailout
 * More information on how consumer confidence affects the economy


 * What others could say**:
 * In fact, this is not the "only" reason why the bailout is not working, and here it outlines the various other reasons why the bailout may not work in both the long term and the short term - none of them due to consumer confidence
 * Furthermore, it should in fact be the other way around - consumer confidence should not cater to the bailout plan; the bailout plan should cater to consumer confidence
 * The bailout plan should show enough promise that the citizens can be confident in the plan
 * The various flaws that have been found with the plan which show why it is not a very good solution will not go away because the citizens kept in the dark about them

It may be a factor as to why the bailout is not working, but consumer confidence is evidently not the only factor. Had the bailout been strong in other areas there probably would be consumer confidence in the bailout.
 * Strength of the first argumen**t: <span style="color: rgb(255, 0, 0);">**3/10**

<span style="font-size: 180%; color: rgb(255, 0, 0);">There is no other solution to the crisis that would work
 * <span style="background-color: rgb(255, 255, 0);"><The final argumen **<span style="background-color: rgb(255, 255, 0);">**t>**

<span style="color: rgb(255, 255, 255);">,,,,,,, there is.
 * ..in fact,**

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