Why is the government planning to spend hundreds of billions to bail out financial companies?
Because we’re all caught in the shakeout already, not just companies directly linked to troubled mortgages. Last week, the credit crunch had reached crisis levels: Banks were charging exorbitant fees to other banks seeking overnight loans; credit card companies like American Express were slashing credit limits for many typically creditworthy customers. The failure of major financial companies could inflict more damage on consumers’ credit cards, auto loans and home mortgages, said Patrick Kelly, assistant professor of finance at the University of South Florida. And that would be particularly painful for an economy like Florida’s, which is already struggling through a housing meltdown and rising unemployment. “It would definitely make … mortgages much more difficult to get, which would mean the housing market would get even worse,” Kelly said. “I’m not saying instantaneously, but weeks, months, you can’t know.” How much will this cost us? The Treasury has proposed creating a $700-billio
