Saturday, October 4, 2008

At last, the Wall Street bailout materialized!

The bill passed by the Congress on Friday to bail out the ailing financial institutions at a cost of $700 billion has given the much needed relief to one and all and will help to reduce the panic in the global stock markets. It is expected when the government steps into the blood bath, the bleeding in the market will hopefully stop.
But wait… Don’t jump in happiness and there is a lot to do to lift the ailing US economy and in turn the global economy. What can you expect from the passage of the bill?
Stock Markets
A cooling in the nerves of the stock market is expected in the days to come along with the return in the confidence of the investors. The markets are expected to be less volatile but with the cooling global economy and lower profits for the American multinational companies will have a negative impact on the growth of stock markets.
The banks are safe. The bill makes it clear that depositors need not worry about their hard earned money because the amount of deposits covered by the FDIC is increased from $100,000 to $250,000 and there is no need to get scared even if the banks fail. The recession is already on and the economic downturn will add oil to the already burning fire.
A latest estimate says that the job cut is 159,000 in the month of September and is the worst in the last five years. The picture in the coming months is not rosy either and more job cuts are expected forcing the customers to be spendthrift, deepening the gloom. The major sector that contributes to the US growth, the auto industry is deep in trouble and its sales in September touched the lowest point in the last 15 years.
Tax relief?
The ordinary US citizen can expect a lesser tax relief than expected because of the bailout package. But there is good news in that the tax won’t be raised because the sale of the troubled securities would yield dividends to finance the extra burden. The loans advanced by the banks to consumers will become scarce, let it be for car, home, credit card purchase or vacations.
But homeowners have the option to renegotiate their loans with the bank but time only will judge how effective these measures are?

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