Got an extra $5,000 to spend?

Image by Getty Images via Daylife

Got an extra $5,000 to spend?

Yep, that is how much you and every American will be paying for the government bailout. This does include your children. Luckily, it doesn’t include your cats, dogs, and fish. This year’s bailout includes the following items: $700 billion proposed Wall Street bailout; $85 billion for AIG; $200 billion for Fannie Mae and Freddie Mac; $150 billion stimulus package (your $600/person rebate check); $438 billion projected Federal deficit; and a small $29 billion bailout for Bear Stearns. Makes you glad you got that rebate check earlier this year, doesn’t it?

The scary part is that this number will probably grow. The Treasury Department is really just asking for a blank check and they won’t have any accountability to Congress or anyone else. There is the potential to include more than problem mortgages in this package. Car loans, student loans, and credit card debt could all be included in this package. This $700 billion Wall Street bailout could grow to over $2.5 trillion dollars.

Just in case you were curious, this won’t help only American banks - it will also help foreign banks. Pretty nice of the US taxpayer to help the world. Though, I guess we did help create the problem.

It was all about trying to take advantage of the system. The investment banks came up with inventive ways of repackaging debt. The rating agencies went along with something they obviously didn’t understand. Then, we didn’t think and went along with their greed. Why? Because we are just as bad as Wall Street is.

Some people bought houses with “neg am” loans. What a concept – you can make a payment, but it doesn’t have to even cover your interest payment - just go deeper in debt. The other cool idea was tapping into your new found “equity” in your home. Just refinance or take out a home equity loan, take out some cash, and go deeper in debt. Well, at least you got to buy a Gucci bag and a jet ski. Hope it was worth it.

Yell and scream at Wall Street and the government all you want, but we are just as much to blame.

Luckily, www.104inc.com isn’t going to be asking you to help them out. Go check out their website to get away from this mess.

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Will you be my sugardaddy?

Image by Getty Images via Daylife

What a mess.

Lehman Brothers went belly up this weekend. Bank of America acquired Merrill Lynch. American International Group (AIG) is on the edge bankruptcy or being acquired for pennies on the dollar. Last week the federal government took over Federal National Mortgage Association and Federal Home Loan Mortgage Corp.

When JP Morgan Chase took over Bear Stearns last March, the US government set a potentially ugly precedent of not letting financial companies fail. This happened again with the takeover of the quasi-government agencies: Freddie Mac and Fannie Mae.

Rumors of Lehman Brothers demise started last week. The Government went into the weekend saying that it wouldn’t bail out Lehman. The Government put the burden of finding a solution on the private sector. Several financial institutions were in the running, but it boiled down to Bank of America or death. The answer was death.

It was kind of strange: Bank of America started the weekend in talks to acquite Lehman Brothers, but ended up with a different partner: Merrill Lynch I guess they didn’t want any more subprime garbage after acquiring Countrywide.

The next piece of the puzzle is seeing what happens with AIG. AIG was downgraded by Standard & Poors, Fitch, and Moodys. This will cost AIG billions of dollars. They now need to raise capital and it looks like they will have to sell assets or find a sugardaddy.

The catch to AIG is how much money they need. They used to have a market capitalization of around $200 billion. At the end of the day on September 15^th, their market capitalization was around $15 billion. They are looking for financing of $50 billion. Why would someone lend a company money for 3x their market value? Will they be too big to fail? Or will we the taxpayers be their sugardaddy?

Check out www.104finance.com for more information about this crazy financial situation we seem to have gotten ourselves into.