Consequences of Not Bailing Out Wall Street?

[ilconsiglliere]

I have been giving this a lot of thought lately.  The bill for the bail out to Wall Street will be in the trillions. But I have an interesting question though and I have not been able to find an answer of any kind despite googling it for lots of hours. What would have happened if we did not bail out the banks on wall street?

Obviously the stock market would have crashed even further than it did. But what other consequences would have happened. Credit would have dried up but that already happened. Would the currency have become worthless? All of a sudden your credit car does not work? Companies cant get short term credit which happened also. More layoffs? Because the layoffs are continuing and the current administration thinks a 10K reduction month over month in claims is a "green shoot" - hate to tell you this but that is a statistical error.

Other than the Wall Street people losing their job and the repercussions in the local economy how does this impact the rest of us? I would just like to understand what this means.

For myself I have been totally in cash since 2006/2007. I nailed it close to the peak. Sold my house as well near the peak. Put everything into government bonds and FDIC CD's. So essentially I am liquid.

Any opinions or articles are appreciated.

[David Randolph]

The consequences of not bailing out Wall Street would have been political not economic. We are going to pay more because of the bail out process, but spread out over time. That allows it to be more "hidden" from the general public. We are going to pay with increased inflation over many years.

 

The consequences of not "bailing out Wall Street" would have been political. First off, a lot of the "bail out" money wound up going over seas. If we had not done the bail out, there is a good chance that the Chinese economy would have crashed also - which would have caused a second revolution and we can not predict what the outcome would have been. Secondly, a lot of other countries would have had similar major political issues. (What would have happened to the Middle East if the PetroDollars suddenly lost value or we had to cut off sending money to Isreal and Egypt?) In short, we bailed out Wall Street to try to keep the current political situation stable.

[ArnoldW2]

I don't agree that the bailout is justified. However, it is still worth reading opposing opinions. Here are some headlines and links.

This Bailout Is Great!
http://www.fool.com/investing/value/2009/01/30/this-bailout-is-great.aspx


Why We Must Move a Financial Rescue Package Forward
http://www.huffingtonpost.com/jim-pivonka/why-we-must-move-a-financ_b_131496.html


The best argument I've read *for* the stimulus
http://www.marginalrevolution.com/marginalrevolution/2009/01/the-best-argument-ive-read-for-the-stimulus.html


The above "best argument" came from the PBS interview at the link below
Warren Buffett, Extended Transcript
http://www.pbs.org/nbr/site/onair/transcripts/090122t/