Bail Out Facts

As election season gets in full swing, I wanted to take some time to look at some of the financial issues that are sure to come up. We all know politics, elections, and even politicians themselves are prone to glossed over facts that make positions look better. Therefore it is important for every voter to know the facts before the election rolls around so that they can make the most educated decision possible. The decisions from the leaders of this country are important, whether you are just starting out on your credit journey or have years of experience with credit and debt. The first topic of conversation: the infamous bailout.

Although many politicians fail to mention it, the bailout actually began with the Bush administration before President Obama even took office. Once it was clear that the worst recession since the Great Depression had helped changed the party holding the white house in 2008, President Bush gracefully bowed out of office by beginning the bailout process that President Obama vowed to execute when he took office. In total since late 2008 a little over $600 billion of bailout money has been paid out. Most people know that the government “gave” out billions of dollars, but many do not know what happened to that money.

Republicans and Democrats alike have an uncanny ability to draw directly opposite conclusions from the exact same natural occurrence. Often times Republicans frame the bailout as a socialist government giving out money to over 900 private companies. They frequently claim that the government bailout cost hundreds of billions of dollars. In reality however, out of the $603.8 billion that the government lent out to private companies in the form of loans, all but $197.6 billion have been repaid. Although this is still a lot of money of outstanding loans, it is far from the government just giving out $600 billion to private companies. Additionally there are currently only around 40 companies, most of them small banks with very small loans, which will never pay back the government at all. Possibly even more surprising to some, the government actually made money one some of these loans! When the government loaned Citigroup $45 billion to support its operations it not only paid the government back but also paid back an additional $12.5 billion in profit as well.

Democrats however, claim many things about the bailout that may not be completely accurate as well. One instance, which President Obama has been very proud of in his Presidency, is that he claims that Detroit, aka the auto industry, have repaid all of the loans from the bailouts. In reality when Obama made that proclamation in June 2011 the auto industry had repaid the amount of money borrowed under his administration. As mentioned earlier, President Bush actually began the bailouts to the auto industry. In order to consider the debt completely repaid part of the loans had to actually be forgiven by the Obama administration.

So what’s the conclusion for the average voter? The truth, like many other political issues, seems to lie in between the two parties with both sides holding some merit. Yes, the bailouts will likely in the end cost taxpayers something. This however, does not mean that it was a socialist take over by the government. Most of what the government does takes money and when compared to other endeavors, such as defense spending and Medicare, getting $600 billion worth of government support at the current, but decreasing, cost of $197 billion isn’t really too shabby.

Sources:
FactCheck.Org – Annenberg Public Policy Center
Dailyfinance.com

Stephen Padgett

Stephen Padgett

Stephen Padgett is a current junior at the University of North Carolina at Chapel Hill. He is working toward a BA in Economics and Political Science and plans on graduating early in December of 2012. Although he does not know what he wants to do for his career, he is looking forward to an opportunity with Credit Suisse’s Operations Team this summer in Raleigh.

Financially Stephen grew up in a family that preached saving and living below your means. That, in part, translated to his interest in Economics, especially how economics can affect individuals’ financial lives. Through his financial markets class in the fall of 2011, he furthered this interest by analyzing macroeconomic events. Stephen believes that finance, personal finance in particular, is a subject severely left out when it comes to public schooling in this country, and it is a problem that has manifested itself and contributed to many of the problems seen today. He also believes that education is the key to improvement and hopes that through his writings he will be able help people learn about finance, macroeconomics, and how to be financially savvy for the future.

In his free time Stephen enjoys playing and watching sports, wakeboarding, sailing, and country music. At UNC he has participated in Strive for College, UNC Dance Marathon, and UNC Relay for Life.
Stephen Padgett

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