COMPARE AND CONTRAST OF THE GOVERNMENT BAILOUT PLAN AND ALTERNATIVES
Jackson State University
Due to the recent economic turmoil that the country is currently facing, the President and certain members of congress have proposed what some call a last ditch effort, a bailout, to stall the recession and begin re-strengthening our economy. The bailout that recently passed, however, is actually just a revised version of an earlier plan that was previously rejected. In addition to these two plans, there are many economists, businessmen, and politicians that have come up alternatives to a plan that they believe is too brash for the current situation. The purpose of this paper is to analyze the plan that passed versus the plan that was rejected, as well as alternative plans from some of the most economically and politically respected people of our time.
The main provision of the plan that passed is “Troubled Asset Relief Program”, which gives the U.S. Treasury $700 Billion to purchase bad mortgages and other assets from failing banks. In addition, the government will get shares in participating companies so that taxpayers get a share of future profits and benefit if their shares rise. The plan also limits excessive compensation for executives at these failing banks, also known as “golden parachutes”. The treasury can also modify mortgage terms to help struggling homeowners avoid foreclosure.
These provisions alone, however, were not enough to gain a majority congressional vote. To “sweeten” the deal, a couple more provisions were added, including a temporary increase in federal insurance on bank deposits, raising the amount of savings protected in the event of bank failure from $100,000 to $250,000. In addition, there were $149 billion in various tax breaks for individuals and businesses over the next 10 years, partly offset by $42 billion in tax rises. Due to these new provisions, as well...