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Bailout Leaves Looming Confidence Crisis
Americans Still Not Out of "Financial Woods"
PRAIRIE VIEW- Financial fallout, tough economic times and pain are only the beginning of the coming crisis ahead for most Americans on the heels of Congress passing $700 Billion Emergency Economic Stabilization Act.
“Tough days are ahead,” said. Dr. Munir Quddus, Dean of Prairie View A&M College of Business. “There will be pain and many casualties of this financial meltdown on Wall Street.”
CREDIT and CONFIDENCE
Two key remaining concerns are not being discussed. One is the silent runs on the banks by consumers concerned about their money, saving and investments and the second concern is the health and state of the credit card market.
Americans owe credit card companies billions of dollars. Any glitch in payments, uptick in bankruptcies or shortfalls could cause big problems for banks holding these balances.
“This could be the next big bubble to burst,” he said. “Any system crisis impacts the entire economy. No one gains in this and all lose.”
According to Quddus, Americans could be facing higher unemployment, more small business failures and the type of slowdown that could mirror the 10-year recession in Japan following its own financial meltdown over a decade ago.
“This is all about confidence,” he said. “The bad part is it could have been prevented.”
Last week, the stock market tanked, trillions were lost, bank failures nearly spun out of control and news spread that the sub-prime housing market and financial bubbles burst nationwide leaving many financial institutions and investors holding bags of worthless paper.
RESCUE vs. RECESSION
Also, the latest unemployment figures is both signaling and suggesting that the United States is entering a period of recession.
“This has been building up for years,” he said. “This is the medicine the market needed. The key to getting through it is not to panic or become overly pessimistic in coming days.”
Quddus said the greed on Wall Street, big banks, deregulation and failure of government leaders and regulators to follow laws and protect investors and the American financial market contributed to the current financial problems and market uncertainty.
The rescue bailout legislation passed by Congress allows the Treasury secretary to use up to $700 billion, contributed by taxpayers, toward purchasing troubled assets from banks. It is the biggest government intervention in the economy since the Great Depression.
“Central Banks and regulators knew what was happening and did nothing,” he said. “Big banks set people up by over borrowing, pushing money and credit off on people and overextending them knowing they could not pay it.”
According to Quddus, getting past the bailout vote is only the beginning because despite it, the market remains unstable, some banks continue to teeter on the edge and credit markets are yet respond with confidence as a result of the move.
"The United States is confronting a serious credit crisis, and everyday North Texans, like Americans across the country, would pay the highest price. Hardworking Americans need access to credit to buy homes and go to college, and without credit, small businesses quickly go under," said District 30 Congresswoman Eddie Bernice Johnson. “Our next step is to continue to work to grow the economy—to create jobs and to lower gas prices. We also must reform how business is done on Wall Street—and fight corruption—so that these large financial firms don’t destabilize our economy again.”
Johnson was one of the 263 who voted to approve the financial bailout that passed the House of Representatives by a vote of 263-171.
She represents the 30th Congressional District of Texas, which, includes Downtown Dallas, Fair Park, Oak Lawn, Old East Dallas, Pleasant Grove, & South Oak Cliff; all of Balch Springs, DeSoto, Hutchins, Lancaster & Wilmer and parts of Cedar Hill, Duncanville, Ferris, Glenn Heights and Ovilla.
While falling short of predicting another Great Depression, Quddus said without serious oversight, more regulation and learning from past lessons, a long term recession is possible.
The days of “Wimpy Economics” are over. It is time for Americans to pay the piper.
“No more I’ll gladly pay you Tuesday for a hamburger today,” a market specialist said. “Bailout bill or not, its pay now or pay later… but taxpayers will pay for this.”