Bail-Out Plan

On Friday President Bush signed the massive bail-out plan into law. Good news, right? While this plan is supposed to help wall street, what will it do for me? Here is my attempt of trying to understand a little more about what this bail-out plan means for the majority of the people in America.

Taxes

In order for the bill to be passed, Congress added $100 billion worth of tax breaks to it. Some of these included tax relief to disaster victims and incentives for renewable energy resources. The bill also requires all private health insurance plans to offer mental health and substance abuse coverage as part of their insurance plans. Another fix was to the alternative minimum tax. The AMT was supposed to make sure that the rich still end up paying their share of taxes, but in the end millions of middle-class Americans were taken by it. Many of these people will now catch a break under the new bill. Everyone wants to know, who is paying for all these tax breaks and the $700 billion being used to buy up bad mortgages? Well, eventually us, the taxpayer will have to foot some of the bill by tax increases in the future. The government is hoping that once the market settles, home prices will go up which will therefore allow them to make money on these "bad" mortgages.

Housing

In theory this bill should repair the credit market which will allow better mortgage rates and more loans to be available for people to buy houses. Does this mean houses will now start to go up in price? No, not so fast. There are so many houses that are being dumped onto the market that are foreclosed and bank-owned, that when they sell for a very low price, that price becomes the new median for that neighborhood. While it is still going to be harder for a person to get a mortgage- they're going to have to put up more money, the hope is this "rescue" plan will allow for more loans to be available (compared to if this plan was not approved). Therefore, the hope is eventually this may help us get out of this housing recession. Still, what does this mean for me? As a potential first-time home buyer, with house prices so low this is the perfect time for me to buy. This bill will hopefully allow me to be able to get a mortgage, of course I will still have to put a lot more money down, but there will be a loan available to me.

Overall, no one really knows if this bail-out/rescue plan will work. Nothing like this on this big of a scale has ever been done before. Now it becomes a game of wait-and-see.