House shuts down $700-billion bailout bill

The House of Representatives voted against a $700 billion bailout on Monday that many hoped would help this country’s floundering financial sector. 
After the Monday 228-205 vote, the Dow Jones industrials plunged 777 points, the most ever in one day.
This affects everyone, even college students.
With no one confident in a market that has gone south, banks are less willing to loan large amounts of cash for cars, houses, long-term investment plans and student loans. 
“What’s happening is people can’t get loans so they can’t buy anything that requires a loan,” said Paul Polzin, an associate at the Bureau of Business and

Economic Research at the University of Montana. “The buyout is the administration trying to help out. I can’t say for sure whether or not the plan will work. History will decide that.”
Polzin, who has been used as a source in Economist magazine, said that because Montana primarily deals with wood products, mining, nonresidential travel and manufacturing, the state’s economy should be safe for a while. But in the long run, Montana will surely feel the effects of a suffering national economy, he said.
Of interest to young adults are interest rates and the availability of student loans.
“While everything right now is uncertain, I certainly wouldn’t be surprised to see this (buyout) affecting the process and certainty of student loans,” Polzin said. 
But it hasn’t passed.
UM Economics professor Ranjan Shrestha said the House’s opposition to the bailout will likely make for a longer-lasting recession.
“The objective right now is to avoid a disaster and increase confidence in financial markets,” Shrestha said.
Shrestha also said that the effects of a looming financial sector will be felt by everyone, not just the wealthiest investors.
“As production falls, firms will be less likely to hire more field type workers and more likely to layoff employees,” Shrestha said.
An Economist article, “I want your money,” said members of both political groups are hesitant to sign a $700 billion check.
According to the article, opponents on the left feel the plan just saves the butts of frivolous Wall Streeters and screws the middle class taxpayer. Right-winged opponents label the bill a dangerous act of socialism in a capitalist market, the Economist said.
Eventually a plan will emerge, but the contents of that plan are still up in the air. The House will likely vote on a revised bill later in the week.
Failing banks, governmental buyouts and a hesitance to loan aren’t anything new. Both Japan and Sweden suffered similar economic situations in the early ‘90s. Japan waited years to buy out its economy and suffered even more years of minimal economic growth.
The $700 billion U.S. plan is about 5 percent of the country’s gross domestic product.

kelsey.bernius@umontana.edu