Basically all of these financial companies are taking a beating because of the sub-prime mortgage crisis, which in turn effects all of their other lending. Then the insurers like AIG who had insured the mortgages started taking a beating, and they had to put up more collateral as they were paying out a lot on the mortgages they had underwritten. So all of these major companies are dragging the stock market, and consequently all of our economy down, which makes everything worth. The government had to step in to prevent a financial collapse, by bailing companies out and issuing a ten day ban on short selling stocks (which would drive everything down as well), the likes of which has not been seen in 79 years.
That was 4 sentences, and is really simplistic. The ultra simplistic one sentence response is: They had to do it because all of these major financial institutions where going to tank and the US economy was going to resemble the Afghani economy without someone stepping in to stop the losses.
Frannie May and Freddie Mac are government subsidized lenders for student loans and low income mortgages, the government is pretty much obligated to bail them out anyway. Even so it's going to be really hard to get student loans and low income mortgages for awhile. It's going to be a bumpy two years. Keep your 401K contributions at the same rate (they're buying more now and they will adjust as the market corrects itself), but any investments you have that aren't in guaranteed CDs get out of and keep the money in cash in an FDIC insured savings account (if you have more than $100,000, split it into multiple accounts at different banks b/c FDIC only covers 100k).
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timeasmymeasure
no subject
Date: 2008-09-20 12:48 am (UTC)That was 4 sentences, and is really simplistic. The ultra simplistic one sentence response is: They had to do it because all of these major financial institutions where going to tank and the US economy was going to resemble the Afghani economy without someone stepping in to stop the losses.
Frannie May and Freddie Mac are government subsidized lenders for student loans and low income mortgages, the government is pretty much obligated to bail them out anyway. Even so it's going to be really hard to get student loans and low income mortgages for awhile. It's going to be a bumpy two years. Keep your 401K contributions at the same rate (they're buying more now and they will adjust as the market corrects itself), but any investments you have that aren't in guaranteed CDs get out of and keep the money in cash in an FDIC insured savings account (if you have more than $100,000, split it into multiple accounts at different banks b/c FDIC only covers 100k).