How Bailout May Affect YOU

Vera Gibbons Cites Many Ways Your Pocketbook Could Be Impacted

(CBS)  Now that the financial rescue plan has been signed into law by President Bush, the immediate concern of most of us is, “What does this mean for my own bottom line?”

And Early Show financial contributor Vera Gibbons painted a mixed picture Saturday, basically saying credit will still be tight, but the lifeline from Washington to Wall Street should help on some fronts on Main Street.

In Gibbons’ view:

HOUSING MARKET

This won’t put an end to foreclosures, or send values back up (we need to work off some of the excess inventory of houses on the market before prices start rising again), but there should now be more liquidity and stability in the market, since this shores up banks' ability to lend, and makes more money available for loans. In general, it should loosen things up a bit in the credit market, and that's a good thing.

GETTING MORTGAGES

Here, the landscape has definitely changed: No more risky loans will be given out. There will be a return to “normal” lending standards. It will be back to basics. Nobody wants to assume any risk anymore in this environment. To get a loan, you’ll need a stable job, cash, good credit, etc. If you’re lacking in one area, you’ll have to make it up in another. For instance, if you have a low credit score, you’ll need a higher down payment.

Before applying, get that credit score up, ideally to the mid-700s: Pay bills on time, pay down balances on credit cards, etc. Lenders also take a serious look at your debt-to-income ratio and how much money you have left over after your down payment on the house and after your standard bills are paid each month. Go over your reserves, and try to stay as liquid as possible.

CREDIT CARDS

Credit card companies are in the same boat as all other lenders. They’ve been stung with rising delinquencies and don’t want to assume too much risk. As a result, they're clamping down on customers: tightening standards, reducing credit limits, increasing fees and rates, and pursuing collections more diligently. It’s a whole new landscape...

JOBS FRONT

Companies are in the same boat as consumers. The credit crunch has made it tough for them to get the funding they need to bring in new hires, or even make existing payrolls. There are particularly trying times for small businesses, which are the nation’s primary jobs generators.

But the job market’s woes aren’t just about the credit crunch. They also are the result of the slowing economy. As a result, the jobs market is expected to take additional hits in coming months. More layoffs are expected, with the unemployment rate possibly making its way up to the seven or seven-and-a-half percent range sometime mid-to-late next year.

RETIREMENT SAVINGS

There’s going to be greater oversight, greater scrutiny of executive compensation, and final deals at publicly-traded companies will be more transparent, so that may restore some confidence, but it's going to be long road back, financially. No one knows how long or deep the recession is going to be. We’re not out of the woods.

Lower your expectations. People have been spoiled by double-digit gains in the stock market.

Continue to save, keep investing, take advantage of any match your company offers to your 401(k) contributions (it is, after all, free money!), make sure your investments are properly allocated and, if you’re willing to assume some risk, think about doing some bottom-fishing for beaten-down stocks that look downright cheap right now.

CASH WILL BE KING AGAIN

In general, the economy is going to be much less leveraged. It will be an environment in which cash will rule. So, we’ll see households reigning in spending, not purchasing as many big ticket items, and forced to stop overindulging. They’ll have to start living within their means, which is something we'd gotten away from, because money was so cheap. Now, it's going to be a much less-leveraged economy, with smaller rewards as a consequence of less risk-taking.

[maiingan]

Some one said on The Early Show Tuesday 10/7/08 (not on this website yet) that we''ll get though it; we have before. It''s easy for someone with a good-paying job to say that, especially if she''s so young she didn''t live through the Great Depression. I''m also too young, but I don''t have a good-paying job. I want to say right now, in the Depression we had, after some time, the WPA. None of the pols are talking about doing anything like that for perfectly decent, capable Americans who are long-term unemployed. The bleeding hearts in & out of government seem to care so much for impoverished people in the Third World, but turn a blind eye to our own.

[dave19512]

Since the taxpayers are "footing the bill" for CEO''S mistakes in management and their GREED! We(the taxpayers) should have a say on what these CEO''S of any institution should make on their salaries and eliminate ALL THEIR PERKS AND INCENTIVES. CEO''S are way overpaid for the COMMON PERSON to have to make up the difference, while the CEO''S still make their salaries, perks, bonuses, etc. even after the taxpayers BAIL THEM OUT with our money. It''s not right!!!!!!!!!

[david393071]

Miss the point again.

This is like a Magic Trick.

Unfortunely, all of you keep looking at the distractor. Politics, Political Parties, Debates.

This is about Corporate Ownage of Corporate America. Especially Corporation Incorporated in Delaware protected by Court of Chancery. Who owns the Politicians, Government, Media, US Military, Justice Department, Law Enforcement, Lawmakers, you.

[lpgideon]

There is a cause of the problem, and an UNDERLYING cause that is rarely even discussed. In the early years of Clinton and the Democratic congress there was passed legislation that allow for banks to lend with more risky home buyers. At that time, it really was a good law. Houses were right at the price that most buyers could then afford and pay off. As time went on, the income of those buyers went up, but their payments remained the same. That was really a good law in that case. So, what happened? Somehow the cost of everything went up. Why? Maybe greedy producers, maybe unions demanding more benefits and wages, maybe more lenient lending policies. Maybe the realization by banks that they can offload the marginal debts to investment bankers. I believe that is is a combination of all of these. That makes the 1990''s era, which was good at the time, a farce in the 2000''s. This about it: A good law goes bad, the real underlying cause of the problem?

[Ribelles]

We are planting now the seed of runaway inflation and becoming a banana republic.
For many years we have had a stupid and in many instances corrupt government that has brought us defficits every year and has ruined the country. What do you expect. People deserve the government they have.

[Ribelles]

We are planting the seeds for runaway inflation.
We are on our way to become a banana republic.
We have had a horrible stupid government for years and now we are going to pay the price.

[tibu987]

It does not take a rocket scientist to figure the downward spiral we are in.

Limit the credit that the average American uses. Lay off many workers, 159,000 in September, keep the gas and heating oil cost high. Try to get by with less of everything.

No one is buying; less food, fewer cars sold, less retail sales, less driving, fewer medical visits, etc.

It takes the little guys to keep the wheels oiled, to keep the economy up. When the little guy can''t buy anything, the losses to the big guys increase. So, if the rich do not want to share their wealth with the little guy, they ultimately diminish their income also.

Trickle down economics anyone?

[davewrite1]

This disaster spells the end of Reaganomics. Starting with Reagan, supply-siders increased by national debt by a factor of 10, and it''s still climbing a half-trillion a year.
Hopefully, intelligent people will -- at last -- understand that fundamental free market economics don''t work, except on the up side and mostly for the wealthy.
Markets and government must work in tandem and a much fairer distribution of wealth should be the aim.