It’s impossible to know, but here is one possible outcome.
There are many banks that did not participate in the sub-prime market, many local and smaller banks that have the same ability to handle all the transactions (debit card, credit card, home loan, car loan etc) that the big boys have (albeit certainly not at the same scale). If Congress told the big banks that they would not receive $700 billion in bailouts, but rather, they would let the free market correct itself by letting them fall to the value the market believed was fair, and allowing smaller banks to gobble them up at fair market value, and using the $700 billion to aid home-owners to refinance at a rate they could afford.
The president could have mandated that anyone who was going to lose their home (only the home they live in, not investment properties) would not be allowed to be evicted during an interim period of one year while the transition took place. A temporary moratorium on mortgage payments (sub-prime accounts in default only) would also ensue, until a successful refinance had occurred. This would give homeowners time to find a new job, and save a little money while the value of their home continued to dwindle. Homeowners experiencing hardship could apply for federal monetary aid.
Meanwhile, credit cards would continue to work. The government would temporarily take-over payroll of the bank (to make sure customer service continued, and cards were still accepted, and accounts still monitored, electric bill was paid, Internet based transactions still continued etc.) as it let the market correct itself, and then auctioned off the remaining assets of the bank to smaller banks who would ultimately be getting the deal of a lifetime.
Smarter CEOs who did NOT participate in sub-prime lending would have acquired power over the banks assets and accounts, and from then on, we could have faith that an ecosystem of more conservative investors were at the helm of the largest financial instruments of the modern world. This doesn’t mean that they would be perfect, but at least there is a strong chance they would not get us into the same kind of mess again, based on their previous unwillingness to lend in the sub-prime market.
This ultimately would not have collapsed the economy. It WOULD have collapsed the economy of wealthy banker CEOs. It would have restored faith in the American government to only intervene on behalf of (and in order to protect) the working class American people from greedy, out-of-control corporate behemoth CEOs making over 300 times the average worker’s salary.
Or…. Conventional wisdom is correct and the greatest depression known to mankind would ensue globally and it would take decades to recover.
If I were president during that time, I would not have approved the bail-out. I would have followed the course above. Notice, I wouldn’t have just stayed out of it. If you’re the president, and you can decide to put $700bil into the economy in a situation like this, the decision is clear that I would NOT want that money going back to those who created the situation in the first place. I would want that money going directly to affected consumers. Those sub-prime lending leaders should be punished financially by the free market they compete in. But average working people should not be punished by a market being manipulated for maximum gains by greedy corporate bankers. They deserve a government who will stand up for them, and have their back.
FOLLOW BELOW THIS NEWS CAREFULLY!!! IT CAN CHANGE YOUR LIFE.
Major sites such as: BBC, FOX5, CNN, CNBC, NBC NEWS and many more are warning of an imminent collapse in the coming years!!!
Prepper1cense 