I am dumb (part 2).
Also… I need a Dummies Guide to the Banking Crisis. I’m not sure I understand what’s going on. Tell me if this is the correct elementary-school-level of understanding:
Banks lent out tons of money on mortgages that people couldn’t actually pay for. So when people couldn’t actually afford the houses, they defaulted on the loans and basically aren’t going to have to pay anything back since they can’t. Unless some rich person buys up the house/mortgage, the banks won’t getting back the money they should. But bigger banks (like Lehman, etc) had previously bought up the little banks’ mortgages/debts, so they could earn the interest instead. But now the bigger banks are in trouble (the little banks are out of the picture), because they aren’t getting their money and collectively have millions/billions/trillions dollars that they are owed and can’t even keep themselves in operation?
So is that where this government bailout is coming into play? So that these bigger banks can continue operating? They’re not going to be able to make their bad mortgage money back, though, are they? They’re just up shit’s creek on that money? So how does the government get its $700 billion back?
If I went to the bank right now to withdraw money, and so did everyone else, we wouldn’t all be able to take out our physical money, right? But FDIC/insured money yadda yadda means that no matter what there has to be enough money in the banking system to cover everyone’s saved money. So is some of the bailout because the government needs to pump in some dolla dolla bills so there’s enough to cover it all? (This is the whole “run on the bank” thing? I keep picturing hordes of people racing to the banks in 1929, but as memorialized by “It’s a Wonderful Life.” Who says Hollywood can’t teach you anything?)
3 years ago