Bailout bill to sustain economy

Congress passed a $700 billion bill designed to aid the ailing banks of Wall Street Oct. 2 in an attempt to help the U.S. recover from recent financial damage. The bill was first rejected by the House of Representatives Sept. 29 by a 228-205 vote. Students and education finance may be effected.

The Dow's falling 778 points the Monday after it failed was a strongly encouraging factor for the bill's passing the following week, along with added provisions, including $150 billion in new tax breaks. In addition, steps were added to the bill to limit home foreclosures and put restrictions on compensation to company executives. Despite the reassurance of the bill's passing, however, the Dow fell 125 points the next day, Oct. 3. Originally titled the "Troubled Assets Relief Program" and the "Relief Plan" but quickly dubbed the "Bailout Bill" by the media in reference to its bailing out Wall Street, the $700 billion bill is designed to buy up the bad assets of banks in trouble, wait for the market to become more stable, and then resell them, according to Time Magazine. By taking the debt weight off of the shoulders of companies on the brink, the plan's creators, including the U.S. Treasury secretary Henry Paulson, Chairman of the Federal Reserve Ben Bernanke and President of the Federal Reserve Bank of New York Timothy Geithner, are hoping that the money injected into the companies can stabilize the markets and help avoid a potential economic crisis. The $700 billion will be released in installments, beginning with $350 billion, according to The New York Times. Many Americans are angry about the bailout because they feel that the government should not give such a huge amount of taxpayer funds to banks that, in their financial misjudgment relating to bad real estate investments, found themselves in this mess in the first place. For others, it's worrisome and unconstitutional for the government to interfere to such a high degree in the free market.

However, according to Paulson, "They're angry and I'm angry too. But the average American doesn't understand the implications it has for them," he said, meaning that despite the banks' starting of the economic wildfire, the bailout is necessary in order to avoid an economic crisis that could trickle down and affect everyone.

Supporters of the plan, Time Magazine states, argue that the price of not taking a measure such as the bailout bill would spread the banks' current credit crisis "to hurt ordinary businesses and their workers." Paulson said that the bailout is important for "making sure that Americans have access to the credit that is needed to create jobs and keep business going." An article, "Bailout Bill, with Benefits for Student Lenders, Passes Congress," in The Chronicle of Higher Education said that the $700 billion bailout package mainly helps banks that hold failed mortgages but " will let the government purchase a wide range of assets related to student loans."

Congress approved an earlier bailout bill that aided student loan companies by allowing the Education Department to purchase assets gained from loans that banks issued as part of the government subsidized student loan program, the Chronicle said.

But a new legislation, which passed on a vote of 263 to 171, "raises the possibility that student loan providers will be allowed to go beyond the terms established by May's bailout and sell assets to the government that are based on older federal loans, as well as assets involving the private student loans that banks issue outside the government system of federal subsidies," the Chronicle outlined.

The decision was opposed by many groups, including the American Association of State Colleges and Universities. The groups argued that if private student loans were made eligible for government purchase in the mortgage bailout plan," the article said, "then Congress should give student loan borrowers the same protections that homeowners have, including the right to discharge the debt through bankruptcy."

But President Bush supported the bailout bill along with the American Council on Education, who said that the nation's credit problems was starting to have a negative effect on educational institutions. According to the article, Bush said the nation's credit crisis was beginning to have adverse effects on many colleges and universities.