Can someone please explain the bail out and the financial crisis to me?

Details please.Can someone please explain the bail out and the financial crisis to me?
Irresponsible, greedy companies that are failing and asking us Americans to give them our tax dollars so they can continue to be rich (something they wouldn't do if we were in their shoes). It's funny how they believe in a free market system, yet when they fail, they say "Oh, well normally we wouldn't stand for this...but this is a unique situation so... bail us out American tax payers!"Can someone please explain the bail out and the financial crisis to me?
Basically the banks screwed themselves and no longer have any funds to back loans.



What does this mean to you----



Almost all employers have a revolving credit with their bank to cover operating expenses including salaries... Why do businesses do this ...well in retail it can take up to 6 weeks from the time an item is purchased with a credit card for that money to show up from the credit card company into the stores account. THe store has a revovling line of credit with the banks to cover operating costs in case this cycle is interrrupted for any reason at any time.



For engineer, doctors, and etc... they get paid usually in installments which means that many rely on revolving credit to meet payrolls between billing cycles.



Banks are denying and retracting these lines of credits to almost all businesses including doctors offices, grocery stores, engineeering firms, no matter how successful these businesses are and no matter how great their credit is.



The bailout will in a way allow banks if they choose to, use the money to continue giving our employers their lines of revolving credit so that we can keep our jobs.



Banks have foreclosed on so many properties that they no longer have cash coming in and have tons of unsellable properties.



The banks choose to foreclose on these properties instead of working compromises with the owners. Other banks just gave 500,000 mortgages to people only earning 90,000 a year and when their property values dove the banks readjusted their payments which were reasonable making their payments impossible.



So the bottom line is that these bankers screwwed up and we are all paying the price. Can someone please explain the bail out and the financial crisis to me?
The watchdogs were asleep and allowed the banking industry to engage in extremely exotic and risky, but profitable short term, ventures.

The banking industry lent money, effectively free money, to non creditworthy customers in order to realize a short term profit. Property values realized inflated prices due to the free money that was being passed out for morgages at introductory teaser rates. Most of these mortgages were adjustable and always adjustable upwards. Primarily due to the financial stupidity of the populace a lot of these loans were made with no collateral, the morgages were bundled into financial instruments sold globally. When he adjustable mortgages began to ratchet upwards the defaults began. Since the mortgages were bundled no one really knows who owns the property when there is a default. Not that it matters, all that really matters is that as the defaults escalated, the losses to the banks also escalated, these are loans the banks cannot expect to ever collect. As more real estate becomes available, the less the real estate is worth and since the mortgages were based on the inflated real estate values, even the property that the banks have, theorically, as collateral are not equilivent to the loan values. Ergo, billions of dollars of losses, reduction in GNP, reduction in national wealth, less money to lend. Credit is the lifesblood of the economy, both making loans and accepting loans. Credit has dried up, businesses cannot run their day to day operations without credit, they lay off people and fold.

Investors are unloading stock at bargain basement prices, again lose of GNP.

Paulson wants 700 billion to act as a safety net for expected continued financial collapses, sort of like Medicare for the banking industry. Since the bill failed, the financial has not safety net and investors are bailing out of banking stocks and heading for the hills. Banking stocks are worthless, banks do not have enough money to meet their commitments and they fail. The FDIC does not cover everything.

That is about as short a version as I can make it.
I would like to answer that but it will take forever to write. If you go cnn.com there are articles about everything or on TV tonight on Nightline there will be a special on it.