Both Washington Mutual (WaMu) and Wachovia have been building new banks in the Austin area over the past year or so. Thus, it seemed that those companies have been doing well. However, those who bank with WaMu and who were watching the morning news over the past two weeks were in for a great shock when they heard that their bank was going under and was being taken over by Chase.
Not only are banks being rescued, but now the government is trying to come up with a plan to "rescue" (the preferred term over "bailout") America's financial state altogether. While young Americans should use this opportunity to educate themselves for their financial future, they should not panic and make hasty decisions with their money.
Unfortunately, that's exactly what many Americans did on Monday, Sept... 29. Monday's record stock market drop of 778 points was fueled by the House's rejection of the "bailout" plan. Constituents in both parties then furiously called their legislators. However, Tuesday saw the markets jump way up.
First Washington Mutual Bank (WaMu) was bought out by JPMorgan Chase and Company, and this week Citigroup bought Wachovia Banks. WaMu became the largest bank to fail in U.S. history with $307 billion in assets. It's enough to shock those following the financial crisis.
On top of all that, mortgage companies, such as Fannie Mae and Freddie Mac, have been suffering, and many American homeowners are scared of losing their homes because they can no longer make the payments.
While the business of the financial moguls leaves most American young people feeling completely out of their depth, they feel not only the financial strain, but also psychological pressure.
When they hear rumors of the financial big dogs losing control of their companies, they can't help but be concerned about how that affects them. Yet, for the most part, the daily lives of average citizens will remain normal while government works toward a solution.
Most students may not have a mortgage to pay, but they are likely to have college debt and they would like to one day own a home. With the pressure on their minds of compiling debt in the future, it will affect young people's decisions in the present.
The economic implications of the current crisis are mostly seen in indirect ways. If people are nervous about the security of their assets, they're less likely to take risks and spend with the future in mind.
Students might cut back on college spending, renters might be reluctant to get into a mortgage, and investors will make decisions based on where their money seems most secure.
As of now, President Bush and Congress are still working on a financial bailout - or rescue - plan of $700 billion to get companies back in the black. Essentially, it would use tax-payers' dollars to save big financial company executives' wealthy backsides. Yet, both parties agree that such a bailout is necessary.
Washington may be near to reaching an agreement with stipulations that would dole out the money to be used over a period of time, create oversight boards, and limit executives' benefits and incentive pay.
Whatever it takes, it might require that American young adults' minds be put at ease over the future of their hard-earned dollars. Young people don't want to put their money into a sinking ship. Yet, they do put their trust in a government with checks and balances that has the authority to deal with individual companies, as well as the overwhelming big financial picture that the average American can't make sense of him/herself.
The American public should all take a step back from the TV screen, take a deep breath, and not make any rash decisions with their money at this tough time. Those who know their American history know what financial terror on a national scale can do to the nation when it gets out of hand.
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