WKOW 27: Madison, WI Breaking News, Weather and SportsBank bailout could free-up money for Americans

Bank bailout could free-up money for Americans

Experts say the government bailout of banks should make getting a loan easier, freeing up billions of dollars, that would, in theory, jump start the economy.

"The reason that we are in trouble is that the financial system appears to be at the point where its freezing up," said Mark Ready, Associate Professor of Finance at UW-Madison. "It's not working properly."

Loans move the American economy, according to experts. Problem is, too many people can't make the payments. When that happens, banks can't lend out money.

"People that are being told 'no' now are people with very good credit ratings," said James Seward, Associate Professor of Finance at UW-Madison. "It's not just people who can't afford to make payments and probably shouldn't be getting these new loans in the first place."

Under the proposed bailout, the government would buy back these bad loans, letting banks keep the money-making good loans, and lend that money back to people.

"It should be beneficial to consumers who buy houses, to companies that borrow money from a bank, credit cards, and so on down the line," said Seward.

"By buying up some of those assets, you stop the cascade, you stop the dominoes from falling," Ready said.

Unfortunately, experts say, the bailout is not free.

According to Seward, "Taxes will most likely be raised as a way to pay for it. Somebody's got to pay for it and that's going to fall on citizens."

But it could also mean more regulation and restrictions on who gets a loan. Experts say too many people, for too long, were buying houses they could not afford, refinancing, and treating their homes like ATM machines.

Said Seward, "A lot of us were interested in living beyond our means. And we're at a point where that's got to stop."