Newswise — Not only was the $700 billion bailout that died on the House floor Monday not a bailout, but it most likely wouldn't have cost taxpayers $700 billion, said noted financial advisor and Texas Tech University associate professor of personal financial planning Deena Katz.
"That would only be true if every single investment purchased by the government was worthless," Katz said. "Although I can't be sure, I expect that with patience, the ultimate cost to the government will be modest and possibly even profitable."
However, average taxpayers are likely to suffer if Congress cannot find a palatable compromise, she said; while political leaders did not effectively explain the enormity of the looming financial crisis to voters they must persevere for the sake of their own constituents.
"In spite of warnings by academics and economists from all ends of the philosophical spectrum " by Republican and Democratic leadership, by the secretary of treasury, the head of the Federal Reserve, the president and many thoughtful, reasonably knowledgeable observers such as Warren Buffet " that failure to pass the compromise legislation would subject the global financial system to significant risk, the vote was 228 against and 205 in favor," Katz said. "What were they thinking? I'm pretty sure I know. They were thinking, 'My pollsters tell me that the voters are 100 to 1 against this $700 billion bailout. If I vote for it, I'll lose the next election. That's a no-brainer.'"
Katz is a principal of Evensky & Katz LLC in Coral Gables, Fla., who has been named one of the 25 most influential people in the financial planning industry four times by Investment Advisor magazine. She is a member of the Financial Planning Association board of directors and author of six books on financial planning and practice management topics.
Texas Tech is a pioneer in the Personal Financial Planning field and played a major role in raising industry standards. A member of the original 20 programs to offer board-certified personal financial planning degrees, Texas Tech helped pave the way for the creation of more than 300 current financial planning programs nationwide.
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