Industries that will Benefit from the Bailout
Posted by gbravo on October 6, 2008 in Business News, Uncategorized [ 0 Comments ]
The near-trillion dollar bailout of United States financial institutions by the government has been called a “savior” by both the media and elected officials. It has been focus of discussion in this year’s presidential election, and will be in the year’s to come. But who really stands to gain from the bailout? The following businesses should see glimmers of hope thanks to the money being poured back into their industries.
Obviously, the number one business that will benefit from the 700 billion dollar bailout is the investment bank. Institutional investment banks are essentially receiving mouth-to-mouth at a time when they are dead on the operating table. The cash infusion into these businesses will allow them to continue to support businesses throughout the world with their investments. In recent news many investment banks are folding during this financial crisis. On September 15th, Merrill Lynch was acquired by Bank of America in a $50 billion dollar deal. In the largest banking failure in history, Washington Mutual (WaMu) was recently purchased by JPMorgan Chase for $1.9 Billion dollars. Also, Wachovia is looking to be purchased by either Wells Fargo or Citigroup Inc sometime this week. The two companies are currently working with the U.S. government to settle their bids on the Wachovia Securities.
Nothing kills a bank’s marketing campaign more than…not having any money! The flow of cash back into the top tier financial institutions of this country will increase lending on down the line. In addition, the perceived stability will help maintain consumer deposits and small home and business loans.
Again, until things stabilize, nobody is lending much money to anyone. Few industries feel the negative impact of this fact more than the consumer auto industry. It is the ability to hand out a large number of relatively small loans that drives every car dealer from Alaska to Florida – and without it, the future looks bleak.
Although most Americans probably don’t understand the direct link between the bailout and their personal finances, the association of bailout-to-consumer confidence is a strong one. By passing a measure to bail out the country’s leading financial institutions, the U.S. government is saying, in effect, that everything is going to be “OK” and that shopping for consumer goods is acceptable behavior. Stores like Target and Banana Republic should reap the benefits of this inference. The holiday season will be the perfect measurement of consumer’s willingness to spend.
Stock analysts will tell you that the strongest stocks are those that maintain their value during a down economy. Through these recent dark times, the Internet sector has been one of the few areas of the business world that has seen a steady flow of investments. It stands to reason then, that when things begin to move forward post-bailout, the Internet economy will continue to grow.
The tourism industry
The weak dollar and an uncertain economic climate have really hurt the travel industry. The bailout, while not providing a quick-fix for the travel business, should at least give people the breathing room required for them to consider domestic and international travel. (NOTE: falling gas prices have already helped this industry see small trickles of renewal in the past several weeks).
Although the bailout plan has now been approved by the Senate, Congress and President Bush, things are far from rosy in the United States. In order to develop stability and confidence moving forward, changes must be made to the way we do business. Expect loan officers to be more stringent, and many institutions to become more conservative in the years that follow. De-regulation and free-spending have gotten us into this problem – and only more careful planning will see us through to another day.