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Jean Chatzky Headshot

Not a Bailout - A Rescue

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Remember this exchange from the movie The American President?

Speechwriter Lewis Rothchild: People want leadership, Mr. President, and in the absence of genuine leadership, they'll listen to anyone who steps up to the microphone. They want leadership. They're so thirsty for it they'll crawl through the desert toward a mirage, and when they discover there's no water, they'll drink the sand.

President Andrew Shepherd: Lewis, we've had presidents who were beloved, who couldn't find a coherent sentence with two hands and a flashlight. People don't drink the sand because they're thirsty. They drink the sand because they don't know the difference.

I don't know what it is about this election - from the overtones in Barack Obama's nomination acceptance speech to Maureen Dowd's fly on the wall "interview" of Jed Bartlett in The New York Times -- but Aaron Sorkin seems to have more on the ball than any of our leaders in Washington.

Why did the $700 billion dollar plan fail? Because Americans, whose phone calls to their legislators have been running 100 or 200 to 1 against, have been told for the past two weeks that it is - to use the term originally assigned to it - a bail out. Only a few days later did Washington start calling it a "rescue."

Americans don't know the difference. And there is no reason they should. For no one - not Hank Paulson or Ben Bernanke or George Bush or Nancy Pelosi or Barack Obama or John McCain - has really explained why it is a rescue and not a bailout, and what the passage of it means to them.

Let me give it a shot.

Here's what happens if we do not get some sort of a plan through Congress. Credit dries up. This means that if you want to get a car loan or a home equity loan or a student loan for your son or your daughter, you may not be able to. If you want to get a mortgage, you will have to come up with a more substantial downpayment - 20 percent in some parts of the country - and you will have to pay more.

An example: The national average on a 30-year fixed rate loan is 6.58%. At the beginning of this year, rates were more than half a point lower. This, despite the fact that the Federal Reserve has cut short-term interest rates in the interim.

This affects everyone - not just the person trying to buy that new home who is forced to pay more for that mortgage and not just the person trying to sell that home and buy a new one of their own.

If credit dries up and there is no plan, more of your neighbors will lose their homes. Those homes will sit empty because potential buyers will not be able to come up with the financing to take them off the market. Empty homes lower the value of the rest of the houses on the block - i.e. yours and mine. Fewer residents mean the town will have to raise taxes on those who remain - i.e. you and me - to pay for all the services that must continue from garbage pickup to snow removal to the running of the schools. Eventually, those residents - i.e. you and me - will get angry and vote down these seemingly ridiculous school budgets or vote in a new school board with a cost-cutting approach. The next thing you know it: There goes the football team.

Yes, supporting the rescue plan - and I do believe it is a rescue plan - means supporting your neighbors, your schools, your town, your children's future.

For the record, I am as annoyed as the rest of you that it has come to this. My book, Pay It Down, warned four years ago that the fact that we owed more on our homes than ever before, more on our cars than ever before, more on our credit cards than ever before, would come back to bite us in the end. Like so many of you did, I paid my mortgage, paid my car loan, paid off my credit cards in full every month. It feels like I am now being asked to pay the price for the excesses of others.

But this time I am willing - I want - to do just that. Why? Because I don't like the thought of a Friday night without a high school football game. And I don't like the taste of sand.