Financial Jargon

In case you've been living under a rock or are Amish (which in the latter case, you probably won't be reading this post...), you might have noticed that the financial system is struggling. Insolvency, balance sheets, FDIC and TARP are only a few terms that have been launched into the consciousness of the American public. While it is certainly confusing, I have found myself personally struggling to keep up with the jargon and inside baseball stats that have been thrown around. Luckily, I have stumbled across a podcast that clears up some of the confusing language surrounding the financial debacle. It is a 59 minute broadcast from This American Life that explains the cause and effects of the crisis in common terms.

As of right now, various banks have received TARP funds that were meant to be given out in the forms of loans, unfreezing the credit market. However, this purpose was not met since the balance sheets (see podcast or transcript to learn about this) were worse than originally anticipated. The banks gave out too many loans prior to TARP, becoming immensely overstretched. Once people began to default on their repayment of the loans, the banking system began to falter and crumble. As the show explained, to merely lend more is to go back to the root origin of the problem, over-lending. While members of congress are grandstanding on many issues and dumbing down the problem into populist nonsense, they do not confront the problems of the banking industry openly. The remedy to this could come in the form of letting banks fail, making the Bank of America truly become the Bank of America by nationalizing banks or anything in between (click here for one view that lies somewhere in between). We must talk openly and frankly about the crisis. Hopefully this podcast will allow more people in on that important conversation!