Please Pass The Confidence Bailout

We’ve all heard the phrase “financial bailout” repeated over and over again for the past month; in fact more times then we all probably care to remember.  Perhaps it’s time to coin a new phrase that better describes the real challenges we are currently facing.  Despite all of the financial turmoil, stock market decline, and housing slump, one factor in this equation of economic recession trumps all, Confidence.  While financial bailout is a fitting term for how we are treating this problem, I think that Confidence Bailout would be a more fitting cure.

The majority of the challenges that are plaguing our economy right now can all be traced back to a lack of confidence.  Specifically there’s a real lack of faith within our banking system.  Over the past 5 years banks and other lending institutions were handing out money like it was candy. Fast forward to today; now we constantly see stories in the news that people can’t get home loans, auto loans, or lines of credit.  Even worse, major household name corporations are finding it near impossible to  secure loans which keep their doors open for business.  Where did all of that previous confidence disappear too?  We’ve taken an approach to try and fix this by simply throwing money in the direction of the financial train wreck, which should open the door for a more liquid credit market, but how do we get institutions that are holding that money to take a step and actually walk through the door?

Today it was announced that world leaders have agreed to convene and reassure large financial institutions that loans made to each other will be secure and “insured”.  This should go a long way to restoring the faith that has recently been lost from the equation of borrowing and lending.  I still think it’s going to be a long process until full confidence is restored in the market place, however I believe 100% that we as American citizens and a global economy as a whole will always persevere.  I don’t think that any one single factor will fully lead to a quick Confidence Bailout; a cocktail of time, government intervention, and an election might just be what we need to get this financial happy hour started.  What do you think it will take to restore confidence?