Good points which helped me understand the economics of the situation a little better:
In the early part of this decade, real estate was appreciating in value and banks wanted to make loans for the profit. They relaxed their lending standards in order to attract more business, but thereby allowed people's borrowing to get over-extended. When real estate started to decline a few years ago and foreclosures began to accelerate, both the borrowers and the banks suffered. However, our government bailed out their banking buddies in the name of saving the economy, while allowing we the people to go down in flames. I have read rumors that the Fed gave the large banks 100% of the money that was owed to them on the defaulted mortgages. That is why the Fed does not want to be audited--people would be upset about that.
So here are my questions:
Why did the Fed bail out so many large banks while allowing a record number of small bank closures? Who decides which banks to bail out and which to allow to fail?
The bail-out money has not made it into the economy to cause inflation yet, but it has made it into the stock market to cause stock market inflation in the setting of a weak economy. I thought banks were in the business to lend money. Do all banks also invest in the stock market or are there regulations limiting their ability to gamble with peoples' savings?