“They” promised us that passing a stock market bailout would help the economy. A Wall Street recovery would be good for Main Street, “they” told us. And a Wall Street recovery would be good for Main Street on some levels. But first, the bailout has to work. And it appears that it isn’t working.
On Monday, October 6, the Dow plunged below 10,000 points (taking my retirement account and my cousins’ college funds with it). Why? Because now the rumor is circulating that $700 billion just isn’t enough. The credit market liquidity problem can’t be overcome with “only” $700 billion.
Credit markets and the financial crisis
Our economy runs on the ability of people and of businesses to get credit. Of the businesses, small businesses may be most important in terms of running the economy. (Unfortunately, while rum producers in the Virgin Islands and Puerto Rico are getting $192 million in help, many American small businesses have been left out in the cold.) And small businesses are having all sorts of trouble getting loans right now.
In your personal finances, you are probably noticing this as well. It is harder to get personal credit for things like car loans and student loans. Additionally, many homeowners are finding out that their HELOCs are being frozen on the worries of housing values that could decline further. So home equity credit is drying up as well.
So, if $700 billion in liquidity isn’t enough, what number is large enough? And when do we get really serious as Americans and demand that Congress should help the economy by doing more for the middle class? After all, it’s the middle class spending that really keeps the economy afloat. Apparently, a bailout that is aimed at mainly helping Wall Street isn’t doing the job.