On Main Street
Toolbox
Published: September 20, 2008
Main Street and Wall Street were the two places everyone was talking about this week. The question was whether the implosion on Wall Street would draw in Main Street with the gravitational force of its collapse.
We are Main Street — the car loans we take out, the meals we put on our credit cards, the houses we buy or don't buy, the gasoline we pump into our cars. If suddenly, our credit limits have been shrunk or car loans are no longer affordable, or we can't afford to take a Sunday drive, then two things have happened. Our economic power and the options we enjoy in our lives have been limited, and all those merchants and dealerships and banks who would have sold us goods and services are losing sales. This is how recessions happen.
The pace of events when history is actually happening can be astonishing. During the past week we have witnessed the collapse of major financial institutions and comparisons to the banking collapse that led to the Great Depression. In response the federal government has committed itself to hundreds of billions of dollars of loans and other forms of what are called bailouts.
To put it another way, a select few government officials are committing Main Street — you and me — to the solvency of Wall Street. The assumption is that we are all in this together and that the public interest in this crisis requires public investment in private companies. As a result, the federal government now owns an 80 percent share of AIG, the world's biggest insurance company. Some critics have called it socialism. That might be so, if the takeover of AIG were inspired by ideology and were part of a plan. But the takeover is really an effort to save capitalism from itself, as Franklin Roosevelt sought to do during the Great Depression.
The two officials who have been at the helm during these momentous events have been Ben Bernanke, chairman of the Federal Reserve, and Treasury Secretary Henry Paulson. Brief appearances by President Bush have served mainly to underscore his irrelevance. Bernanke and Paulson are taking the crisis seriously, and members of Congress appear ready to follow their lead in the effort to create an institution that will take on the bad debt that now threatens the world's financial system.
Barack Obama has exercised restraint in his comments on what should be done, urging greater regulation of the financial markets in the future but leaving it to the policymakers in power now to make the decisions that have to be made in these perilous days.
John McCain has lashed out at greed on Wall Street and issued a call for Bush to fire Christopher Cox, chairman of the Securities and Exchange Commission. At the time Cox was formulating a plan to forbid short selling on Wall Street in order to stabilize the stock market. McCain's call for his firing was an example of the kind of rash, politically motivated action that is not needed in this crisis.
Main Street watches with wariness. Vermonters are busy stockpiling firewood for the winter. Wall Street is a long ways away, but it never felt as close as it has in the past few days.
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