Election 2008: What’s At Stake?

A couple weeks ago, the Federal Reserve helped finance a buyout of the Bear Stearns investment bank, hoping to forestall the economic fallout that would result from its collapse.  This may leave average citizens wondering when the Fed is going to come to their rescue to help them with oversized debts and mortgage foreclosure.

But the truth is that while the financial decline is real, most homeowners don’t have subprime loans and don’t risk losing their homes.  The fangs of this credit crisis are more subtle than that, with a financial downturn causing the economy to lose jobs and making financial growth uncertain.  What the credit crisis has exposed is how reliant ordinary Americans are on transactions and financial institutions that operate beyond their reach.

We expect financial institutions to make smart, stable investments that will bring cash into the economy and grow our retirement accounts.  Yet even many economists don’t understand the tangle of subprime and high-risk loans that were bundled and sold across markets, a system of prospective profit that crashed after the bills came due.

The problem is that even people who make smart investments and manage their money well are paying the price of the high finance profiteers.  And Americans who are living paycheck to paycheck are going to have a tough time dealing with a credit constriction, in which it’s harder to get the loans for housing and education that we rely on to buy a piece of the American dream.  The credit crisis was a problem of poor regulation; we need a transparent system in which everyone’s stake in the economy is protected.