Perhaps the biggest problem with the credit market debacle is that Main Street doesn't get it. Literally. Try explaining the credit market to the average guy.
The "TARP bailout" is being billed as a Main Street rescue, by Henry Paulson, et al. If you look at the situation realistically, Wall Street has already fallen. If you were Rip Van Winkle and you fell asleep for a year, while the US government tried to bailout Wall Street, you'd be wondering, what happened to all the banks that disappeared, or were bought up as of September 26, 2008. What was the point?
Add to this now Wachovia (now Citigroup), and the $700-billion TARP bill itself, as of September 29, 2008.
While Congress was voting against the credit market bailout yesterday, the market panicked and gave up $1.3-trillion.
Ironically, the folks who make the laws in America are not Wall Streeters, and are having the same difficulty as Main Streeters in understanding how the credit market works. How can you expect US Congressmen to vote on something they do not understand?
What is a credit default swap? Alt-A Securities? The Discount Window?
The failure appears to be an inability to "sell" Main Street on this bailout deal. The average guy doesn't get "Wall Street," and is wondering why they are going to get stuck with the bills that this bailout will generate.
What happens when you can't refinance your mortgage, when you can't withdraw cash from an ATM, when your employer can't pay your salary, or the buyer of your home can't secure financing, or your business is unable to extend credit to customers, or get credit from suppliers?
Wall Street, Ben Bernanke, and Henry Paulson are going to have to a better job to get an agreement on a "rescue package" to lawmakers, that the lawmakers can understand and pass on. Main Street still doesn't get why it has to pay for the mistakes of others, and they don't get yet how close the credit system is to imploding.
For now it appears that Congress has rescued voters. From what, though?
