Wednesday, October 01, 2008

Credit Crisis

The current liquidity crisis in America (otherwise, and poorly named, the Wall Street bailout) is an issue that should concern everyone. By not passing legislation to lessen the impact of our dried up credit market every American faces day to day impact. The biggest problem, in my view with the bill in front of Congress is not what is included/excluded but the fact that our elected officials have neglected to properly explain the impact to voters.

With no money to lend from large investment banks the smaller local banks are less able to loan money. These smaller banks are the mainstay of local businesses, loaning money to the new small business, loaning money for a home equity loan, loaning money to purchase a car. With the current limited liquidity in America credit is harder to come by. People can’t buy a new washer and drier, people can’t get a new (or used) car to get to work, and we are being impacted.

Ok, so you say I don’t need to buy anything this still doesn’t impact me. This is again a misunderstanding of how the financial markets impact each of us. With less money to loan credit card companies will start to reduce credit limit, this lessened credit has a direct impact on everybody’s credit score. A lower credit score impacts insurance rates. Even a small increase in your personal car and homeowners/renters insurance will be a noticeable impact. If we do not act to address the credit issues now very soon all of us will be impacted.

Congress, specifically the House, acted poorly on Monday. The purpose of elected officials is to put the good of the many above the good of a few. On Monday the House showed it was more concerned with the perception of local voters, not the impact not passing legislation would have on the entire country. While the current legislation may not be perfect it is better than not acting at all. On Monday the stock market lost $1 trillion far more than the budgeted $700 billion to help the credit crisis. Before assuming the only people who will benefit from this package are wealthy CEOs take the time to read and investigate how less credit (money to borrow/loan) will affect you. Then take the time to demand that your elected officials in Washington educate themselves on the issues as well and act on behalf of the country, not on behalf of their needing to be re-elected.

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