The defeat of the financial rescue plan in the House of Representatives on Monday dealt a needless blow to an already faltering economy. Investors lost $1.2 trillion in wealth. Confidence that our elected leaders are capable of solving big challenges was further shaken. And, we continue to invite an economic calamity of epic proportions every day we delay addressing this crisis. It's time for Congress to put aside partisan differences and act in the national interest.
Major opposition to the bill stems from the mistaken belief that this is a rescue of Wall Street, not Main Street. What escapes many people is how dependent one is on the other. Both must be successful.
Pitting Wall Street vs. Main Street is wrongheaded and unproductive. They are inextricably connected. The funds that flow through Wall Street drive the activity on Main Street that creates jobs and generates income. Businesses rely on the financial markets for their daily operations, for purchasing inventory, and for writing paychecks. An inability to borrow money means businesses can't expand production and create new jobs.
Families also rely heavily on financial markets for loans to buy everything from cars to furniture. They invest in 401(k)s and other financial instruments to help provide a secure retirement. A collapse of the financial markets would prevent individuals and businesses from getting the funds they need to consume and invest--the two things that drive economic growth. Without them, our standard of living declines and our economic future is imperiled.
One of the basic benefits of an integrated financial system is its ability to make credit available to both large and small entities in every geographic location. However, one of the fundamental drawbacks of such a system is its interconnectedness. When a fundamental piece of that integrated system undergoes a complete meltdown, it is a problem for everyone. That is what is meant by systemic risk. That's why it's essential we do everything we can to save and strengthen a financial system that has benefitted all of us--Main Street and Wall Street.
An old adage warns us, "don't cut off your nose to spite your face." Americans have every right to be mad at a handful of reckless businesspeople who made off with millions while their businesses failed, our outdated financial regulatory system, and the host of other problems that got us into this mess. There will be time to sort all of this out later, and we must. But now is the time to put our anger aside, look at the big picture, and avert an economic apocalypse that could devastate all of us.