Financial Crisis

The news has been dominated by the current credit crises affecting global markets. Due to extensive media coverage, many Americans are now familiar with how Freddie and Fannie affect the secondary mortgage markets and what subprime and alt A loans are. The unchecked growth of the derivatives market, collateralized debt obligations, and credit default swaps has wrecked havoc on the financial systems.

President Bush recently signed a Financial Bailout Package in hopes to avert the upcoming economic disaster. The bill has been highly unpopular and politicized with accusations of helping Wall Street and not Main Street. People are rightly concerned with putting their hard earned tax money at risk to bail out institutions which have unwisely invested in toxic assets.

There are a myriad of factors that influence the economy. The housing and credit markets are just a few of the elements that interact and affect the global economy. Though people are afraid of the repercussions, I find it quite troubling that the media can easily present definitive views of various bailout plans and strategies to avert a recession/depression. No one knows, with any degree of confidence, what may or may not happen in the future.

The central issue at stake is trust. Do we trust the government, which has access to the most critical information available, to minimize the risk of a credit collapse? Do we trust the notion that the demise of Wall Street has ALREADY affected Main Street, and needs support?

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