Oct 07 2008
Main Street vs. Wall Street: One of the Greatest Trials of Our Time
Also one of the most misunderstood debates of our time is this discrepancy that has come up strongly especially in the last couple of weeks between Wall Street and Main Street; complex and growth-hungry investment banking and local, low-rate home loans. As with every other economic issue in this year’s election, our representative politicians have not helped the average Joe Six-Pack see clearly on this one. Fact is, Main Street desperately needs Wall Street and vice versa and that’s exactly (and only) how our capitalistic system works.
Not only does your local bank need a highly experienced and talented staff of investment bankers, they also need a portfolio that at least includes some high risk investments in order to balance things or else you don’t get your 6% mortgage rate, you end up with a 20% mortgage rate so the bank can balance it’s risk among borrowers. However, believe it or not, it’s harder to balance out borrower risk than to invest and trade the stock market — well at least it used to be not as easy, now Wall Street’s where the mess is.
Everything is connected to banks and in a capitalistic society, the banks are not run by the government apart from a few restrictions and laws that really apply to everyone but banks are in more of a position to make large, impacting decisions against the law than a middle class citizen working 9-5. Also, every single business is tied in with the banking system through what we experts like to call “credit,” and businesses usually have quite a large line of it that they daily tap into. During this current credit crisis, you may guess that this line is negatively affected and this has a direct effect on the growth of the business and the ability of the business to even stay in operation in some cases. Of course, this same issue affects consumers who now have less credit to buy with from the business which has less credit to sell with and the problem is exacerbated all the more.
Whether for good or for bad, Main Street and Wall Street are in the same section of town and the system ain’t changin’.
