Main Street Should Care About Wall Street

Make no mistake -- Wall Street and Main Street are joined inextricably at the hip. The heart of this crisis stemmed from falling real estate prices due to subprime borrowers' inability to continue mortgage payments once resets started hitting.

The resultant foreclosures and tightening of credit has spread this contagion far beyond the bailiwick of the original "bad apples." The freezing up of the credit markets is now damaging the businesses of even "good banks," making it impossible for them to extend credit to even "good borrowers," whether they are individuals or businesses in need of financing.

As a result, not only are financial equities plunging, but the overall market is plunging due to "good companies'" inability to roll debt and finance working capital. This will inevitably result in more and more bankruptcies in all sectors, causing rapidly rising unemployment.

Main Street America has yet to fully grasp the ramifications of a frozen banking system, and falling real estate prices are just the beginning. When banks are too scared to even lend to each other (as evidenced by the freeze-up in commercial paper and highly elevated LIBOR levels), why would they extend mortgage financing to anyone but the super-qualified?

And even then, because there is no other game in town, why shouldn't those rates be exorbitantly high? This means that even "innocent bystanders" will be hard-pressed to purchase and hold onto properties. At a time when home ownership is at an all-time high in America, the average person on Main Street in dangerously close to lose most if not all of his/her net worth.