The stock market held a few gains after hemorrhaging on Monday following news that the House of Representatives voted against a $700 bailout plan that has been on the table since last week.
The foundation of the financial industry has been noticeably shaky since the bailout of AIG and Fannie Mae and Freddie Mac. Meanwhile, the impact to the average person on Main Street that might not own stock or who may bank with a smaller regional bank has been hidden.
But as the stock market continues to shed value even those without a brokerage account will soon see these events matter very much. As the government steps in, what does this mean for the average consumer?
“Any collapse of a major banking institutions questions the strength of the U.S. economy, and can weaken the way the U.S. economy is perceived, internationally,” says, Katarrina McBride, partner at Beermann Swerdlove.
This perception translated into real losses. As folks who plan to apply for car or home loans, among others, will no doubt learn soon.
“Unlike the past, the economy is not dictating events but the events are dictating the economy,” says Michael Gallo, partner at firm DeCotiis FitzPatrick, Cole & Wisler.
How will it hurt non-investors? For answers, MainStreet turned to McBride and Gallo to explain.
If the U.S. economy is perceived as weak, it means the dollar is not as strong in other markets, says McBride. That means less yen and euro for family vacations.
The costs of our imports and the demand for our exports drive our economy, says McBride. A weakened dollar causes the price of our imports to go up, which results in more expensive goods. . It affects all classes [middle and upper middle class.] The price of plastic containers and even tube socks go up.
Investments are not just for individuals, companies invest in stock, says McBride. Other institutions that depend on stock market thriving are affected. The result is computer companies downsizing, and job loss across numerous industries as companies begin contracting.
Tougher Lending Standards
The biggest impact is that what you have seen and what has occurred already is the tightening of credit by institutions, says Michael Gallo. As a result it has made financing a little more difficult to obtain. Even though consumers might have a great credit history, they are dealing with an environment where they are receiving loans on different terms and conditions. ( You might see increased borrowing costs or the need for additional collateral.)