Main Street Bail Out?
By Kudlow's Money Politic$
The Wall Street brainiacs are panicked about sub-prime mortgages and the current stock market correction. But Main Street investors -- with their plentiful incomes and longer-term stock market horizons -- may ultimately bail them out.
Main Street rescuing Wall Street? It's a compelling thought -- not only for the stock market, but the economy at large.
While Wall Street was busy conjuring up high-yielding bond packages that were heavily invested in unsustainable sub-prime mortgages -- and distributing these collateralized debt obligations to big institutional investors around the world -- Main Street was focused on the real economics of our nation. To this day, the American labor force is going to work, running the millions of small owner-operated companies that provide the wellspring of our prosperity. And Main Street is benefiting from an unprecedented global boom that is stocking our stores with affordable goods and creating plentiful new jobs as U.S. firms service the rise of new export markets.
Federal Reserve officials believe we have a temporary liquidity issue, not a solvency crisis. So, at the prevailing interest-rate target, the Fed and other central banks are prudently injecting $131 billion of new cash to "facilitate the orderly functioning" of markets. Fed chairman Ben Bernanke has the story right.
And so does President Bush, who is arguing against government bailouts, which would wind up rewarding banks, hedge funds, and unscrupulous lenders for their poor judgment. (Do U.S. taxpayers really want to finance France's BNP Paribas?) Market forces will see us through this correction. Mr. Bush is also on the money with his opposition to any and all tax increases, which would damage the work and business incentives that have been such a success in Middle America.
Nobody likes stiff stock market corrections. But if folks step back a bit they'll see the many positives -- the jobs, the incomes, and the profits -- that will carry us through this difficult period.
They'll see Main Street -- working and prospering. |
