Well we are at that point again. I can't stand it any longer.... Begin by reading this:
Dear Main Street,
Are you trying to make sense of what's happening here on Wall Street?
Don't worry -- you aren't alone. A lot of people even here are trying to figure that out. It isn't that complicated, but Wall Street is so full of mumbo jumbo that it's easy to get confused -- or bored.
Say "collateralized mortgage obligation" a dozen times and see if you can stay awake.
More from WSJ.com:
• Getting Reflective About Private Equity and the Financial Crisis
• The Story of How Lehman's Last-Minute Korean Rescue Fell Apart
• The Panic of 2008? What Do We Name the Crisis?
Stick with me, though, Main Street and I'll explain what's going on here in New York.
Believe it or not, you've seen this movie before. And I don't mean, "It's A Wonderful Life," though that movie isn't far from the mark.
What's going on is a classic industry shakeout -- not all that different from the shake-out of the American steel or auto industries over the past half century. Just in a much shorter time frame.
In just nine months, we have gone from five big, independent Wall Street brokers to only two -- Morgan Stanley and Goldman Sachs.
The government took over Fannie Mae and Freddie Mac, the country's largest mortgage companies, a bit more than a week ago.
And just Tuesday, we nationalized AIG, the world's largest insurer.
Of course, consolidation inevitably produces winners and losers. Lehman Brothers, the fourth largest US broker, is a loser. It went bankrupt two days ago.
Bank of America is a winner. It bought brokerage Merrill Lynch three days ago and is now our nation's largest financial institution.
That's a lot of change in not a lot of time.
And when there's change, there's uncertainty. Today, for example, we still don't know whether Washington Mutual, the largest U.S. savings & loan, will stay independent.
Uncertainty isn't good for any business, as it destroys confidence. It is especially bad for our financial system, because the system runs entirely on confidence. I lend you money confident that you will pay me back. If I don't have confidence in you, I won't lend.
Which is just like Wall Street today. Our nation's financial institutions don't really trust each other. And for good reason.
In all, about $2 trillion dollars of lower quality mortgages are spread about our financial system. Many of these are now in default which threatens the banks that hold them.
And of course the lack of trust spirals. Less lending by banks to each other, less lending to Main Street's companies and less lending to you. In the end, the money's not there for you to get a mortgage or auto loan.
And you account for 70% of the economy. So when the money isn't there, that's bad for everybody. Without credit, you get a crisis -- a credit crisis.
Of course, we deserve heaps and heaps of blame. Wall Street took the mortgages, sliced and diced them a hundred ways, sold and traded them. We took a nice cut along the way, blissfully oblivious to the risks.
We do have a remarkable talent for cooking up crazy get-rich schemes. Remember the Internet bubble? That was less than a decade ago.
More from Yahoo! Finance:
• The Market's Triple Whammy: Don't Join in the Panic
• Comparing the Candidates' Hot Button Issues
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Visit the Banking & Budgeting Center
But Main Street, you're also to blame.
Recall the hundreds of billions in bad mortgages that are now killing Wall Street? That was money lent to you, Main Street, for homes and condos many of you could not afford.
And ironically, it is now your money that will be used to repay those dud mortgages because we on Wall Street are running out of money.
The government takeovers of AIG and Fannie and Freddie? That's your money. J.P. Morgan's buyout of broker Bear Stearns last March was also your money,
You might not like it. We on Wall Street may not like it. And even the politicians in Washington may not like it.
But nobody has a choice -- unless you happen to have an odd yearning to live in a barter economy.
So Main Street, our crisis is unfortunately your crisis. We made the mess together and now we pay for it together.
The mergers, government takeovers and bankruptcies that will continue to sweep our financial system are a good sign. It means that we are fixing ourselves. Albeit at gunpoint.
Isn't it strange the way our free market works? The government saves Wall Street -- and you Main Street foot the bill.
My advice? Save this letter and show it next time we all embark on another stupid misadventure.
Sincerely,
Wall Street
Copyrighted, Dow Jones & Company, Inc. All rights reserved.
Q'S RESPONSE:
I'D LIKE TO ADD ANOTHER IDEA --- SENSE THE GOVERNMENT - MY MONEY - AS YOU LIKE TO PUT IT - IS GOING TO PAY FOR THIS "MISDAVENTURE", LET'S HAVE SOME GOVERNMENT REGULATION TO PREVENT PEOPLE FROM CAUSING THIS TYPE OF SITUATION AGAIN. WE HAVE TOO MUCH GOVERNMENT YOU'VE SAID FOR SOME TIME ..... WELL YOU CERTAINLY ARE IN LINE FOR THE "GOVERNMENT" - "MY MONEY" TO BAIL EVERYONE OUT OF THIS SITUATION. AND, (DEEP BREATH HERE) EXCUSE ME, I DIDN'T BUY THINGS I COULDN'T AFFORD, BUT NOW I KNOW HOW MANY OTHER PEOPLE BOUGHT SUCH EXTRAVAGANT HOMES AND DROVE PRICES UP FOR OTHERS THAT WERE BEYOND ANY COMMON SENSE.
YOU PREACH INDIVIDUAL ACCOUNTABILITY, BUT NOT IN THIS INSTANCE. I AGREE - WE HAVE NO CHOICE - BUT WE MIGHT HAVE HAD A CHOICE OR PREVENTED SOME OF THIS PROBLEM WITH SOME - ON NO, I'M GOING TO SAY IT - GOVERNMENT REGULATION ALONG THE WAY. YOU'VE CONTINUED TO TELL US THAT GOVERNMENT IS CORRUPT AND INEFFICENT - WELL IT WAS THE PRIVATE SECTOR THAT MADE THIS MESS AND NOW NEEDS - SCRATCH THAT - MUST HAVE GOVERNMENT INTERVENTION (MONEY) TO BAIL THEM OUT....
WE MAY NOT BE ABLE TO AFFORD A DEMOCRATIC PRESIDENT WITH A DEMOCRATIC CONGRESS, BUT WE SURE AS HELL CAN'T AFFORD 4 MORE YEARS OF ANYONE WHO AGREES WITH GEORGE BUSH "94%" OF THE TIME! I ACTUALLY COULD HAVE VOTED FOR THE MAVERICK MCCAIN OF 2000, BUT THIS "NEW AND IMPROVED" MODEL (I.E. RIGHT WING BUTT KISSER), JUST DOESN'T CUT IT....
THIS PAST WEEK I REALLY "ENJOYED" MICHAEL BARRONE'S (SPELLING?) RESPONSE TO ELINOR CLIFT'S (SPELLING) COMMENT ON THE MCLAUGHLIN GROUP....
ELINOR: YOU'VE BEEN TELLING ME FOR MONTHS/YEARS WE HAVE TOO MUCH GOVERNMENT AND REGULATION, WELL YOU CERTAINLY ARE IN FAVOR OF THE GOVERNMENT INTERVENING AT THIS TIME....
MICHAEL: THIS IS NO TIME TO TALK ABOUT WHO IS RESPONSIBLE FOR WHAT WENT WRONG. WE JUST NEED TO ADDRESS THE PROBLEM.
Q' RESPONSE: BULL SHIT!
I KNOW, I KNOW.... I CAN'T BE VERY SMART BECAUSE I'M NOT RICH - CERTAINLY NOT IN MONETARY TERMS - I DON'T HAVE A MILLION DOLLARS, MUCH LESS THE 3-5 MILLION DOLLARS JOHN MCCAIN SETS AS THE LOWER LIMIT OF BEING RICH. AND - I DON'T HAVE SO MANY HOUSES OR CONDO OR TOWNHOMES THAT I CAN'T KEEP TRACK OF HOW MANY I HAVE....
BUT I DO BELIEVE THIS, THE UNITED STATES AS WE HAVE KNOWN IT CAN NOT AND WILL NOT EXIST WITHOUT A MIDDLE CLASS AND THE MIDDLE CLASS IS AN ENDANGERED SPECIES AT THIS TIME....
THINK BACK TO A POLITICAL SLOGAN / QUESTION FROM OUR NOT TO DISTANCE PAST... ARE YOU BETTER OFF NOW THAN YOU WERE 4 (OR 8) YEARS AGO? I DON'T THINK MANY PEOPLE CAN SAY YES TO THAT QUESTION.....
