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Exile on Main Street

  • Jon Kelly
  • 30 Sep 08, 05:16 AM GMT

Wall Street might be reeling from Congress's vote to reject the US government's $700bn financial rescue plan. But I was more interested in what Main Street thought.

To be specific, Main Street, Memphis, Tennessee. I could see that this stretch of downtown already had its own economic woes to contend with. Around me were fading storefronts and panhandlers asking for change.

But this seemed as good a place as any to ask voters how they felt about the failure of the bail-out.

Jennifer also went out to ask people for their views and this is what they told her:

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Opinion polls have suggested that the public were strongly opposed to the package. Most people I spoke to, however, seemed resigned to losing out no matter which decision Congress made.

Denesa Segrest was clutching a copy of her mortgage agreement when I encountered her. The 47-year-old mother of two had her own financial crisis to worry about: she had missed the last two instalments on her home loan and was desperate to escape foreclosure.

Denesa SegrestHer eyes moistened as she told me how she was unable to sleep at night for worry. It was like losing a relative, she said. When she'd taken out her mortgage four-and-a-half years ago, her monthly loan payments had totalled $705. Now they were $1,150 - more than half her income.

At the same time, her husband had lost his job and she had had to pay for two operations. Recently, she had started working as a housing counsellor to help others avoid the traps into which she had fallen.

I took her to watch the bail-out vote as it came unfolded on TV. She sat impassively as the "no" tally reached 218. I asked whether she wanted Representatives to back the bill.

"We're damned if they do, damned if they don't," she replied quietly. "Everyone's going to be touched by it in some way."

Jerry LovettBut Jerry Lovett, 40, definitely wasn't happy that the vote had failed. His clothing store was struggling: he'd just had to lay off one of his three employees following a drop in sales.

This was normally his day off, but he'd opened up because he needed the business. Although a committed Republican, he was annoyed at the Congressmen and women who had rejected the proposals.

"I'm disappointed," he said. "Something needs to be done pretty quick. Doing nothing is not an option.

"What's sad is that Nancy Pelosi was on TV earlier saying that they'd struck a deal. But it looks like the same old political garbage took over."

Two doors down, Palestinian-born Rida Abu-Zaineh, 51, was fatalistic. He'd been running the Peanut Shoppe for the past 15 years. But he was worried how much longer it could stay open.

Rida Abu-Zaineh"Look at it," he gestured at his empty store. "Business is terrible."

He didn't know whether or not the bail-out would have helped him. But he didn't like the idea of his taxes acting as a safety net for failed Manhattan banks.

He had a message for John McCain and Barack Obama.

"Use the money they were going to spend in Wall Street and make the lives of blue-collar people better," he frowned.

"I'm not voting for either of them. They don't deserve my vote."

Until today, I'd been impressed with the level of political engagement among Americans. But as I left his store, I wondered how many citizens would come to the same conclusion as Rida before election day.

Comments

  • Comment number 1.

    This may sound dumb but my sister said that if the government took that 700 billion dollars, they could divide it up and give 1 million to everyone over eighteen in the US.

    People could pay off their mortgages and their bills and have something to invest or save. Yes, some people would go crazy and buy things they did not need but this time money would be trickling up from Main Street to Wall Street.

    It is an interesting idea, anyway.

  • Comment number 2.

    Well aquarizonagal,

    I dunno what effect that will have on the dollar and inflation,as everyone being a million bucks richer will just make the value of money less.

    Make any sense?

  • Comment number 3.

    aquarizonagal, are you joking? There is over 300 million people in USA. Around 1/4 of the population is under age 18. That leaves approx. 225 million people. They would only get around $3111 each if $700 billion was divided up. It would also do about the same as the waste of time stimulus package where people got $300 or $600 dollars a few months ago (I think that also cost $100 or $200 billion dollars)

  • Comment number 4.

    aquarizonagal wrote:

    This may sound dumb but my sister said that if the government took that 700 billion dollars, they could divide it up and give 1 million to everyone over eighteen in the US.

    $700,000,000,000 divided by
    305,000,000 US population

    is roughly
    $7,000 divided by
    3
    or
    $2,333 a head.

    even if there were 100,000,000 under-18s, that's still just
    roughly $3,500 apiece.

    not $1,000,000 apiece. not even close.

  • Comment number 5.

    Ordinary citizens suffer. The "fat cats" of Wall Street never do. They haven't on past occasions, they won't this time round either but will simply carry on milking the population as before. A bailout rescues only the richest who make disgusting amounts of money without any real risk to themselves. I concur with aquarizongal. Give the money in equal amounts to the ordinay citizen. That will prime the economic pump. And let the fat cats go to the wall and personally pay for their greed and extortion, including the Sec of State who is ex Goldman Sachs, therefore only interested in saving his own kind.

  • Comment number 6.

    Aqua, the same idea has been proposed by (I think) Bernancke at some point in the past, who once said that money should be dropped with helicopters on populated areas.

    So here we are: After nearly 30 years of trickle down from the Chicago boys, Friedman and Co., we are beginning to realize, I think, that what's been coming down from the Blessed Rich (whose wealth has grown by some 75% or so in the past years... don't nail me on the exact figures, but it's up there) has been sort of thin and yellowish.

    This crisis will hurt a lot of people, but being vindictive about it will be of no help. Let them have their yachts, and let We The People learn and change our voting behaviour and especially our lifestyles. Get over it, get on with it.

    We collectively went wrong as well, namely:
    1) We went into debt, and then more debt, collected debt, mainly because we felt strange needs to busy expensive bedrooms, kitchens, cars, yeah, even support some frothy preacher to ensure a front seat at Rapture (my sister worked in debt relief, she could write a book!)
    2) Speaking of cars.... we forgot the lessons of the 70s oil shocks... We bought humungous cars that Detroit manufactured and sold us. If we would have said no to big cars early on (and yes to ecology, as President Carter had suggested, being then laughed out of office by the nation's greatest spendthrift before the current POTUS), we would not be in the mess we are in today, period.

    You know: I am conservative. But the GOP people would call me a Commie-anarchist-pinko-tree-hugging-liberal...

    For being reasonable.

    My recipe to get out of the mess begins with: Switching off the TV.

    Whatever..

  • Comment number 7.

    I would like to add, that debt is also from doctor and dentist bills.... but if you say "universal healthcare" on Main street, USA, you are liable top get lynched as an agent of Kim Il Jung, Lucifer and Osama all wrapped in one...

  • Comment number 8.

    @ 6+7 (U5656350)

    I have a lot of agreement with you. I'm also have conservative views, but the people who are supposedly conservative in our government have been terribly liberal with others money.

    I say people buy their chickens and let Wall Street collapse. It's basically gambling (according to a broker I knew) and why should I support a gambler? Same with the banks. Handing out money they don't have. Especially the central banks, who print banknotes and the rate they feel like. How do you think they "freed up" $300 billion here and there?

    The Fed should be dropped and a public transparent government institution should be our money manager. That private company, the Federal Reserve, is just reshuffling money so their benefactors have more in the end.

    As far as healthcare, I don't like the having universal insurance. I'm currently living in Europe (continental) and healthcare doesn't have the "care" part. Any government insurance will just raise our taxes and won't give us as good service. (you can to see a exceptional difference between the hospital that you get government-covered insurance and the hospitals that you must pay for)

    The solution is keep the system in place and fix the legal system. The reasons why costs are high is because they have to cover expensive malpractice insurance because idiots can sue for millions of dollars. If you cap the money people can squeeze from doctors who mess up, that will reduce real costs.

    Also, doctors charge a lot because they know that individual's insurance will pay it. As always with money problems, somebody is greedy.

  • Comment number 9.

    About 10 years ago we, here in Canada, had a 400 billion dollar national debt. Being our population is about 1/10 of the US that would be like the US being 4 trillion in debt. The US is now 10 trillion in debt and it's going up fast. If the 700 billion buy out were approved that would add almost 10% to an already ridiculous amount of money, overnight.

    Bailing out the banks is not the answer ... bailing out the government is. The US has basically sold out to China to keep this massive debt. It's going to be really, really hard on you, but you need a leader that can bring in consecutive balanced budgets and maybe pay off a little bit of the debt. As the debt drops taxes can be lowered due to falling interest costs.

    Good luck to you. I'm glad it's not me in the middle of this.

  • Comment number 10.

    Actually if divided amongst every US citizen the amount is just about 2,000.00 per person.
    As to what happened to all the money in the first place, it did not disappear it just changed hands.
    Bankruptcy or bailout, in this instance the bitter pill of the latter is the wisest route.

  • Comment number 11.

    I feel they such help the home owner and then let the market work it self ,I don't feel they such not help Wall St, those greedy MF, their the one's who started this mess and I feel they should pay for everything not the tax payers if I committed fraud they would come after me in a min, but these greedy MF who committed fraud and predatory lending are getting away with it. I feel they should let the bankruptcy court deal with these mortgages not any of these groups like neighborhood works,acorn,hope these groups just want the money congress gives them they are not helping. I went to some of these group because of my mortgage and they did noting to help us but tell us to sell our home in a short sale. I am a victim of Fraud and predatory lending. Still having problem with my Mortgage try to get it modify but our mortgage company told us no so now I am trying to see if I can get it don't threw bankruptcy court.What I would like to see happen with the money Bush is asking for is that they help the home owner, extent employment for the ones that lose their jobs and like I said before the market will work itself one's all the home owner that have the sub prime loan pay their mortgage after their mortgage gets modify

  • Comment number 12.

    U5656350 - I applaud your attitude and will try to remember this for the future.

    We can all become negative, curse the "fat cats" for not really losing out, despite ultimately being at least partly responsible for the financial situation of the institutions they work for, or we can take a more positive, proactive approach. We as citizens of our respective countries need to take responsibility for our own situations, become more financially aware and at the same time probably become more politically aware. I wonder how many people actually really understand what the bail out would mean and, more to the point, what would happen if it did not occur.

  • Comment number 13.

    I take issue with worldwideryan: I'm a Brit living in Italy and have a recurring, potentially serious medical complaint and I thank God for the Italian national health service. I simply could not afford private treatment on this scale. The service is excellent and I can honestly say that welfare has saved my life!

  • Comment number 14.

    One million to every one.

    This is a good idea.

    It does not have per person, over 18. I should be for per family, for their existing mortgage value for one residential house, plus some more for reviving the economy. Mortgage will be immediate and will become refundable when economic situation is better. All mortgages will be discounted by 25% where it can be shown that, lender pushed a higher or even regular interest loan to a borrower. Also all Unsecured loans will be discounted by 25%.
    People who do not need help, should voluntarily decline.

    I think numbers can be worked out within 700 billion.

  • Comment number 15.

    People keep complaining that this thing is just bailing out the rich and ignoring the little guy.

    Am I off my hinges in saying that if it doesn't go through, then the little guy will no longer be able to secure a mortgage, personal loans, business loans, basically anything that allows good honest working people to live their lives.

    Global economics is not a simple thing and there isn't a right answer, but if this cash isn't put in, banks aren't going to trade with each other in order to retain cash to secure themselves and in the end the poor get poorer and the rich, well they are already rich so don't really mind not being paid massive amounts anymore.

    I understand conservatism as an idea, but to use the principle to try and fix this mess by brining down the bill was arguably the most moronic thing I've seen in US politics for a long time. It doesn't even give people political cover anyway, as if this goes bad, the american banking sytem will fail and good hard working americans will be crippled, and less inclined to vote republican I would think.

    right, rant over

  • Comment number 16.

    worldwideryan - I'm not sure what You have experienced, but so far my experience with continental European health service has largely been positive.

    "The reasons why costs are high is because they have to cover expensive malpractice insurance because idiots can sue for millions of dollars. If you cap the money people can squeeze from doctors who mess up, that will reduce real costs."
    Well, this is only part of the problem.
    Another part that is independent of how the health service is organized is that health insurance costs are going up as new and more expensive treatments are discovered and the population is aging.
    However - private sector health insurances (e.g. USA) have some serious problems that drive prices up, and malpractice insurance is the least of these.
    Health insurance is the textbook example of a market failure scenario - there is an inherent lack of information and transparency, and a lack of choice. Because of geographical limitations and the "emergency" nature of medical care, demand for most services is highly inelastic. An individual is incapable of making informed choice in a medical emergency scenario, and an insurance company is usually incapable of monitoring the necessity of procedures conducted and the price charged - and puts the cost of uncertainty back on the consumer. This drives prices up significantly (the USA is paying more than twice per patient than Europe for what might be "friendlier", but is in effectiveness about equal care).
    There is at least some degree of consensus that the most cost-efficient way to counteract this market failure / monopoly scenario is a monopsony - either a single (state or state controlled) insurer (e.g. UK), or strong state regulation of both insurers that are private companies and the medical sector (e.g. Germany). This can be coupled with free competition in sectors where information is more available and market failure not complete (e.g. competition of companies providing blood tests), but also this needs to be heavily monitored.
    You can also see the effect of mono/oligo-psonistic agreements with the lower prices big insurers can negotiate in the US compared to private individuals paying for their care.

  • Comment number 17.

    Hindsight is wonderful, but perhaps all of this could have been averted when it first appeared if the US government had been willing to spend this money not on relief measures for Wall Street, but for the sub-prime borrowers who encountered difficulties. A system of housing benefit to help them through the short-term would have perhaps stopped the complete collapse of the market. The banks would have learned to be more responsible in future, the people in danger of losing their homes through the banks' failures' would be in effect 'insured' against such loss ... and it probably would have cost less, too.

    ... but perhaps this smacks to much of welfare reform and social care to be palatable to US lawmakers.

  • Comment number 18.

    Well as an American I can tell you that most Americans are completely ignorant of not only how the bicameral system works but basic macro-economic theory,, let alone one trying to change the other. The bottom line is it doesn't matter how we got into the mess; if we have a laissez-faire attitude like we did before the great depression,,, well it's kind of a big duh that we might fall into another...

  • Comment number 19.

    I'm so glad I live in Canada. Our Prime Minister was on the telly last night reassuring us that we our economy is not nearly as bad as the US. It made me feel a little better.
    I wonder what the Americans were thinking when they voted no to the bail out. I firmly believe that the Fat Cats who created this dilemma should be brought to book, charged and if found guilty, imprisoned for lengthy periods of time. Heads should certainly roll. Greed took hold of many and now many more will pay the price for the said greed of others.
    Obama offers a fresh approach to managing the US and I hope they vote for him and let him get on with the job of bringing the US back to where it can hold its head high with honour and not greed.

  • Comment number 20.

    I am once again surprised at how a discourse can become gospel truth after it is repeated a couple of times by some discourse setters.

    1. Gospel Statement: Bailing out wall street seems to be the only option.

    Why? Are we sure? Are we sure we are not being taking for a ride? Are we sure this is the easy way out, no the best way out of a finantial crisis? Are there not any other options?

    2. Not passing the bill is not an option. Something has to be done pretty quick.

    Why? Why nothing was done two years ago, a year ago, in summer? Why the sudden rush? The crisis (incidentally in greek means change) started at least three years ago. Something should have been done then, now it is already too late. Perhaps members of congress should look at all the options instead of taking Paulson's plan at face value.

  • Comment number 21.

    By the way I remember being at work and listening to my mates conversation about investments and where their money was and wasn't and I thought then, "wow, Blairs Capitalism, the third way, has found a rather clever way to get everyone involved so that in the future, whenever they want to justify any course of action, the can easily formulated as –anny other action would be as bad for you my dear nanus as it is for us-" We are all on this together, whether it is war in Iraq or bailing out the fat cats".

  • Comment number 22.

    How many citizens will come to the same conclusion as Rida? Hopefully very few. We have been here before. Laizzez-faire (Republican) economics brought our financial system to its knees in 1920-1932, and we threw the rascals out, elected Democrats, and got a New Deal which held up for decades. The financial system is collapsing again because of a Republican program of disassembling the New Deal over the last quarter century. How bad does it have to get before we throw the rascals out again?

  • Comment number 23.

    worldwideryan (#8), drop the Federal Reserve? That's the one thing that works! The Fed chairman is appointed by the president and confirmed by the Senate. He is a salaried employee who makes less then $200,000 per hear. The Fed is independent, but it is not "private" in the way that Fannie Mae and Freddie Mac were. The CEOs of those outfits made more than $10 million apiece last year. We need to restructure Fannie Mae on the Fed model, which has been proven sound over many decades of its existence.

  • Comment number 24.

    airplanedave (#9), the US national debt never goes down, but it does go down relative to growth. The linked graph illustrates how it has changed since WWII:

    http://zfacts.com/p/318.html

    It's pretty clear where the problem lies. The explosion of our debt coincides with the presidencies of Reagan, Bush 1, and Bush 2. In other words, this is Reaganomics at work.

  • Comment number 25.

    Sorry, lots of typos in those posts. I meant "1929-1932" in #22 and "less than $200,000 per year" in #23. I should proofread more carefully.

  • Comment number 26.

    Worldwriter wrote: "I'm so glad I live in Canada. Our Prime Minister was on the telly last night reassuring us that we our economy is not nearly as bad as the US. It made me feel a little better."

    I too live in Canada, but I dont share your confidence in our prime minister. He has proven to be less than honest at the best of times, like so many politicians.

    I do echo your sentiments concerning Obama. The whole North American continent needs revitalising, but least of all the Fat Cats.

    With $700BN available, I am sure that somebody could come up with a plan to help the people and let the Fat Cats flounder in thier own juices!

  • Comment number 27.

    The Financial Crisis in America started in America. The Republicans and Democrats wasted money on an unwinnable war which is Iraq and Afghanistan. The Republicans and Democrats [in collaboration with Wall Street] mixed the state with business. Another factor were the people who made purchases in houses and autos without reading the fine print in the contracts or finding a lawyer. The last factor was unscrupulous bankers in the USA who made immoral business measures. The solution lies in voting out the Republicans and Democrats, replacing them with Libertarians and Greens.

  • Comment number 28.

    I am just a simple custodian(read janitor) who
    has two jobs currently. Not a high priced executive position, just a guy who cleans floors and toilets.
    700 BILLION dollars is way beyond my ability to comprehend. And bonuses of millions of dollars for the folks who got us into this mess.
    I guess what I am trying to express is that a person who can balance the check-book every week is the one who should be running these money markets..you don't Lend money to someone who can't pay it back, that is called giving away money....just as you should lend money to someone who is a hard working person who takes the obligation seriously.
    Someone is responsible for letting people think that they were getting something for free(cheap) and they do not deserve to be rewarded for it. A quote from a news article said that limiting pay and bonuses would make the principles harder to work with. If you have your hand out for a bailout, you work with the bailout folks and don't make demands or become difficult.

    Sorry it rambled a little

  • Comment number 29.

    I am from the UK but ordinarily live in the US, I'm out of the US for a few months watching this unfold here. The 'institutions' should declare bankruptcy, which will favor the creditors and do the right thing to the stockholders, make them lose money. These are failed businesses, they serve no purpose and we can do without them and their management teams. Why not hand over that 700 Billion to solvent small businesses, perhaps as a tax reduction, this will help them invest, and perhaps increase profits which will result in increased bank deposits. It is a crime in my view (and it seems in Congress's view) to handover public money to private stockholders.

  • Comment number 30.

    Jon, I am enjoying your series very much and am entirely jealous of your trip.

    I do have to take issue with this entry’s closing:

    ""I'm not voting for either of them. They don't deserve my vote."

    Until today, I'd been impressed with the level of political engagement among Americans. But as I left his store, I wondered how many citizens would come to the same conclusion as Rida before election day."

    I consider myself a politically engaged American having lived and worked in DC for five years and continuing to follow politics and elections. (Yay for C-Span!)

    However, I won’t be voting for McCain or Obama either. There are other options and philosophies that more closely match mine. After years of compromising and choosing a candidate that didn’t really represent me, I’ve decided to be a bit more ideological with my vote. That doesn’t make my voice any less valid, and it doesn’t make me less engaged.

    - JoAnna, Indiana

  • Comment number 31.

    Although there are certainly blame for the current financial crisis from Wall Street, Congress, CEO's , White House and the other lot, the American people must look to itself, as well, for the problem.

    American history is littered by crashes such as the Great Depression, the Dust Bowl, and the more recent bubbles in the financial crisis in the "dot com," and others. Each has an element of optimist American betting their futures in "sure things," such as the income in their houses. We should know better.

    There is a, now, song from Ricki Lee Jones called, "Easy Money," that we should dust out again, and play it again every day.

  • Comment number 32.

    American should read history

  • Comment number 33.

    The Financial crisis

  • Comment number 34.

    These good people have been betrayed by political leadership that kept repeating for years:

    Just vote for us, we'll just keep spending your grandkid's money, and lining our pockets.

    The bubble has burst, and naturally, these folks have been clobbered.

    The REAL story you missed today: The sentencing of the crook politician John Ford, for outrageous corruption, to an additional fourteen years in prison. The Ford family has had a huge hand in Memphis politics for generations. They make old Mayor Daley of Chicago (in his heyday) look like an amateur.

    I contend there is direct relationship between the corruption of politicians like found in the Ford family, and the downtrodden state of their constituents.

    Borrowing another 800 billion or so, to spread around the robber baron class, will NOT improve their lives.

  • Comment number 35.

    Something needs to be done, Jon, but I am keeping my expectation levels low. Maybe I will be pleasantly surprised. I wouldn't bet on it, though.

  • Comment number 36.

    There is a tendency to see the savers' situation positively, but investers as unworthy. However, they are not always separate groups. I have only earned around £6,000 p.a. generally, but have lived like a pauper to save like a dog. I put some money into shares because the housing market was growing too high to rely on savings alone, and private pensions had a dodgy turn - shares being an opportunity to have more direct access than one would with pensions. I haven't lost my shares, but I have sympathy with ordinary folk who did. I think there should have been more regulation of the rental market because landowners were snapping up the houses, making it difficult for people to buy. Also, they charge higher rent than the cost of a mortgage, so I can see how some people fell for that. Maybe there should be a cap on how many homes are owned for letting. Who knows!

    With the bail-out - depends if it works out that it is bailing-out ordinary society or fat-cats. If the system stops working, everyone has an issue - we might not live on credit directly, but all of the services we use require it directly or indirectly: to get food in the shops; petrol (gas) in the station, etc. It always effects individuals and smaller concerns first, but unfixed it would seep into the big corps.

    What do I know! Makes you wish you could move to another island and start again - mud huts, and living off the land and the like.

    Hope no-one is hurting too much out there.

    Midlands, UK

 

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