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Yesterday’s Globe had an article entitled A Crash Course in Credit that shows how the woes of Wall Street end up on Main Street. A seriously in-debt homeowner and two businesses are profiled, showing how hard it is becoming to get loans. The homeowner, already “awash in mortgage and credit card debt” is an example of the easy credit problems that led us to this point. The fact that he wants to borrow more money is a little scary; however, the pendulum is swinging too far the other way, illustrated by the two business owners who are also finding it hard to get credit and are putting projects on hold, scaling back and just trying to hold on. To quote the subheading of the article:

When lenders are afraid to lend, the economy stalls and uncertainty grows.

That was yesterday. Today, with Republicans pulling out of the bipartisan bailout plan (which their leadership helped to craft), there’s no deal. No one was 100% thrilled with the plan; however, this stalling and playing politics isn’t doing anyone any good. As I heard on Morningstar.com this morning, it should be called a Main Street Safety Net rather than a Wall Street Bailout. Why? Because if the big banks who hold the toxic loans aren’t stabilized with an infusion of cash and more importantly, confidence, the credit that fuels our economy becomes harder to get. Morningstar’s Pat Dorsey likens credit to the oil that keeps the engine running and without it, the financial markets, like an engine without oil, will seize up. Many businesses, such as the two mentioned above, rely on short-term loans for inventory, day-to-day operations, crafting deals, etc. Without these funds, they will grind to a halt, increasing business risk for themselves with a ripple effect out to consumers, employees and other organizations. Credit has been tightening since the subprime crisis began almost a year ago; but now we’re about to find out what happens to an economy when there is no credit. We might like the poetic justice of letting Wall Street twist in the wind, but we’re all going to feel the pain.