Rescue 'America Street'

The House lawmakers who sank the financial rescue package Monday said their phones and e-mails burned with protests that Main Street has to bail out Wall Street. But it's not helpful, or even accurate, to view this crisis as scrappy alley cats vs. fat cats. In truth, the whole neighborhood is at stake. We cats are all in this together.

It's understandable that many Americans might view the financial turmoil of recent weeks as distant rumblings in the canyons of lower Manhattan. Failing investment banks and frozen credit markets – what have these to do with the leafy suburbs of, say, Minneapolis?

Plenty. Middle-class America is inextricably linked with Wall Street. The stock market's plunge on the news of the rescue rejection should bring that point home – and bring lawmakers to pass a bipartisan rescue plan.

Almost half of US households own stocks and bonds in the form of mutual funds, most of those through retirement plans. Of the mutual-fund households, 3 in 5 earn moderate incomes of between $25,000 and $99,999.

On Monday, stockholders saw the value of their holdings drop by double-digit percentages – exactly the concern that Federal Reserve Chairman Ben Bernanke voiced in congressional testimony last week.

Asked whether the country would fall into a depression, Mr. Bernanke – an expert on the Great Depression – didn't want to make that comparison, but he warned of "very negative implications" absent a rescue plan, including losses in retirement funds held by millions of everyday Americans.

Both Bernanke and Treasury Secretary Henry Paulson spelled out the ripple effect that frozen credit markets – the result of the mortgage lending crisis – can have as they make their way through an economy that depends on borrowing for day-to-day business.

Without intervention, the duo said, neither consumers nor businesses will be able to borrow – not for cars, not for homes, and in a case such as the big business McDonald's, not even for new coffeemakers. The practical impact of this is a contracting economy and more joblessness – a challenge for Wall Street and Main Street, and thus for all on "America Street."

Assumptions also need to change about the term "bailout." Note that when financier Warren Buffett put up $5 billion for a stake in troubled Goldman Sachs last week, it was characterized as an "investment" – a smart example of buying low so he can later sell high.

The Treasury would also be buying low, though granted, buying very troubled mortgage securities and probably not at a rock-bottom price. Nonetheless, some of these securities could be resold after the housing market recovers, and even turn a profit for taxpayers.

Meanwhile, the bipartisan legislation negotiated over the weekend would allow the government nonvoting shares in participating companies – so taxpayers can benefit if the companies return to profitability. Other protections were added for taxpayers, as well as compensation punishments for executives.

This package is not perfect. That's the nature of compromise. But it has come a long way since it was first floated. Lawmakers must see it not as a bailout for Wall Street, but as a necessary rescue for all of America.