Although Wall Street seems to have rebounded in recent days in response to the Congressional approval of the $700 billion financial-system bailout last week, there seems to be continued concerns found amongst financial professionals, who are concerned with the continued pall of recession over the American economy. The main concern remains focused on government ownership of the American banking system.  Will this end the market's paralysis or is it just another bad idea from a failed administration?

Let's face it the average American person does not concern himself or herself with the goings on of Wall Street.  Until recently this just did not impact their lives unless they were savvy investors.  The average American mainly concerns themselves with the bankers that lend the money out.  We are a credit minded country.  So now what to do when the credit market folds?  Banks have had no choice but to limit the amount of credit that can open for people but also the guidelines for credit lending have tightened incredibly so.  The subprime market, once open for business is no longer available.  What else has happened for the banks is the widening spread, or surcharge, that banks must impose on short-term loans to other banks. This has increased over the last year from 0.65% above the cost of funds to an exorbitant 4%.

While the symptoms of the economic crisis and virtual breakdown have been evident for quite some time, since the market became deregulated in 1999 and allowed less government regulation, the current prognosis remains unseen even by the country's foremost financial experts.  Many can play the blame game like a pro and point the finger at bipartisan investments in the mortgage industry, specifically the borderline predatory lending practices found in the subprime market.  This was all very hush-hush, as this knowledge was not readily shared with the common everyday investor. 

While there was de-regulation of government involvement, there was also a lack of securitization.  This action shatters the connection between the underwriter who made the loan and the person and homeowner who has the loan.  Starting in 2004, this proved to be a toxic behavior as this relinquished the accountability of the banks and mortgage lenders via lax underwriting practices now known as predatory lending especially with regard to certain aspects of subprime loans.  This has sent the overall health of the market into a downward spiral.  I believe so many were making incredible profits hand over fist that not many saw the signs of recession or depression coming over than four years ago.  Government sponsored businesses like Fannie Mae, Freddie Mac and the insurance company AIG were suffering from mismanagement and living high off the hog.  How do you correct such organizational problems?  By rewarding bad behavior with less than a slap on the wrist?  Not only are the American people now worried but also they are left wondering, how are we going to pay for this Bailout and where, if any, is the relief for the people?  Where is our bailout?

The warning signs have been there even before all this happened.  It is mainly the failure of the current administration and the investment companies that kept advising people toward these stocks. We can play the blame game but it really comes down to the complexity of these investments.  There were too many degrees of separation, which allowed for the due diligence to be lost in the shuffle.
It also leads to a misunderstanding of how the investments worked in this structure but also a vague understanding of the financial advisor's decisions. This put the investor's money in uncertain hands.

What will happen next?  What is the next best step?  Government ownership of the banking system? Maybe there needs to be clear accountability and less grey areas to hide mistakes. This begins with educating the investor about the changing market and the risks involved.  This is the only way fear can be dissipated amongst the public. 

Many believe the bailout is not the right solution, many even in Congress who voted for the bill.  Many believe the only true cure to what ails the American economy is to allow the corporations to fail and therefore correct the market of bad debt.  Still very slowly investors will regain confidence, the real estate market will bounce back and short-term loans will return.  It is just a matter of time and patience for new trust rebuild in the American economy.