Wednesday, October 1, 2008

What the financial crisis means locally

It occurred to me that in my last post, I might not have made clear how the current financial crisis has a direct impact locally. Here are a couple impacts:

  • Towns and cities in Massachusetts receive aid from the state for infrastructure and schools. If the State finds its access to credit drying up, that means less money for cities and towns for schools, which means more money has to be raised locally through increases in local property taxes.
  • As property taxes continue to increase, some people have been refinancing their homes and using access to other credit; with fuel bills in the $1,000/mo. range for many households, and property taxes increasing faster (see previous bullet), access to credit will be even more important for more people -- at a time when the financial crisis is due to make access to credit much more tight, and best case at higher rates.
  • This situation inevitably would lead to more foreclosures, which means more homes on the market, lower property values. Declining home values would make it difficult -- even for us homeowners who have been careful to live within our means by not taking out mortgages we can't afford -- to pay down our mortgages faster than the decline in value of our homes.
It's unfortunate that the current package that failed the House Monday and the Senate is considering today has been dubbed a "bail-out package for Wall Street," because it's really not.

What it really is, is an attempt to take responsible government action -- with bi-partisan support from President Bush to the most liberal Democrats in the House -- to prevent further harm to individual households, local businesses, cities and towns, state and federal government, and all sectors of business by bolstering our credit markets, which are an engine of economic activity at every level of our economy.

My hope is that our U.S. Congress can temporarily set aside ideological finger pointing for the current mortgage mess, and instead focus first and immediately on what action can be taken to avert further economic crisis that will spill over at a much more personal level than we currently feel. That is the responsible thing for government to do.

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