Economic crisis hits Main Street, too

People are asking me about the current economic crisis. Is it really that bad? Will I lose my savings or my 401(k)? Is the Bush administration lying about the consequences of not adopting a plan to address the problems on Wall Street? How did this happen?

These are valid questions and ones that Congress and the administration, as well as Treasury Secretary
Henry Paulson , have not answered with clarity.

In fact, the reason that a potential rescue plan has faltered is because the discussion has revolved around Wall Street and has not focused on Main Street.

How did we get into this mess? I liken it to one of my favorite movies, "It's a Wonderful Life." In the film, the main character,
George Bailey , operates a modest building and loan bank that serves the small town of Bedford Falls.

The Bailey Building and Loan relies on the town scrooge, Henry Potter , and his big bank for financing and for short-term money to loan to finance mortgages, new home construction and small businesses.

In the middle of the film, the Bailey Building and Loan experiences a run (people take their money out of their bank accounts all at once) because people fear that the bank may go out of business. This fear is quietly encouraged by Mr. Potter because he wants to see the bank fail.

When the run is made public, George appeals to Potter for financing to save the bank and Potter refuses. Mary, George's new bride, steps up with their honeymoon money, and George explains to the fearful customers that the money in the bank is used for financing homes and small businesses all over the community. The bank is saved with just $2 left at the end of the day.

In our current economic crisis, our lending institutions are the Bailey Building and Loan and, you guessed it, the big investment banking firms are Mr. Potter. Mary is, well, us -- the taxpayers.

Without the willingness to lend, and the belief in the strength of our economy, lending stops, borrowing stops and the economy seizes.

This means that within a matter of weeks, businesses will begin to close, factories could shutter, and we could face a catastrophic meltdown of our economy.

It will be almost impossible for the average Danburian to get a car loan or a home loan. Our retirees will find their 401(k)s and their retirement savings gone or greatly reduced.

In Danbury, our Pension Fund boards manage $220 million through our pension advisers in the stock market. We have been lucky and we have been smart to ensure that we have spread our risk over many different assets.

This strategy has protected the pensions of our retirees and reduces the exposure of our taxpayers to those pension liabilities.

However, our revenues for building permits are off dramatically and we are seeing some of our corporate partners introduce layoffs to cut costs. The first foreclosures are popping up throughout the city, and small businesses are suffering.

If the crisis is not averted, you can expect to see more of this type of activity. Without money to lend, and without people with jobs to borrow it, we face a situation that will continue to deteriorate.

The state of Connecticut is also experiencing difficult times, and the current crisis will play out with our state government on a much broader scale. There is already a deficit that is projected to grow to almost $1 billion.

Since Danbury relies on state aid to help deliver services, the impact of the economic crisis on state aid is unknown.

It is time to stop the run on our mortgages and businesses. That is what Congress has been wrestling with. It is time to restore and renew faith in the marketplace.

There will be time for accountability (somebody ought to throw Mr. Potter in jail), there must be time to address CEO pay, we must have oversight, and we must be sure that the circumstances that have created this crisis never happen again.

It is also disturbing that the taxpayers are being asked to contribute to the failed decision-making of the large investment banks. Unfortunately, Wall Street's bad decisions have a profound impact on our Main Street. Let's hope that Congress gets it right.

Mark Boughton is the mayor of Danbury.