|
|
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
Auto Beat
Bangalore Tigers
Blogspotting
Brand New Day
Byte of the Apple
Economics Unbound
Eye on Asia
Fine On Media
Green Biz
Hot Property
Investing Insights
Management IQ
NEXT: Innovation
NussbaumOnDesign
Tech Beat
Working Parents
TECHNOLOGY
J.D. Power Ratings
Product Reviews
Tech Stats
Wildstrom: Tech Maven
AUTOS
Home Page
Auto Reviews
Classic Cars
Car Care & Safety
Hybrids
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads |  |
SEPTEMBER 3, 2007
Main Street Is Fed Up A wide swath of small investors feels duped When I called my 87-year-old father in Wichita a few days back to commiserate about the recent financial turmoil, I had no clue what I was in for. "How about that crazy market?" was my opening gambit. "It's terrible," he said bitterly. "I think we need a revolution in this country." A revolution? This was my father, a lifelong Republican until he quit a couple of years ago over Iraq and global warming. He had never staked out a position to my left. "All these excesses, the hedge funds, private equity, and these CEOs who pay themselves incredible salaries—the greed is outrageous," he said. "And we all pay the price." The problems on Wall Street are making folks on Main Street plenty angry—even those who haven't bought a new home or refinanced a mortgage in recent years. Regular investors feel as if they, too, are victims of the predatory lenders and gluttonous financiers whose actions are wreaking havoc on the markets. It doesn't help matters that the recent moves by the Federal Reserve will largely benefit big institutions such as Countrywide Financial Corp. (CFC ), the nation's largest mortgage lender. "I've been watching my 401(k) and wondering if I'll have anything left," laments Lisa Moon, a 49-year-old paralegal in Middletown, Conn. Says Craig Dalrymple, a 37-year-old salesman from Northbrook, Ill.: "People are losing their homes, savings, retirements, and we're seeing worldwide financial chaos because mortgage brokers can make empty promises, lie, cheat, and steal without penalty." Those sentiments are echoed by some in Congress, where politicians are pounding the table for the little guy. Representative Barney Frank (D-Mass.) recently said he'll hold hearings about the role of the rating agencies in the subprime mess. BLAME ALL AROUND Yet just as in the dot-com bubble and other booms, the Joneses haven't been innocent bystanders. Consumers also gorged on cheap credit. Buyers eagerly signed on the dotted line for houses they knew, or should have known, they couldn't afford. Owners mortgaged themselves to the hilt to pay for a new car or to remodel the kitchen. The personal-savings rate has fallen from an average of 9.1% in the 1980s to 1.7% during this decade. Meanwhile, average household debt now equals personal income; it was 60% of income, on average, two decades ago. "I blame the lending industry, but I also blame people who bit off more than they could chew," says Rita Arens, a 33-year-old freelance writer in Lee's Summit, Mo. Still, some people are digging through the wreckage and finding opportunities. Arens and her husband bought a four-bedroom house out of foreclosure in June. The sell-off in stocks is attracting bargain hunters. And 401(k) investors may yet find relief. After all, the major indexes are up for the year, and it's possible that six months from now the subprime saga may turn out to be merely a short-term disruption of the market's rise. "Excesses are Americana," says Richard Laermer, 45, a New York City marketing consultant. Of course, Laermer can afford to be blasé. He sold much of his stock a few weeks before the market turned.  By Steve Hamm
BW MALL
SPONSORED LINKS
Get BusinessWeek directly on your desktop with our RSS feeds.
Buy a link now! Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
 Copyright 2007, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Notice |
Printer-Friendly Version