Government action provides the 'oxygen' for economy to start moving forward once again

The events of the past several weeks are an unprecedented effort to unclog our financial system and economy. The basic idea behind the government's action is to get banks working again by cleaning their balance sheets: to provide 'oxygen' for the economy to start moving again.

Many consumers and businesses are dealing with some of the most difficult conditions in memory. Others, fortunately, have not. The consumer has been hit both by falling home values and more difficult consumer credit. Businesses and service providers have suffered from tight credit and lowered business activity.

The whole world is watching the government's intervention, intended to avoid the credit crunch of the 1930s - which prolonged the Great Depression. How does what the government did change any of this?

From what has been released to date, the concept is to provide a floor which gives banks and financial institutions a baseline to start new lending. Large banks have been reluctant to issue even the most straight-forward new credit because they did not know how low the asset level on their balance sheets would go. If banks know that several of these assets are not going to zero, they can start rebuilding the balance sheets with new and better loans.

The hope is that the baseline provided by the government will put in a bottom for home prices and, therefore, start the process of rebuilding household wealth and eventually jump-start the consumer.

What areas in our economy should be positively influenced by the bailout now? Most are areas which revolve around financial services and real estate.

Banks and Mortgage Services: Now is the time for banks and mortgage service firms to promote the new rules. Specifically, the Fannie Mae bailout has created a new set of rules for mortgagees wishing to refinance their home mortgages. Banks themselves need to start making money and the way they do this is to lend it.

They have avoided this as they have sought to conserve capital in the past several months. Now that there is a floor to the value of these mortgages, the feared 'unknown' is now more known.

Real Estate: Everyone has been waiting for a bottom here. Even before the bailouts, new home building had slowed measurably indicating a maximum in inventory and a possible bottom in pricing. The biggest problem has been the availability of mortgages. Demand for housing will return.

There is no price stability until there is financing stability. And the government's action is directly targeted at getting the mortgage underwriting process started again. Agents need to move inventory and mortgages have been made much more available as a result of this action.

Attorneys, Accountants, Financial Advisors: Whenever there are new regulations - as with the Fannie/Freddie bailout - there are professionals seeking to help interpret them. Many Americans will be affected by the new mortgage rules and should seek their advice.

Government services: There are several programs to help homeowners sift through the implications of recent government action. Some programs are new, some have always existed. Again, seek their assistance.

Building consensus is that, properly administered, the government's plan will avert a major crisis. The private sector now has an active sponsor - the federal government - encouraging them to increase business activity which, in turn, will get our economy moving again.

At the end of the day, Main Street will bail out Wall Street and the winners in our communities will be those who work hard to gain new customers.