Financial fix may be too late

WASHINGTON - While Friday's flurry of regulatory rescue actions on Wall Street should help loosen the ever-tightening restrictions on consumer credit, don't expect American families to rush in and take on much new debt.

The Bush administration's decision to buy up faulty mortgage securities, whose falling values on the books of U.S. banks helped trigger the crisis, is designed to unclog the financial system and strengthen "otherwise sound financial institutions," Treasury Secretary Henry Paulson said.

Taking these problem assets off the books of skittish banks will help keep credit flowing for home, school, auto and personal loans.

The economic crisis for American families is still in full swing, however, and the latest round of Wall Street fixes probably isn't enough to overcome the damage or prompt a consumer-spending spree.

Last week, 35 percent of Americans said that they planned to spend the same amount in September as they did in August, according to the U.S. Spending Monitor, a monthly survey of 15,000 consumers by Discover Financial Services.

Those who plan to spend more in September fell to 33 percent, the lowest percentage since February. And only 51 percent of respondents said they'd have money left over after paying their bills. That's down a point from last month and the first such drop in the survey since February.

"While their confidence in the economy has improved, the Monitor's numbers are still showing that consumers (are) acting cautiously when it comes to increasing discretionary spending," said Margo Georgiadis, the vice president and chief marketing officer of Discover Financial Services.

Because of the unfolding economic crisis, credit card issuers, lenders and retailers began tightening credit standards, increasing fees and rates, and reducing credit limits months ago.

Many consumers now are trying to pay down their mounting credit card bills. The portion of credit card holders who are behind on one or more cards is up 14.3 percent from the second quarter of 2007, according to a new analysis by TransUnion, the Chicago-based credit-reporting agency.

In a year of rising unemployment and food and energy costs, the economic stimulus package that Congress passed has been the only effort that spurred greater consumer spending.

Congressional Democrats are pushing for a second stimulus bill, but Republicans and President Bush oppose the costly measure.
On Friday, Sen. Jay Rockefeller, D-W.Va., said struggling families deserved government help just like the banks and Wall Street corporations.

"I am absolutely determined to make sure that if we are going to consider more bailouts for Wall Street, we had better reinforce our efforts to give real help to working families living right here on Main Street. People are struggling, and we cannot let them shoulder the burden of corporate negligence," Rockefeller said.
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