KEY POINTS:
The US House of Representatives has sent the financial markets a simple message.
Main Street to Wall Street: Drop dead.
American taxpayers' indignation at being stuck with the bill for the banking system's follies and excesses is understandable.
But if Congress breaks up for the election campaign without passing a measure to restore some confidence in the markets and get credit flowing again it will be a spectacular exercise in cutting off your nose to spite your face.
We can only hope they have another go before the end of the week, and that this time they get it right.
If the wholesale credit markets freeze up, because no one is confident their counter-party will still be solvent when an IOU falls due, the effects inevitably flow to the real economy, where we all live.
Yes, that's us too.
We are fortunate that New Zealand banks run a more old-fashioned, plain vanilla style of business than many of their overseas counterparts.
The loans they make stay on their books. They are not turned into securities and passed on to investors. The banks have more incentive to be careful who they lend to.
That has led to dodgier propositions being financed by finance companies whose collapse has meant pain for the investors involved but has been largely quarantined from the rest of the financial system.
But we are exposed to the nightmare on Wall St all the same, and not only because of its flow-on effects on global trade and commodity prices.
New Zealanders always want to borrow more, a whole lot more, than other New Zealanders are willing to lend. Our banks get about a third of their money for loans from overseas credit markets - the ones in danger of freezing up.
If they do, that could mean the person who wants to buy your house can't get a mortgage. Or you miss out on a job because your prospective employer has just had his overdraft limit cut. And so on.
Banking requires borrowers as well as lenders. While the focus has been on the follies of the US banking system, the underlying economic pathology is one of too many people thinking they could borrow their way to a standard of living their incomes could not sustain.
Let's face it. That is not a uniquely American phenomenon.
