What's Up With Wall Street ... and John McCain?

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Over the past few days, you may have been hearing some pretty crazy words being thrown around the news: "Wall Street Crisis!" "Fannie Mae and Freddie Mac Closed!" "Merril Lynch To Be Sold!" "World Markets Tumble!"

As confusing as it may sound, it's important stuff, because it will affect our economy in some way (which could mean less trips to the mall!).

Here's some background: You know how when someone buys a house, they usually have a mortgage? A mortgage is a very normal thing: it means that a person is borrowing money from the bank to pay for their house. They pay the bank back in small monthly amounts over many years. Banks usually look at how much the person makes for a living and how much the house is worth to figure out how much to loan them.

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But over the past few years, the banks and mortgage companies that lend out this money have been giving out more of something called "sub-prime mortgages." Generally speaking, this means giving larger amounts of money to people who may not be able to afford the monthly payments.

Everything was fine at first, but as banks gave out more and more sub-prime mortgages, things started backfiring! Many people didn't have enough money for their mortgage payments, and then they had to sell their houses — or, their houses got taken away from them by the banks! The rest was sort of like dominoes falling over: House prices went way down. Then, the banks and mortgage companies started losing money and had to borrow money for themselves - and well, this is when things got a little crazy on Wall Street!

Rewind back to last week: The two biggest companies lending money, Fannie Mae and Freddie Mac, almost went bankrupt and the government had to take them over. This was a REALLY big deal - and it was just the beginning! Other big companies involved in the business of sub-prime mortgages (like Merrill Lynch and Lehman Brothers) lost a lot money this week, too, and this is having a HUGE effect on the economy. In fact, investors have suffered their worst losses since the September 11th attacks, and the U.S. economy is incredibly unstable!

To top this off, McCain has had his own share of drama this week! On Monday, he responded to what happened on Wall Street by saying that the "fundamentals of the economy are strong" — which is not exactly what people wanted to hear during such a rough week! Check it out here:

This sent McCain's critics into a total FRENZY, including Obama! In fact, the Obama camp immediately jumped on McCain's comment by releasing the following video, asking "How Can John McCain Fix Our Economy If He Doesn't Understand It's Broken?":

However, only few hours after McCain called the economy fundamentals "strong," McCain clarified that he was actually referring to American workers. On Tuesday, McCain declared that the American economy was in "a total crisis" based on "greed" from both Wall Street and Washington.

In fact, McCain has begun arguing against the general Republican opinion on how to deal with the economy.

Republicans tend to believe in less government regulation. This means that they believe the government should take a hands-off approach to the economy, letting the markets deal with things on their own.

Democrats generally feel the opposite way: They believe in more government regulation of the economy. The Democrats — including Obama — argue that the economic crisis we are facing now could have been prevented had the Bush government regulated the market more tightly.

For years, McCain has been a very strong supporter of less government control of banks. However, McCain is now arguing for more government regulation! So both he and Obama think that the government needs to go in and have more control over banks and other financial companies over the next four years to help strengthen the economy.

How do you feel about the "Wall Street Crisis"? What do you think of McCain's comment about the economy and Obama's ad in response? And, who do you trust more to fix the economy over the next four years — Obama or McCain? Share your thoughts below!

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