As Wall Street continued its downward plunge amid fears of a worldwide recession on Thursday, the Coachella Valley and the rest of America faced the repercussions and contemplated future side effects.

How Steven LaBarbera and his family will get by in an increasingly troubled economy “is what I concern myself with on a daily basis,” the Indio resident said.

An Army veteran who served in Iraq, LaBarbera works part-time at the Indio Police Department while using the Montgomery GI Bill to attend school full-time at Cal State San Bernardino's Palm Desert campus.

His wife, Elana, works full-time at the Riverside County courthouse. The couple have a 10-month-old son, Nicholas.

Over the past three months, the credit limit on the couple's credit cards has been cut — some of them eliminating all remaining available credit, LaBarbera said.

“At this point, it hasn't gotten to where we feel cornered,” LaBarbera said. “But I think of the bigger picture, if it were to continue this way, and things were to get worse.

“If we were to have another tight month — and it's already happened; someone backs into you and you have to pay your (car insurance) deductible — you look to this money and suddenly it's not there. Unless you have money saved up, you no longer have a way to pay.”

Caring for their baby adds a layer of concern as the economy worsens, LaBarbera said.

“If things continue the way they have, we could find ourselves being limited in what we can do for him — even if it's something as simple as we need to buy baby gates to make the house safer,” he said. “We can't do it because we're in such a tight spot.”

Pam Harwell of Palm Desert said she's seen her IRA rapidly decline with the stock market in recent days.

Harwell points the blame directly at the members of Congress responsible for banking oversight and irresponsible home-lending they allowed and many encouraged.

“What happened with Fannie Mae and Freddie Mac was abominable, and I think the people on that finance committee, be they Republicans or Democrats, should all resign,” she said.

“I think that's where it all started.”

Business owners are struggling with unknowns — what the free-falling stock market, the still struggling housing market and the government bailout package will all mean for them, said Patricia Nugent, owner of Dare to Dream Business Consulting in La Quinta.

“The lack of knowledge really is keeping everybody in a fear mode,” she said. “And when that happens, everything comes to a screeching halt.”

Main Street woes

It's become clear that Main Street America is suffering from the deteriorating health of Wall Street.

Banks are unable or unwilling to lend amid the growing crisis, and that's deepening the downturn.

In Sacramento, Bertram Chatham runs seasonal Halloween stores that stay open just a few months of the year.

Last year, he received a $26,000 line of credit, but as the credit crunch worsened, Wells Fargo allowed Chatham to tap just $10,000. He opened one store instead of two this year; that means 30 fewer jobs.

“We didn't understand it (but) we understand it now. They simply don't have the money to lend,” Chatham said.

The banks' credit crunch is rooted in the housing-finance bust.

Santa Margarita resident Liz Pauschek recently wrote a $1,500 check to a contractor for a new patio, but the check was returned unpaid from GMAC.

When she inquired, the creditor said her line of credit had been frozen because her home's value had declined. She had to use a credit card and money from her savings account to pay the bill.

“I explained that I was remodeling because I live there, and they absolutely would not work with me,” she said. “They said the housing market is bad and your house isn't worth what it was. Essentially, you're out of luck.”

The Federal Reserve has shoveled about $800 billion in short-term emergency loans into banks and other financial firms since March to keep the banking system functioning. It hasn't been enough.

This week, the Fed bypassed the banks altogether to begin backstopping the finances of major U.S. corporations.

It did so by agreeing to buy commercial paper, the short-term promissory notes that corporations sell to investors in order to raise money for inventory and payrolls.

New data released by the Fed on Thursday show that for the week ending Wednesday, this commercial-paper market shrunk by another $56.4 billion, or an unheard of $264.4 billion during the past four weeks.

That macro money squeeze means less cash across America.

In Modesto, two longtime area car dealerships — Generation Motors and Friendly Chevrolet in nearby Escalon — closed this month.

In South Carolina, William Bradshaw, who owns eight dealerships, has seen sales plunge as buyers are unable to get car loans.

“People who could have gotten loans a few months ago can't,” Bradshaw said. “Credit has gotten more stringent, rates are up.”

Car loans are still being made but now require 10 percent down and a credit score near 700, said Greg McBride, senior analyst for Bankrate.com.

“Loans are being closed every single day. It's just that the rules of the road have changed,” he said.

Market-research giant J.D. Power and Associates revised downward its outlook for U.S. auto sales, saying Thursday it expects only 10.8 million new-vehicle units to be sold this year, 2 million vehicles fewer than in 2007. This year's slump began with high gas prices and rose with the credit crunch.

“Any truly pronounced recovery appears to be more than 18 months away,” said Jeff Schuster, executive vice president of automotive forecasting, in a statement.

Stock prices reflect future expectations about the U.S. economy, so the continuing avalanche on Wall Street signals tough times ahead. The Dow Jones Industrial Average on Thursday was down 39.4 percent from its high-water market exactly one year before, and blue chip stocks are down more than 23 percent during the past month alone.

The steep drop amounts to a slow-motion stock-market crash, and carries all sorts of implications for ordinary Americans.

The most obvious one is the sinking value of retirement savings of workers who contribute to 401(k) retirement plans. Those plans are now worth on average 20 percent less than they were 15 months ago.

A Wall Street Journal survey of economists revealed Thursday that most now consider the economy in recession.

McClatchy-Tribune Information Services contributed to this report.