NEW YORK - TURMOIL on Wall Street is pushing financial professionals to the therapist's couch, cutting into retirement funds and testing the mettle of small investors caught in the vortex.

With investment bank JPMorgan Chase agreeing to buy stricken rival Bear Stearns and the United States Federal Reserve stepping in to prop up securities firms and cutting interest rates another 75 basis points on Tuesday, everyday Americans are feeling the squeeze.

The state of the economy is now the major issue in the campaign for the US presidential election in November and various polls show consumers are turning gloomy and believe the economy is in recession.

The rate cuts diminish returns for older people who have shifted their retirement portfolios to safer investments like government bonds and money market accounts.

Ms Judy Bridges, 68, a writing teacher in Wisconsin, said the retirement fund for her 91-year-old aunt living in a US$6,000-a-month (S$8,300-a-month) nursing home is about to run out.

'As the interest income on her investments retracts, we get nearer and nearer to the day where she will have to go on (state aid). ... We'll need to pick up the tab,' Ms Bridges said.

'I'm glad she doesn't know what is happening to the money she worked so hard to save.'

People are voicing concerns as they see businesses slump, friends laid off and ballooning mortgage obligations surpassing the value of their homes.

'We're the savers and that's what we've been doing, and then the banks became very greedy. They lent all of this money through the mortgages,' said Mr Jim Maki, 69, a retired art teacher in Shorewood, Wisconsin. 'The banks took big chances with basically all of our monies that we put in the bank.'

Election year politics
The Fed is also bailing out securities firms - extending them credit and helping JPMorgan reduce its risk in the Bear takeover - while small businesses struggle.

'It seems to me all we've done is transferred the risk from the private sector to the taxpayer,' said Mr Larry Clanton, 59, a Michigan man whose vehicle detailing business recently failed.

'A lot of it is just politics. In any election year, there's always stuff going on with the economy in Washington that you don't see in the other three years,' Mr Clanton said.

Mr James Masten, a psychotherapist near Wall Street, has noticed anxiety from patients about layoffs and said the downturn was putting stress on couples.

'The process of witnessing the layoffs is very demoralising and it undermines self-esteem and ability to work,' he said.

But Mr Masten did not expect to see brokers leaping out of windows as they did during the stock market crash of 1929.

'Just as there are structures in place - at least I hope there are as an investor - to prevent the market from collapsing, there are structures in place to prevent people from collapsing,' he said.

In Los Angeles, information technology developer Mark Lea, 47, was especially pessimistic: 'There's absolutely nothing good in the American economy.

'The only thing worth investing in is coastal real estate.'

People in the construction business in Phoenix might agree.

Fallout from the mortgage crisis has hurt the building sector in one of the fastest-growing US cities.

'The large builders are in big trouble; a lot of the small builders have gone out of business,' said Mr Steve Cheifetz, a Phoenix construction attorney. 'The subcontractors that we work with, a lot of them are letting people go or diversifying.' -- REUTERS