BINGHAMTON, N.Y. -- The Wall Street financial collapse may seem distant, but its effects are likely to hit home.

Even with a proposed $700 billion federal rescue plan, local governments and small businesses could face hard times.

"Wall Street finances the activities of Main Street. When Wall Street ends up having losses, eventually businesses are going to have a harder time to find loans to buy up the store next door," said Kenny Christianson, a lecturer in economics at Binghamton University.

In Binghamton, the sale of the Regency Hotel is a case in point.

"The buyers got within a week or so of getting their financing, but they were working with Bear Stearns and as soon as that fell apart, the whole market fell apart," said Binghamton Mayor Matt Ryan.

Wall Street's troubles are also unbalancing many local governments' budgets.

Binghamton receives $9.8 million in state aid each year. But with Albany's expected 20 percent revenue drop, that aid may drop as well.

"Everything trickles down to the local governments. And we have no revenues to pay for it. We have no ways of raising money, and we have a very flat tax base. So I don't know how they could consider that we could do with less. We need more," Ryan added.

Local municipalities' inability to raise revenue is just one of the problems that's traveled from Wall Street down to Main Street.

Now local businesses are feeling the pinch, too, as consumers realize they have to watch their wallets a little bit more.

"In our own personal lives we may not spend as much, so of course we can't expect the consumer to purchase as much from us," said Kati Cline, manager of Marilyn's Bake Shoppe on Court Street in Binghamton.

Small businesses like Marilyn's, face even more difficulty with lowered consumer confidence.

Some local financial planners think individuals will also have to reevaluate their expenses.

"This is the time where a lot of folks on Main Street are going to think maybe I'm not as risk tolerant as I thought I was," said Brian Schmidt, a financial planner in Binghamton.

Reducing risk, means reducing spending. And less spending, along with tightened credit standards, can eventually drive up unemployment.

"As businesses have a harder time finding loans or being able to finance a new factory or new machines, they won't be able to hire new workers," added Christianson.

And while these types of effects may not be felt for months or years, there's perhaps a greater risk.

"You have problems of moral hazard. If you bail out people because of risky decision you'll be encouraging more risk behavior in the future," cautioned Christianson.

The news isn't all bad for small towns in Central New York. Experts say that because the area escaped the housing boom and bust, the financial fallout won't be as dramatic.

Hopefully for New York's Main Streets, Wall Street's lesson is well learned.