President George Bush last Friday signed the historic plan to rescue the U.S. financial system by allowing the Treasury Department to buy “toxic” assets from distressed financial institutions.
Enactment of the law did not immediately ease fears about the financial system or the U.S. economy, which shed 159,000 jobs in September—the sharpest drop in more than five years. The Dow Jones Industrial Average plummeted Monday, falling below 10,000 for the first time since 2004, and the sell-off continued in the days following.
Just 10 percent of poll respondents said they had pulled money out of the stock market, however.
Roughly 640 readers participated in this week’s poll, which was conducted Oct. 6 and 7.
How confident are you the $700 billion rescue plan will produce a long-term solution to the U.S. financial crisis?
Very confident: 3%
Somewhat confident: 31%
Not very confident: 41%
Not at all confident: 25%
In your view, how likely is it the U.S. economy now will fall into a long, severe recession?
Very likely: 25%
Somewhat likely: 55%
Not very likely: 18%
Not at all likely: 2%
Have you personally pulled money out of the stock market in response to the market’s steep decline over the past two weeks?
Here are some readers’ comments:
(A) long-term solution will require repair of the deregulation in 1999, etc. Throwing money at the problem will not solve the problem, although it may calm the panic somewhat.
—Ralph Carter, Xerox Corp.
They say when you are in a hole to stop digging. I don’t get why cheap money is the answer to a problem caused by cheap money. Cheap money misses the root cause of the problem, i.e. the housing mortgage debacle.
—Keith Condemi, Equimark LLC
Congress chose the easy way out—debt! The same choices that led us to this point in financial history. Whether it was the right decision or not, we must make it right. It is not $700 billion; it is larger and will continue to grow unless our representatives in Congress stop spending our money on earmarks and concentrate on fiscal discipline. To have a successful rescue plan, Congress must focus on what is best for the country—not continuous spending.
—Kurt Uetz, RainMaker Energy Services
My concern is that the more I find out about the bailout, the more concern I have in that the way to use the $700 billion was never really defined. I fear that more partisan politics are yet to come and the amount of dollars spent to “appease” committee members and chairs will simply grow.
—John Halewski, president, CSNY Inc.
The United States’ plan is always to throw money at our problems, instead of just fixing the cause. What intelligent politicians we have.
—Steve Vogt, CUnet LLC
Oct. 6, 2008, should be recorded in history as National Pork Day. Our legislators showed their true colors. Even in time of great need, they still put themselves ahead of their responsibility to the country and the people. This is an evenly matched bill; the greed and irresponsibility of our politicians is in line with Wall Street’s. The sad part is that all this spending will dissipate in a feeding frenzy of opportunists and very little will trickle down to where it will do some good. Ironically, nothing in this bailout plan is designed to fix the issues that led us to our current situation. It’s tantamount to appropriating money to remove the debris from the china shop, but doing nothing about the bull roaming within. This bill was a decision made out of weakness. Any decision that is arrived at by comparing it to a worse scenario is by definition the least bad decision, but definitely not the best, or even a good decision. Strength comes out of adversity and pain. We had an opportunity to reinvent ourselves, which we selected not to choose in favor to taking a very expensive analgesic to temporarily numb the pain while curing nothing. So, what happens next, after the pork is gone? Republicans and Democrats will be blaming each other. What a novel idea!
—Tony Mangione, Delta Stratagem Inc.
No one is held accountable except the small businesses and individuals in this country. I believe there is no way the government has the capability to track this kind of plan without yet others getting rich off the citizens who do things right. If the strong survive this without the bail out so be it, oil and airline industries have small monopolies why not financial institutions. It’s bad no matter how you slice it. I guess my kids will have to work a little longer to retire.
—David Topian, Westminster Real Estate Advisors
The incompetent people who created the problem just stole our money ... again! We let them. It is time to quit being sheep and demand that our politicians carry out the will of the taxpaying people. Outside of a revolution (not a bad idea), the vote is our only voice. I propose starting a new party to take on the idiots in office. The Patriot party. With strict adherence to the concepts our founding fathers put forth. All decisions thereafter become simple. The common denominator should always put country first. No social engineering. No foreign aid without playing by our rules. No welfare without forfeiting your rights to the rest of society (who support you—you could always get a job if you don’t like it). The government should provide safety and infrastructure. The “bailout” is 100 percent against everything our country was founded on. The perfect storm is gathering strength. The three components of 1) big business and government are becoming the same thing, 2) the blurring of party lines in politics with self-serving politicians becoming one party, 3) and taxation spiraling out of control, demands action. This bailout is a great example of why the hair should stand up on the backs of your necks. How many people do you know supported this idea and how silly do the politicians’ explanations sound trying to justify this blatant thievery. The government is the largest employer in the country. The government makes more money on a barrel of oil than the oil companies do. The government makes more money on a pack of cigarettes than tobacco companies do. Don’t remain comfortable until it’s too late! Let your opinions be known and DEMAND the will of the taxpaying people gets implemented. Join the Patriot party!
Stock market investors should look at this drop in the market as a buying opportunity. Do your due diligence and invest in some great companies at wholesale prices.
—Michael Lebowitz, real estate broker
The increase in gas prices has eaten up all our extra spendable income. As long as people have no extra money to spend on goods and services such as going out to dinner, toys for the kids, new clothes, etc., our economy will continue to be flat.
—Scott Osborn, Fox Run Vineyards Inc.
As a good and faithful proletarian I should have the faith that the rulers in power will make things right. But with the thought of so much money waving around with so little planning and control I fear it will be a feeding frenzy for greed, graft and corruption.
We should have done more last year to bail out the housing industry. Had we done that we would not be where we are today.
When greed takes over, a few benefit, the many suffer. Not what this country was founded on and not the basis of our politicians’ personal agendas. The politicians in Congress and our presidential candidates, especially the Democratic hopeful’s personal agenda, does not benefit the American way of life and what we, as citizens look for.
—Bob Hyder, Hyder Machinery
$700 billion provides a lot of cover for a Congress that cannot control spending. I’ll wager that the bailout will cost less than a third of that amount of money but that the new Congress and the new administration will spend twice that amount “expanding opportunities.” Recent federal revenues have been at the highest levels in history and they continue to spend at 125% of income, grouse that there isn’t enough to go around, and then complain that the economy is bad! Saddest of all is an angry, partisan media that doesn’t get it or even understand it.
Mounting debt, high unemployment, high levels of inventory and tight credit are ingredients for a long recession. It doesn’t help that our society is aging and becoming more dependent on government funded programs. There is no incentive to save for old age as we become burdens to future taxpayers.
The $700 billion is only a Band-Aid to a systemic problem. We simply owe too much to the global community to be taken seriously when it comes to sound financial policy. In order for the bailout to even begin to make a difference, we need to initiate regulations that will reassure the global markets that the U.S. is serious about getting our financial house in order. It will take a long time to achieve but the markets are looking for the initiative. Start something, now! Our House and Senate representatives have shown terrible leadership, pandering to all sorts of monetary special interests and literally bankrupting our nation. And, yes, it IS their fault. They should be ashamed of their lack of performance. They have conspired with the money changers in the temple and unfortunately, we all are paying the price. What a pity!
Will the bailout work for WHOM? For the risk-taking CEO’s of the firms that “believed” the mathematicians’ analysis of what included human behavior re: the investment packages? Maybe, sure. For 99 percent of the rest of the country, including those whose retirement plans are shrinking, who have lost their homes and whose incomes are not keeping up with rising prices? Nope. God bless us all. We need to pull together and accept all the help we can get.
Our leaders, in their haste to pass this bill, have once again let down the American people. There is no doubt that the economy is in a free fall, here and around the world. If you step back and look at some of the decisions that have brought us to this point it should become clear that just throwing more money at failed practices will not succeed. Monday’s worldwide financial markets plummeting should serve as evidence to that point. There is no doubt in my mind that some drastic financial system changes will need to happen to dig us out of this hole, but doing more of the same will only allow those who created this mess to walk away (with their absurd golden parachutes) while leaving others to figure out how to resolve the problem. Make no mistake about it; every one of us will feel the pain of this crisis for quite some time. Now is the time to assemble the best financial minds from across the country to analyze the root causes of these problems and propose short term and long term solutions. Then, and only then, should bills be drafted and put before Congress and the House of Representatives for consideration.
This adjustment is long overdue. This bear market will provide opportunities to buy some sunken value blue chips, G.E., etc. as well as really good value fallen stars: Ford, GM, etc.
—Karl Fonda, Colonial Life Insurance
From most of the estimates I hear, if we stick with “our” new rescue-bailout policy, the eventual price tag will be $2 trillion to $2.25 trillion. Will we bail out the big car companies next? Will our elected foxes guard our hen house any better now that they have more of our money. Can we trust Barney Frank, Chris Dowd and Barack Obama, who were the biggest recipients of the largess of Fannie and Freddie? Did the market cause banks to give loans with no income, no job and no assets, or was it government intervention gaming the market for the votes of people who couldn’t afford houses?
—Clifford Jacobson, WebHomeUSA, Inc.
Confidence in the financial system will be the key that we may trust the system again. We regulate the flow of “Traffic.” But it is loudly demanded that “The Market” be unregulated, which is equally important for the wellbeing of the national security. Both “The Traffic” and “The Market” (notice the capital letters!) are nebulous concepts without conscience. Both need to be brought into order by those elected by the people of the country. Chaos does not inspire trust or confidence, which has been the working plan of “The Market.”
Ingo Leubner, Crystallization Consulting
I think we are seeing the Austrian economists being proven correct about the money supply, the business cycle, malinvestment, socialism and more. From my vantage point this is only putting off the inevitable correction that the economy needs. A good analogy might be giving more meds to a complaining drug addict. They will feel good for a brief time, and they will be off your back ... but when the inevitable comes it will only be worse the longer it is delayed. With the passing of this so-called bailout bill we may have witnessed one of the single largest unconstitutional power grabs in U.S. history.
—Chris Meisenzahl, Lima
The extent of the problem is now become a crisis of confidence. The bailout may help stem the depth of the crisis only. The problem is Wall Street greed, stupidity and arrogance which were allowed to happen because of the corrupt, no-nothings that run Congress.
When the government meddles in the economy we always lose. This whole fiasco was caused by government meddling in the first place. They insisted that banks make mortgage loans to people who could never afford to pay them back. This created a whole new formula for qualifying otherwise unqualified people, and instruments to fund them. This was uncharted territory. Common sense went out the window. Liberalism at its finest! It was foolishness. And no mechanisms of oversight were ever established. We are now paying the price for this. And it’s funny that those who were largely responsible for all of this, Democrats in congress like Barney Frank, Christopher Dodd, our own Chuck Schumer and others, are pointing the finger of blame at Republicans! It was a few Republicans who saw this coming back in 2003 and raised the alarms. The Democrats shut them down! Now here we are in this costly mess. The Democrats now want us to vote them into the White House so will then control the whole government. “Change we can count on.” I can only imagine how badly things will go if we give them their wish! The polls look like they will get their wish. We are being led like lemmings to the sea! That is what really scares me.
—George Thomas, Spencerport
I don’t expect the bailout to work, because I don’t believe it is the correct solution. (Not that I know the correct solution.) This was foisted on the Congress, once again, without much investigation on their part, much like the “Trust me, I know where the weapons of mass destruction are” from the Iraq War, by the Bush Administration. To foist $850 billion of new debt on the American taxpayer is just as criminal as sending 100,000 American troops and hundreds of billions of American dollars after a folly. But, like the war in Iraq, this bailout was forced upon Ccongress as an emergency, with little time to investigate a better approach, before the country’s economy falls apart. I can’t wait until Bush is out of office, as cooler heads (hopefully) will prevail.
Will it work? Only time will tell. (The) $700 billion could turn out to be only a drop in the bucket if there are trillions in at-risk loans out there, not to mention commercial paper, money market funds, etc. Until there is something done about the unfair practices of the hedge funds and after hours traders, there will never be a level playing field for the average investor. As for the U.S. economy, it looks to be a long, rough road. At least the printing presses will be busy!
—John Midolo, Irondequoit
Pulling money out of the stock market at this point will likely doom individuals to miss the upswing that will eventually happen. Continuing to contribute to my 401k means that I am buying in at a very low point so the long-term rewards could be very big. It is easy for me to say this because I am 35 and years away from needing to tap into my retirement funds. Those who are more dependent on short-term gains (e.g., retirees) are in a completely different situation.
—Jake Pierson, Harris Interactive
The bailout is strictly helping the financial sector that created this problem by aggressively lending to subprime creditors. They took risks that were once unheard of and now the system has failed—hurting the average American and crippling those who bought into the “helter skelter” housing market. What will the government do to help the individuals who have lost their homes and can’t pay their mortgages? There are 4 million homes behind in mortgage payments in the US. How can we fix that problem when the government is too busy bailing out the executives that caused it? This is not a long-term solution, it is simply a Band-Aid that will hurt when torn off.
—Patricia Beggs, Rochester Institute of Technology
It is going to take time to repair the damages in our financial system and in our economy. 700 billion is a good start. It is not THE solution. It has to work in conjunction with fiscal and monetary initiatives. Our financial system is based on trust (credit) built based on our legal system and with business transparency. Right now the trust (credit) has been severely violated. Only time can heal. We are America. We’ll come back stronger.
—Patrick Ho, president, Rochester Optical
Wouldn’t you know it—George Bush, the 10-minute socialist, is running scared! During the last 7-plus years, Bush et al have consistently used in their defense (of refusing to support common-sense bills) the concept of letting the markets, economy and democracy is self-regulating. This is a fair and agreeable stance and yet, at the first sign their own investments are disappearing into a black hole, they throw taxpayer money at the very people that have made considerable fortunes and caused the fiasco. Not only that, they have the nerve to buy off the average citizen with phony tax breaks just to pass the bill that failed first time out. Then, because foreign markets have been paid off to continue investment in a crumbling U.S. society, the rest of the world goes belly-up, too. This will be quite the legacy, and you know the money will never come back to Main Street. I think it’s time for the middle class to declare our own bailouts and simply not pay off bank credit card bills and the like – we have to have some chance of recouping our $5,300 each.
—Richard Stevenson, CobbleSoft International Ltd.
The national economic situation is not surprising considering the media’s performance over the past three to four years. During this time they continued to pound the issue of the economy and at times bizarrely comparing it to the Great Depression even though unemployment had been extremely low, new jobs were being created at record levels, GDP growth was good, inflation was low etc. It became a self fulfilling prophecy because of the brainwashing. The stock market is very sensitive to perception and psychology. The constant brainwashing by the media finally succeeded in turning a normal cyclical adjustment into a “crisis.” We still have many strong companies and fundamentals in this country which means the economy will rebound quickly if we decrease government spending and maintain the tax cuts In fact, we have not yet met the technical test of being in a recession. The media has an agenda and hopefully will not reach their goal.
—John Rynne, president, Rynne, Murphy & Associates Inc.
The biggest problem we have facing he recovery from the subprime credit crisis is the public trust in the proposed remedies, and the trust we have in the leadership. Congress and the new president will have to overcome the follies of the past. We all want to believe. Will we be supported in that belief? That is the hope and the barrier to recovery.
—Dennis Kiriazides, Xerox, retired.
(c) 2008 Rochester Business Journal. Obtain permission to
reprint this article.