Local Experts Say $700 Billion Economic Bill Not a Cure-All
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By Sonia Fernandez, Noozhawk Staff Writer
The injection may ease the credit crunch and stabilize market volatility, but anxiety persists.
Bailout, rescue, whatever you call it, President Bush signed a $700 billion economic bill on Friday afternoon, bringing to a close at least one phase of the country’s effort to recover from several blows to its economy in the past few weeks. The president signed it into law shortly after Congress ended its nearly two-week standoff as the market swayed under the pressure of banks and creditors too wary to lend.
Breathing a sigh of relief is the business sector, as the $700 billion reintroduces some liquidity into the market, making it easier for businesses — from large corporations to small startups — to operate. According to Dick Castner from the U.S. Chamber of Commerce‘s Western Regional office, businesses were choking for lack of credit.
“I would call it a rescue plan as opposed to a bailout,” said Joe Armendariz, a Carpinteria city councilman and executive director of the Santa Barbara Technology and Industry Association. The U.S. Treasury and Federal Reserve “are unique” in their ability to step in to stop the economic hemorrhage, he said, and stabilization is what is needed. While he acknowledged that the “root canal” approach — one that lets the market correct itself without any federal intervention — was “legitimate,” it wouldn’t be as helpful as the injection of the $700 billion.
The most recent version of the bill comes after days of renegotiating a plan that could not get enough support from the Republican side of the aisle. On top of the $700 billion is another $150 billion in relief such as tax breaks and extended tax credits, many of which disappointed Democrats, including Rep. Lois Capps, who nevertheless voted for the Emergency Economic Stabilization Act.
“I share my constituents’ deep anger over this situation created by the greed of lenders and Wall Street players, the inattentiveness of federal regulators and the overall failure of the Bush administration’s policies” Capps said in a statement. “We must act quickly, and this proposal to meet this crisis is the best option we have. I know it would have been much easier for me to have taken the more popular route and voted against this measure, but I believe that would have been the wrong choice for my district and my country.”
Whether you’re for or against the Emergency Economic Stabilization Act, which has been criticized for effectively rewarding the biggest sinners on Wall Street for their poor judgment and risky behavior, you would be hard-pressed to find anyone who says the $700 billion is enough to assuage all of the economic anxiety.
Investors, from those who sock their money away in money market funds to those who day-trade, might find a little less volatility. Still, according to local investor and philanthropist John Glanville, the picture is still a huge mess.
“I think it’s fair to call it a debacle,” he said.
There are two kinds of investors with regard to this situation, he said. One camp hopes the situation will be something like the market dip of 1987, where the market fell, but found a bottom and climbed up again within about a year, before getting knocked down again by the tech bubble and the Sept. 11, 2001, terrorist attacks.
“The other school of thought is that there have been so many sins in the markets that have accumulated in the last seven years, that we’re really looking at a reset that’s going to be three to five years or longer,” he said. “That’s the kind of pain that not a whole lot of Americans who are out there today have dealt with. Things are still very, very fragile.”
Noozhawk staff writer Sonia Fernandez can be reached at .
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