Backlash to federal bailout grows among voters
Liberals and conservatives sign online petitions and complain to Congress. Some push alternative plans.
(Page 2 of 2)
The object of the bailout plan is as much to reassure the markets as it is to actually buy the bad debt securities, said Milton Ezrati, senior economist at Lord, Abbett & Co., in Jersey City, N.J. To that end, another method might have been to do what the Federal Reserve Bank of New York did when Long-Term Capital Management collapsed in 1998. The Federal Reserve told banks that they should lend to LTCM and that they would, in return, have backing from the Fed, Mr. Ezrati said.Skip to next paragraph
Subscribe Today to the Monitor
In this case, the Fed and the Treasury could have told banks to provide credit months ago with implicit backing from the government, he added. It would not have been as dramatic, but it might have forestalled some of the problems that exist now.
Not everyone in the industry agrees. "There are 100 options," said David Kotok, chief investment officer at Cumberland Advisors, a money-management firm in Vineland, N.J. "But we don't have the time to spend a year weighing them."
While Paulson's original request for little or no oversight was too much, the focus shouldn't be on punishing those responsible because the fundamental credit mechanism of the market is broken, he said. The markets need three things: a lot of money, transparency in the way decisions about that money are made, and a clear process for bailing out institutions.
"Main Street only sees rich people on Wall Street getting help," he said. "They don't understand that the local store gets credit from Wall Street firms." That makes transparency in any bailout plan that much more crucial, he added.
The image is hard to shake.
The bailout seemed to have mixed public support. Nearly two-thirds called it the right thing to do in a Pew Research Center survey of 1,003 adults released Tuesday. But a Rasmussen Reports telephone survey of 1,000 likely voters Sunday found only 28 percent support. Both surveys found opposition around 30 to 35 percent.
But since then, Congress has gotten an earful from constituents. Carolyn Cheeks Kilpatrick (D) of Michigan, who chairs the Congressional Black Caucus, said she has been getting calls that are overwhelmingly in favor of holding off on any bailout plan. "It's not settled," she said. "We know it's urgent. But we want it tied to a stimulus package."