Sep 24, 2008 6:55 pm US/Central
If There's No Bailout -- Recession Or Depression?
(WCCO)
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The number one concern is that executives whose companies will benefit from the deal will get richer at taxpayers' expense. (File)
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Lawmakers in Washington, D.C. have been flooded with calls about the government's bailout deal designed to rescue the financial industry. Both parties agree that a vast majority of those calling are against the deal.
The number one concern is that executives whose companies will benefit from the deal will get richer at taxpayers' expense. So the Bush Administration bowed to the pressure and agreed to put limits on executive pay. The president has said the $700 billion deal is needed to stave off an economic catastrophe.
So what if Congress doesn't pass the bailout package? Will the dire predictions come true? Government leaders and financial pundits are warning that the consequences of not passing a bailout could be devastating.
An exchange featuring CNBC's Jim Kramer and MSNBC Chris Mathews is among the most extreme.
"I am worried about the failure of the largest savings and loan in the country and I am worried about bank lines, and I am worried about the domino effect. I believe many big banks will fail, the FDIC will be overwhelmed if we don't get this plan," Kramer said.
"And you believe we're going to get to a cash crisis, in other words?" asked Mathews.
"Absolutely," said Kramer.
"In other words, you won't be able to get any money out of your ATM?" Mathews asked.
"I believe we will have a Great Depression scenario," responded Kramer.
So would ATM really be out of cash without action on the bailout?
"I would say that's preposterous," said Professor David Vang, the chair of the finance department at St. Thomas University's Opus College of Business.
Both Vang and Professor Murray Frank of the Carlson School of Management watched the exchange between CNBC's Kramer and Mathews.
"To say that it's the end of the world is a bit extreme," Frank said.
"The one thing I will agree with him (Kramer), in essence with, is that the faster a deal can be done, the faster the various businesses and banks out there can make plans," said Vang.
Both local financial experts said without a bailout there will be a recession. Consumers would find it very hard to get loans for homes and other big purchases, unemployment would rise and some businesses and banks would go under.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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