LAKE COUNTY – Lake County residents” reactions to the failure of President George W. Bush”s proposed bailout bill Monday mirrored national reaction to the measure.
Congress rejected the $700 billion bailout bill Monday in a 228-205 vote. First District Congressman Mike Thompson (D-St. Helena) voted against the bill.
“We find ourselves in serious times, and we need equally serious solutions to steer our economy back onto solid ground. There”s no question we must address the weaknesses in our financial regulatory system to make sure that there are 21st century regulations for 21st century markets,” Thompson said.
He continued, “I voted against this proposal because it did not contain the market reforms necessary to address the underlying cause of this problem, nor did it have strong enough taxpayer protections.”
Thompson”s Washington, D.C. office could not be contacted by phone Monday afternoon for further comment because the phone lines were busy and the voicemail box was full.
Lake County residents interviewed at random were divided on whether the proposed bailout bill should have passed, but most said similar protections are needed.
“I think it was a short-sighted thing they (Congress) did. The damage they have done by not passing it greatly exceeds the cost of the bailout. The stock market almost instantly dropped almost 800 points. A lot of our 401ks are going to go up in smoke,” Hidden Valley Lake resident John Wise said.
The stock market fell 777 points Monday, the worst single-day drop ever. While he wasn”t happy with the bill as it was proposed, Wise said it was the lesser of two evils.
“I”m happy it did not pass in its current form. We need to rethink bankruptcy laws and we really have to deal with executive severance packages and salaries and benefits, and if we buy it, we own it. Give people mortgages at fixed rates, keep people in their homes and keep communities together,” Lucerne resident Donna Christopher said.
She continued, “This is not something that should be rushed – we rushed the Iraq war vote, and we”ve paid dearly for that. We have got to do whatever it takes to get credit markets going again because small businesses rely on lines of credit. I don”t care if people like Henry Paulson”s buddies go under, but I do care if Main Street goes under.”
The bailout proposes to buy the assets of banks that are failing because the banks irresponsibly extended lines of credit, according to Jennifer Hanson, a professor of economics at the Yuba College Clearlake campus.
“Banks are being bought out on a daily basis by other banks, and people are scared. They”re pulling their money out and not investing, and that leads to a greater crisis than we”re already in. The FDIC (Federal Deposit Insurance Corporation) insures up to $100,000 (per account), so unless you have more than $100,000 don”t draw it out, because that is going to cause a run on the banks,” Hanson said.
An example is the transfer of Washington Mutual”s assets to JP Morgan Chase last week. JP Morgan paid $1.9 billion for the institution”s banking operations, including assets and qualified financial contracts, according to an FDIC press release.
The deal was facilitated by the FDIC, which insures deposits up to $100,000 per account. For customers and depositors, the transaction is a combination of two banks and is expected to be seamless, according to FDIC Chairman Sheila C. Bair. Stockholders are not covered in the transaction, according to FDIC spokesperson LaJuan Williams-Dickerson.
“I”m not worried about it. Banks buy out other banks all the time,” Washington Mutual customer Raymond Scott said.
Hanson said the problem Lake County faces in the bailout deal is that it thrives on tourism and agriculture, both summer industries. She said that means small businesses needing loans for the winter might pay higher interest rates to already credit-wary banks. She said restoring consumer faith is key in healing the economy.
“When people don”t have faith they don”t invest money or purchase goods. If we don”t do that we don”t grow, so we have to recover in that way. Job creation has to happen, and the government is going to have to raise taxes on the people who can afford it in order to make the money back that they”re paying into the bailout. If we can help the lower and middle classes regain their footing, it will trickle up and bolster the economy,” Hanson said.
Contact Tiffany Revelle at trevelle@record-bee.com or call her direct at 263-5636 ext. 37.
