Bailout just the start of long, pricey rescue
Wake up and good morning. Is this bailout a "good" one? That's the $64 (really the $700-billion-plus) question. An interesting NPR segment explored that question and the answer is ... yes, even though a majority of economists queried prefer an alternative approach. And another segment is a great "you're not alone" tale of people trying to survive in the economy -- including this Tampa Bay story. As the Boston Globe reports, economists predict people are expected to cut back further after the tumultuous events of the past month. And the fourth quarter in the stock markets? Watch out for more turbulence ahead. Still, this is nothing like the Great Depression, say those old enough to remember those days.
At least not yet. Federal Reserve Chairman Ben S. Bernanke may find little time before the next trauma: a potential spread of the crisis to corporate America and state and local governments. Companies from Goodyear Tire & Rubber Co. to Duke Energy Corp. are being forced to tap emergency credit lines or pay more to borrow as investors flee even firms with few links to the subprime-mortgage debacle. California Gov. Arnold Schwarzenegger says his and other states, including Massachusetts, may need emergency federal loans as funding dries up. Florida government leaders already have said deals around the state to build infrastructure have been put off. Without funding, states "can't operate the health-care system, schools, roads and other services they provide,'' said Ben Watkins, who heads Florida bond sales.
We know automakers have their hands full with high gas prices and a down economy. But auto dealerships are right there with them. My Sunday column in the St. Petersburg Times quotes AutoNation CEO Mike Jackson and president Mike Maroone explaining how tough things are out there.
I've never been a fan of the King Solomon method of bank regulation, but this smacks of one. Citigroup Inc. and Wells Fargo & Co., prodded by U.S. regulators, may divide up Wachovia Corp. to end a takeover battle that's disrupting a federal rescue of the ailing North Carolina bank, the Wall Street Journal reports. Wachovia insists it is pressing ahead with its deal to sell itself to Wells Fargo. Wachovia responded to a judge's order Saturday temporarily blocking the sale of the bank to Wells Fargo, saying it does not believe the order "has any effect on the validity of the Wells Fargo agreement with Wachovia." Here's the latest update on the legal wrangling, but the net effect (for the moment) is Wachovia remains determined to cut a deal with Wells Fargo, while Citigroup refuses to be pushed aside. All this has prompted prompted a self-assessment in the Charlotte Observer and the good think piece in the New York Times on Sunday: Is Charlotte's economy too bank dependent? (Gee, ya think?)
Before we jump into a hectic week, take a lighter moment with this Saturday Night Live skit on the financial bailout. Especially amusing is the segment featuring the spoof on California billionaires Herb and Marion Sandler, who sold their Golden West Financial and its subsidiary, World Savings (prominent in the Tampa Bay area), to Wachovia for $25-billion. It was that sale that largely lead to Wachovia's demise and the condemnation of the Sandlers. Now Herb Sandler, in an AP interview, says he has been "listening to this crap for two years" and says he and wife Marion have been "unfairly tarred." What do you think?
-- Robert Trigaux, Times Business Columnist