After the bailout
The dome of the Capitol is lit up as the Senate votes on a new bailout package -- October 1, 2008
TEXT OF INTERVIEW
Tess Vigeland: Looks like the second time is the charm for the House of Representative. Members voted -- some probably grudgingly -- to pass the administration's financial bailout package and joining me to talk about all this is our own Bob Moon who is with me here in Salt Lake City. Hi Bob.
Bob Moon: Hey Tess. Well, you know, it's been an incredible week, but this'll give you some idea: I've been looking for a single sound bite that would kind of cover the mood that we have seen in Washington all this week and I think I found it:
[From from The Jack Benny Program]:
Robber: This is a stick-up!
Jack Benny: Mister, put down that gun.
Robber: Shut up! I said this is a stick-up. Now, come on: your money or your life. I said, your money or your life!
Benny: I'm thinking it over!
Moon: I think that pretty much sums up the tone in Washington right now. We've had a week in which Congress initially balked at this program and then we saw a very sharp change in attitude and I think that was reflected in a quote from a Republican Senator from here in Utah, Robert Bennett. He said it's "ordinary people looking at ordinary pensions, with their ordinary Main Street kind of 401(k) plans" who lost more than $1 trillion of value in their accounts and that is what changed the mood in Washington to a more positive response to the plan.
Vigeland: And the mood didn't only change in Washington. At least from the few cities that I've visited this week, I did not get a sense of the seething anger that I think we saw even a week ago. This week, it was more a tone of resignation, the idea that, you know what, we're going to have a bailout package and the concern was if we've going to have one, let's at least make it a responsible one. I have to tell you Bob that the other concern that I am hearing, again on Main Street, is people are very worried about their banks, the banking system. Wall Street or no Wall Street, they're concerned about their deposits because we keep seeing bank after bank get bought up. We're kind of at a point where it seems like we have maybe three or four big banks in this country and people wonder if that's a good thing.
Moon: Bank after bank get bought up or fail for that matter, and you're right. We've seen really this kind of wave of forced consolidation in the industry. We've now got JPMorgan, the largest bank by deposits. We've got Citigroup, the largest bank by assets. Bank of America, which was the largest bank until those other two banks kind of skipped ahead of them and what that means is that you have fewer choices, you have fewer places to go for credit and with credit so tight right now, if you're a small business, for example, you have far fewer choices to tap and that is going to be a problem not only for small businesses, but for people trying to get a mortgage, that sort of thing. We aren't seeing it really strongly at the retail level just yet, but it seems to be coming very soon.
Vigeland: And I think that's being reflected here in Salt Lake City with a couple of the construction projects underway.
Moon: That's right. In fact, we heard from one construction company here that a project on Main Street, oddly enough, had to be put on hold because the developer could not get the funding required to continue the project.
Vigeland: Bob, why is money so tight if we keep hearing that the Fed and central banks all over the world are pumping all this money into the worldwide economy and yet credit is still so short?
Moon: Well let me see if I can paint a word picture for you: imagine the fire hose is going, it is just gushing out that money right now to make sure that there is an adequate money supply around the world. What's happening is it's going directly into the coffers of those banks, into the vaults of those banks. So the fire hose is wide open and they're drinking it all up right now.
Vigeland: But they're not sharing it?
Moon: That's right, and one of the problems is until they fill up their vaults and don't have to worry about making their own payments, we're probably not going to see that money. That's what the rescue plan has been all about.
Vigeland: Well there is another source of funding if you're not looking at the big major banks in this country. You still have a lot of community banks out there, right?
Moon: That's true, although there is concern about their future as well. As a matter of fact, early in the week we saw Sovereign Bankcorp, National City stock tank by 60 percent, so there is still real worry about the status of those banks and we hope that there won't be a lot of bank failures. We hope that the rescue plan might take care of some of that.
Vigeland: Alright, to be continued once again. Thanks so much for coming in Bob.
Moon: Thanks Tess. Enjoy your trip.