People angry, confused about bailout

By Mark Fischenich

MANKATO — Jim Downs and Vilia Blom were talking about the financial and political mess playing out on Wall Street and in Washington, D.C. even before Congressman Tim Walz walked into Pagliai’s Pizza seeking opinions on the proposed $700 billion bailout proposal.

Downs, who owns Pagliai’s, was talking about the impact of the economic uncertainty on his other business — one that sells clothing and other promotional merchandise to companies. One corporation put an order on hold until Friday, waiting to see what happened in Congress and in the financial markets.

“We’re seeing some clients pulling back,” Downs said. “They’re afraid. They’re not going to do anything until something happens.”

“If his clients are pulling back, then he’s not buying from me and it’s just a chain reaction,” Blom told Walz.

Blom, a manufacturer’s rep who provides the shirts and other customized promotional products Downs sells to his clients, said skittishness by corporate America is making her reluctant to spend, scaling back her family vacation plans, buying less in stores. ...

“You have to be just real careful every month,” Blom said.

So Blom and Downs realize that there may be a direct and negative personal impact if Congress and President Bush fail to come up with a rescue plan that calms the corporate fears and keeps the economy from plunging into a deep recession. But that didn’t mean they like the $700 billion legislation to buy off the bad debt that is sitting like a cancerous tumor on the books of major investment banks and other financial institutions.

The legislation should include a provision requiring that the CEOs of the corporations receiving the bailout assistance step down immediately and without a cushy severance package, Downs said.

“If you led that company into that situation, you obviously did a lousy job,” Downs said. “You should be gone.”

Blom wants the legislation to include tough regulations on the financial companies to prevent reckless lending and other risky financial moves. And she wants taxpayers to be reimbursed if the bailout succeeds and the companies return to a profitable footing.

“This can’t be on the honor system,” she said. “They let the kids in the candy store. ... And they ate all the candy.”

Rampant skepticism
Others that Walz talked to on a tour of several businesses in downtown Mankato may not yet have felt the direct financial repercussions of the credit crisis. But the animosity toward the East Coast firms at the heart of the turmoil was unanimous. So was a deep distaste for using taxpayer dollars to help the companies recover.

“I’m just a consumer, just a taxpayer,” Pat Ellis, a Mankato native and retiree, told Walz at the Hy-Vee Food Store on Riverfront Drive. “I believe the people should come first, not the fat cats. The fat cats are getting way too fat.”

Walz, a freshman Democrat whose first re-election test is just a month away, told Ellis and others that he voted against the bailout on Monday when it narrowly failed to pass the House.

He quickly added, however, that he thought a rescue plan was imperative, that it wouldn’t necessarily be as expensive as it sounded, and that he would support a similar-sized rescue bill if it was improved.

Walz, a high school geography teacher until his election to Congress in 2006, did a quick lesson on the motivation behind the bailout plan, its primary provisions and the items he wants added to the bill. He said the level of bad debt on the books of financial institutions was so large that only the government was big enough to take it on.

He explained that many economists have told Congress that, with plenty of time and patience, much of the $700 billion — spent to purchase the bad mortgage-related securities and other shabby assets held by troubled financial institutions — could be recovered when those assets gain value.

“If it works ...,” Walz said.

“That’s a rather big ‘if’,” Downs replied.

Unequal treatment
People repeatedly brought up the inequity of the deal — that millionaire CEOs, after making foolhardy financial decisions, get help from taxpayers who receive no assistance as they wrestle to come up with money to pay the monthly bills.

“Why would I want to bail them out when I can’t afford my own (needs) on a day-to-day basis?” asked Andrea Ballman of Kasota, having lunch at the Wagon Wheel Cafe. “... If there’s no promise of them ever paying it back, what’s the point?”

A couple of booths away, hair stylist Emily Green of Mankato talked of the $17,000 of college debt that she’s worked to pare down to $12,000. Green struggled to understand why her tax dollars should be used to help huge financial institutions erase their debt.

“It sounds like kind of a fraud,” she told Walz. “I’m thinking, why isn’t all that money going to homeowners, people who really deserve it?”

Even that would come too late for Chris Beightol, who told Walz that he and his wife had been foreclosed on even with each working full-time, a part-time job added on to try to keep up with the payments. After the congressman moved on to the next table, Beightol said he hasn’t been following the debate over the Wall Street bailout.

“I almost would prefer not to,” he said. “I just hope it works. I just hope it works.”