Bailout tough pill, Colorado leaders say

But they're quick to add that it's also necessary

By James Paton, Rocky Mountain News (Contact)

Published October 2, 2008 at 12:05 a.m.

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Richard Drew / Associated Press

The screens of specialist Thomas Ebner are reflected in his glasses as he works on the New York Stock Exchange floor on Wednesday. Stocks fluctuated in anticipation of a bailout.

A bill passed by the U.S. Senate on Wednesday hopefully will be a key to averting a potential economic disaster, though a $700 billion bailout is still hard to swallow, leaders from Colorado's business and political realms said.

"The current conditions clearly call for drastic action, and the Senate approval is a first step toward unfreezing our credit markets," John Dill, CEO of the Credit Union Associations of Colorado & Wyoming, said after the vote.

Chief executives, economists, and owners of small businesses across Colorado are keeping a close eye on Washington this week, and Gov. Bill Ritter tackled the economic rescue plan at an Association for Corporate Growth luncheon on Wednesday.

"I understand how hard it is to think about putting $700 billion into Wall Street, but . . . I think there'd be a devastating impact without a bailout," he said.

The legislation would allow the government to spend billions of dollars to buy troubled assets held by financial institutions, freeing those companies to continue making loans.

With the presidential and congressional elections approaching, the Senate passed the bill by a wide margin. The House of Representatives on Monday had rejected a previous version of a bailout plan, sparking a sharp decline in the stock market.

The Senate bill extends tax breaks for individuals and businesses and temporarily raises the limit on bank deposit insurance to $250,000 from $100,000. The House is expected to consider revised legislation on Friday.

Colorado leaders said they hoped Congress would provide the markets with some clarity. "The thing that is killing people right now is the uncertainty," said Dick Hinson of the Aurora Economic Development Council.

The financial markets saw some relative calm Wednesday as investors uneasily awaited the Senate vote, with Wall Street falling only moderately. The Dow fell 19.59, or 0.18 percent, to 10,831.07. Key lending rates and demand for Treasuries stayed at lofty levels.

More large companies have been having trouble getting loans at rates they can tolerate - and as a result, they're altering their business plans.

"We've taken the credit markets for granted much like you do the electricity coming on every day, but in this particular case the power grid is down," said Jim Dunigan, of PNC Wealth Management. "If we don't have a functioning credit market, banks aren't lending to each other - credit is dried up. That ultimately affects economic activity."

Dill, of the credit union organization, said the anger is justified.

"Credit unions, like most Americans, are not the source of the problem that has led to the worst economic meltdown since the Great Depression," he said. "Despite the fact we're fully insured by the federal government and our efforts to help members, we still need action to address the psychology and the substance of the problem."

The Associated Press contributed to this report

What's in the plan Key provisions of the $700 billion financial industry bailout and sweeteners.

The underlying legislation would:

* Authorize $700 billion for the government to purchase troubled assets and buy equity in distressed financial firms.

* Require the Treasury Department to make rules to prevent excessive compensation for executives whose companies benefit from the rescue, and cap deductibility of executives' pay packages at $500,000 for firms that get $300 million or more from the program.

* Establish an oversight board, a special investigator general and regular government audits.

* Require the president to establish a plan to recoup the cost from the financial industry if, after five years, there are any losses.

* Phase in the money, with $250 billion available immediately, $100 billion if the president certifies it is needed, and $350 billion with another certification, but subject to a congressional vote.

Sweeteners would:

* Provide business tax breaks, including for renewable fuels.

* Require group health plans that include mental health or addiction treatment.

* Increase personal credits against the alternative minimum tax.

* Grant tax relief to victims of natural disasters in the Midwest and elsewhere.

* Extend through 2011 a program that funds rural schools and local governments that have low property-tax bases because they are in or adjacent to federal lands.

* Extend until the end of 2009 the deduction for state and local general sales taxes.

* Extend until the end of 2009 individual tax breaks, including deductions for higher education costs and teachers' personal expenses.

* Increase, from $100,000 to $250,000, the limit on federal bank deposit insurance.

• October 2, 2008

  4:25 a.m.

  Suggest removal

  Brix57 writes:

  Sweetening the poison pill will do nothing but alter the taste, this will still kill us all.

  We, as the voting public, can start to get rid of these politicians that do not listen to those that put them in the office, starting with those in the House that vote to pass. Republicans and Democrats have led us into this mess, time for new parties to take the reins.

• October 2, 2008

  7:48 a.m.

  Suggest removal

  FCZ writes:

  Do not swallow the bailout as it will leave a bad taste.

  The sweeteners will allow the crooks to keep their current $100 million sweeteners ( each ) . The restriction is only on future bonuses.

  When Raines and Gorelick apologize and return their $80 million plus ( each ) sweeteners , then we can talk.

• October 2, 2008

  10:05 a.m.

  Suggest removal

  windbourne writes:

  Why does adding even MORE debt make this easier to swallow?

• October 2, 2008

  3:56 p.m.

  Suggest removal

  Americans4Liberty writes:

  Call your U.S. Representative today! Tell them NO to any bailout!!

  The House website to find your Congressman's contact information is so swamped right now, we'll provide an alternate site for you to use. So here's another way to contact them:

  1. Go to the http://www.congressmerge.com/onlinedb...
  2. Find your congressman.
  3. I know many of us are very upset, but take a deep breath and. It is important to be polite.
  4. Pick up the phone, dial, and once connected, state:

  "Hello, my name is _________ and I am from ___________ (your city).

  I strongly urge you to vote NO on any proposed bailout plan. The American taxpayer does not deserve to be put on the hook for the mistakes of the Federal Reserve, Congress, and Wall Street.

  It's time for real solutions, such as cutting taxes and curbing regulations, restricting spending, and adopting a sound money system. The days of the Federal Reserve manipulating our money supply and marketplace MUST come to an immediate end. I am counting on you to vote NO to any bailout!"

  http://www.campaignforliberty.com/con...#.

  Then please join the Campaign for Liberty and help us restore our Republic!
  http://www.campaignforliberty.com/#.

• October 2, 2008

  11:10 p.m.

  Suggest removal

  jrhino writes:

  Like George Lilly, running for the US house dist 1, has been trying to get across, You can't fix these problems with funny money.

  This bail out will haunt citzens for a long time.

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