Sunday, October 05, 2008 | News, In this Issue...
Scrap at the corner of Wall and Main

Atlantans caught in the middle as banks and anti-Bush sentiment clash

Anti-war activist group Code Pink protests the bailout from inside Democratic presidential candidate Sen. Barack Obama’s office.
Melissa Golden/Getty Images

By Stephanie Ramage

Georgia didn’t have to wait long to see the effect of Wall Street’s crisis on Main Street.

Last week, natural gas marketer Catalyst filed for Chapter 11 bankruptcy protection due to the failure of Wall Street investment bank Lehman Brothers. Catalyst, which has about 30,000 customers in Georgia, relied on the nation’s largest energy marketer, Constellation Energy, for its credit and gas contracts. Constellation had a partnership with Lehman Brothers, and after Lehman’s failure, Constellation’s stock plunged, effectively shutting down credit to the companies that relied on it, like Catalyst.

Lehman’s two-degree relationship with Catalyst was a special case—most businesses wouldn’t be as closely connected with an investment bank. But even without such relationships, the credit crunch for businesses is on, and consumers should understand that even with a “Wall Street bailout,” there will be some lag time before things get noticeably better.

“This doesn’t all happen at once,” says Emory University business finance guru Jeff Rosensweig. “It will happen faster than the new tax cuts that have been added to the bailout by the Senate will kick in, but it’s more a matter of getting some confidence back in the market. It’s a signaling device, not just a cash infusion. Right now, the whole system is frozen.”

Credit lines had begun to dry up by mid-September. Some consumers noticed in recent weeks that their credit lines had been decreased, along with their credit ratings. Most financial experts say that the bailout would reassure jittery banks enough to get them to loosen up credit lines again.

Even as Georgia’s Public Service Commission announced an emergency hearing on Catalyst, the U.S. Senate began debating a new version of the so-called “bailout bill” in the wake of the original version’s defeat in the House on Sept. 29. The version passed by the Senate late on Oct. 1 was strikingly similar to the original, with some things, like tax credits for alternative energy developers and $100 billion in tax breaks for businesses and the middle class, thrown in to lure the House into passing the measure. Both presidential candidates, Republican Sen. John McCain and Democratic Sen. Barack Obama, voted for the bailout.

The House was slated to consider the bill—in essence, for the second time—on Oct. 3, the morning after The Sunday Paper went to press.

The day after the Senate passed the measure, the U.S. Commerce Department reported that orders to U.S. factories had tumbled by the largest amount in nearly two years as credit dried up. Stocks also dropped under the news that the number of people seeking unemployment benefits had risen to a seven-year high, thanks to the financial crisis sparking panic in would-be employers.

In the midst of this whirlwind, Atlantans from West Midtown to Ansley Park are worried. 

“They waited until the 11th hour to do it, although they’d known about the problem,” said Linda Ferguson, a legal secretary who was using her lunch break on Oct. 1 to read a thick novel in the autumn sunshine outside a Starbucks in Midtown. “These careless banks? I don’t really care about saving them at all, but it scares me too much to think that if we don’t do something now, that everything will domino down.”

Ferguson has worked in her field for 25 years, and though the Wall Street crisis is troubling, she says, it’s only part of a larger, older problem.
    
“I think when they have more time, they need to make a lot of reforms across the whole economy,” she said.

As Wayne Seling, a database architect for a little more than six years, strolled into the Peachtree Street coffee shop he, too, was taking a cautious view of the bailout.
 
“I kind of felt like they were cramming it down our throats,” he said, regarding the original bill. “I think we have to do something other than blame one another, but I don’t have any solutions.”

Behind him in line, Daniel Davenport, who has worked in interactive advertising for 15 years, listened in. He wasn’t pleased, in part, because of the Securities and Exchange Commission’s decision on Sept. 18 to ban “short-selling’ against 800 companies it had designated as troubled by the financial crisis. Short-sellers borrow shares of a targeted company’s stock, betting that they will be worth less later, then they buy them at the lowest price, finally reselling them back to the company at a higher price, and pocketing the difference. The ban will remain in place until either three days after a bailout plan is passed into law or until Oct. 17, a month after it was put in place.

‘We already had rules,” he said. “We need to enforce the rules we have, and that would go a long way in solving things.”

Over at Atlantic Station, 38-year-old Curtis Graham was hoping Wall Street’s failure might continue unabated, at least for a little while.

“I want it to fail for about a month because securities are going to be more affordable; it’s going to be a fire sale,” he said. “It’s a good time to jump in, and everyone I’ve spoken with feels the same.”

And at Ansley Mall, as John Meyer, a 49 year-old regional district sales manager, hurried to an appointment, he was more concerned than optimistic.

“Whatever they do, it’s only going to be temporary, like a Band-Aid on a dam,” he said. “We’ve just got to take a whole new look at how we do things. We, people in the business community, are waiting until the election to see how things are going to turn out. Things flowed better in the Clinton years.”

A vote against Bush

On Sept. 29, the Emergency Economic Stabilization Act of 2008 failed by a vote of 228-205 in the House of Representatives. It was a bipartisan defeat, with nearly half of those voting against it, 95 of them, being Democrats. Among Georgia’s 13-member delegation, the defeat was even more resounding, with 11 of our Congressional representatives—Democrats and Republicans alike—voting “nay.” Only two, Rep. Sanford Bishop of Columbus and Rep. Jim Marshall of Macon, both Democrats, voted in favor of the financial rescue.

The vote against the package made for very strange bedfellows. Congressman Jack Kingston, a white conservative Republican from the 1st District, home to the Kings Bay submarine base, found himself voting against the bailout in lock-step with 5th District Congressman John Lewis, a black Democrat from Atlanta.

“What Congressman Lewis and I have in common is that we both have seen [Treasury Secretary] Henry Paulson’s track record,” says Kingston. “It’s been one bailout after another, $29 billion for Bear Stearns, $85 billion for AIG and so on, and every time it was supposed to fix the problem—and Paulson knew about all of this a year ago?”

In a statement on his Web site, Lewis says: “Why is it that we can find a way to bail out Wall Street, but we cannot help the people struggling on Main Street? People are losing their jobs, their homes, and struggling without health care. No one has come to their rescue, but yet overnight we are pressed to come to the aid of Wall Street.” 

Kingston and Lewis were also responding to their constituents. Kingston posted a summary of the proposed bailout on his Web site on Sunday, Sept. 28.

“We had 350 hits by Monday morning, and phone calls,” he says. “And these were not organized groups calling. ‘Jim’ didn’t know ‘Suzie.’ These were independent callers. They were thoughtful and intelligent.”

Many of the 228 members of Congress who voted against the bill said they would have supported it, but public opinion was wildly opposed to it. People, said one representative after another, were mad as hell.

A survey conducted by the Pew Research Center tells a different story. As Kingston was posting his summary of the bailout, Pew survey respondents were mostly saying they were in favor of the measure.

“Forty-five percent said it was the right thing to do,” the Pew Center’s Andrew Kohut told National Public Radio on Oct. 1. About 38 percent were opposed to it.

Why the discrepancy? There is the old saw about angry people being more vocal, and it was angry people who were contacting Congress, whereas the Pew researchers were surveying random respondents. 

Some of the opposition can be seen as a matter of vociferous anti-Bush sentiment. Georgia’s 4th District Congressman, Hank Johnson, for example, called the measure “President Bush’s massive federal bailout plan for runaway Wall Street investment firms.” He went on to state on his Web site: “Frankly, the president carries no credibility with me, and that is one of the many reasons I opposed this reckless bailout proposal.”

The loud protest against the bailout might also be explained, according to David Colander, an economist at Middlebury College in Vermont, by citizens taking a short-sighted, though deeply personal, view of the situation, when what’s called for is thinking long-term about the whole society.

“From a social perspective, it looks different, and I think the issue is whether a social perspective or a myopic perspective will prevail,” he says. “Of course, it was a myopic perspective that got us into the problem, so I'm not sure we can rely on a social perspective to get us out of it.”

But what looked like something too far off to worry about less than a month ago is now hitting home, becoming something that even the short-sighted can see. As NPR national political correspondent Mara Liasson reported on Oct. 1: “The tide is changing a little bit as the effects of the financial crisis reach Main Street; people’s opinions about whether the government should do this are changing.”

Macon’s Congressman Jim Marshall and Columbus’ Congressman Sanford Bishop were ahead of the tide.

“It was the right thing to do,” says Marshall’s press secretary, Doug Moore. “We have a brewing financial crisis, and if we don’t fix the problem, it’s going to be a disaster.” SP