The Economy Across America
Marc Sanchez
OCTOBER 4, 2008
- Marketplace's Amy Scott hits the road.
- (Alexander Heilner)
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More From Marc Sanchez
As you may know by now, the president has signed the bailout bill Congress sent him Friday. Let's hope it eases some economic anxiety, given the stock market drama all week: Up and down, but mostly down.It'll be weeks, months, and maybe years before we fully understand what's gone on in this credit crisis and its implications.
But we do know it's not just a Wall Street and Capitol Hill story.
Marketplace's New York Bureau Chief Amy Scott left her perch over the center of the financial universe this week to hit the road, and ask people across the country what's going on for them in the middle of this mess.
Amy and Marketplace Money's Tess Vigeland will meet up in St. Louis next weekend. We caught up with Amy on the road.
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John Moe: Amy, what has the financial crisis meant to people you're talking to?
Amy Scott: Well, John, I started in Charlotte, which is the country's second-largest banking center, and where one of the city's largest employers, Wachovia, is about to be bought either by CitiGroup, or now maybe Wells Fargo. So people are feeling it there. The bank employs about 20,000 people in Charlotte, so people are naturally very worried about layoffs. I talked to a barber who's been cutting bankers' hair for more than 30 years. He says roughly half of his business is from Wachovia employees, and that gives you a sense of how layoffs could ripple through the economy in Charlotte.
Moe: And what are people saying about the bailout?
Scott: I'd say I'm hearing one of two things from most people I talk to: anger, horror, resignation. I went to a high school volleyball game in Charleston, West Virginia. And I met Ted Young, who drives a school bus for the local district. And he had no sympathy for the people and the banks that got in over their heads.
Ted Young: If it's me having a problem, and I don't spend my money right, I'm the one that hurts. These people, they messed up. And they know they did. And they should take the bite. They should go down. Don't bother me at all. As for Wall Street, it will come back.
Scott: But I'm also hearing from a lot of people that, while they don't like this rescue package, they feel that Congress had to do something. One thing that I've found in West Virginia is that many people feel a bit removed from this financial crisis. I mean, for one thing the economy wasn't in great shape to begin with, and the real estate market never really heated up like it did in other parts of the country, so they haven't seen the same levels of foreclosures that others are seeing. So I think some are wondering how much of a crisis this really is.
Moe: So as you've left the hallowed halls of Wall Street, what's been surprising?
Scott: One thing that's surprising is that a lot of people I've met tell me they're not looking at their 401Ks and retirement right now. To me that just takes a great fortitude at a time like this. But another thing Tess and I are on the lookout for as we make our way across the country are some positive stories. For example I met a woman in Charlotte, Carmela Johnson, who's the manager of an apartment complex.
Carmela Johnson: With all the foreclosures in this city, a lot of people are losing their homes, so they have to have a place to stay. So we're thankful that we have an apartment complex that's available and as of Friday we became 100 percent occupied. So there's always going to be a need - a demand and a need - and our need has been met.
Moe: And where else are you off to this weekend?
Scott: Today I'm going to explore Pittsburgh a bit. I just arrived here last night. The city is celebrating its 250th birthday today with all kinds of historical reenactments and music and fireworks. So I'll probably check out some of that and talk with folks about how they're feeling about the economy. And then everyone keeps telling me to go to this legendary sandwich place where they put French fries and coleslaw right in the sandwich-
Moe: Yes, I've heard about that.
Scott: So everyone keeps telling me to check that out. But I'm a little skeptical.
Moe: Marketplace's New York bureau chief Amy Scott. Thank you, Amy.
Scott: Thanks, John.
Comments
Comment | Refresh
05/20/2014
NC
From MD, 10/17/2008
I tend to believe the best way to manage complex problems is to apply a simple solution.
Forced terms
Banks with troubled home loans should be required to refinance via a mortgage modification agreement to reset these balloon loans to a fixed 5.1% 30-year terms. In the event the owner can’t afford those terms they need to vacate the premise because they are beyond their means. If banks refuse to participate, refuse government backing or support.
Equity Ownership
Recent steps to take equity ownership in the banking industry is a good idea and not only a national issue, it should also come without question - We (i.e. the US tax dollars) should only purchase shares at a significant discount over preferred and market share holders. Simply apply a 20% discount rule. This will ensure US citizen will have immediate equity. Why would share holders or stakeholders not expect to pay a premium for resuscitation? 7 years from now, let it fund our national healthcare plan or social security (2 birds 1 stone). If banks are unwilling, let them fold. This would not be first investment that did not pay dividends. For God's sakes, are you going to argue terms with a the person applying a tourniquet?
Bad Debt- 60% of book value
Similarly, to think the transaction cost (appraising, assessment, valuation etc.) of purchasing these trouble assets are not going to be excessive, is absurd. Furthermore the same benefactors that got this into the mess will be administering and charging us rent along the way. Simply purchase these assets at 60% of the original book value. I can assure you that after all the over pricing, deflation, etc you can make a science project out of every asset. I say- offer a price 60% of book or let them collapse. I assure you that Buffet or Trump would not buy any distressed asset unless the price was right. Why would we not do the same? This will again ensure owner equity is a short period. Give me a calculator and it will take me a minute and at no material cost to the stakeholders (US economy) to administer.
It should be considered criminal gross negligence to think US tax payers to not be put first. Let’s not reward larceny.
One last comment, the beauty of our financial system is the traceability from the broker who trades the note to the agent who sold the asset. I believe there is price that should be paid by all involved. The problem is that there is no incentive because everyone involved in the transaction is on the gravy train. It would not be difficult to remedy. For anyone to think that cash out flow at a greater rate than inflow would not lead to this situation should not have a license to do business and held negligent.
Thanks for entertaining my comments.
Steve
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