Durham professor says he warned lawmakers of financial crisis
Posted September 24, 2008
Updated September 25, 2008
Durham, N.C. — A Professor at Duke University says he saw the problems in the financial markets coming two-years ago. He even asked Congress to do something about it last year.
Back then, however, lawmakers were unready to act, Professor Steven Schwarcz says.
Now, President Bush is asking Congress for a $700 billion bailout. If they don't approve it, lawmakers risk a cascade of wiped-out retirement savings, rising home foreclosures, lost jobs and closed businesses, the president said in a television address Wednesday night.
As the financial crisis dominated media coverage Wednesday evening, the founding director of the Duke Global Capital Markets Center says he set off alarm bells in nationwide articles nearly a year ago. Schwarcz even spoke before Congress about his plan to save the U.S. markets from what he called a "death spiral."
Schwarcz said the response from lawmakers was, "It makes sense to do this, but there is not the political will.”
Schwarcz called for a governmental group to purchase devalued securities at a discount to shore up and renew confidence in the stock market during panic.
That "is very similar to what the U.S. Treasury is now proposing,” he said.
However, Schwarcz's calls for action were nine months ago. At that time, he claims, the price tag to taxpayers would have been a lot lower and a profit could have been turned on the investment.
In the future, Schwarcz said, he would like to see the government create a brain-trust of experts like himself, a group to whom officials could refer when markets start heading in the wrong direction.
"The government is not really appreciating what is happening,” Schwarcz said.
A taxpayer bailout is meeting with deep skepticism, especially from conservatives who are revolting at the high price tag and unprecedented intervention in the private sector.
Though there is general agreement that something must be done to address the spiraling economic problems, the timing and even the size of the package remain in doubt.
"Many of you cite this as a serious problem, and I agree,” Treasury Secretary Henry Paulson said.
An ABC News-Washington Post poll said Wednesday the public is split about evenly over whether it supports federal "steps" to handle the financial crisis. In a survey released Tuesday by the nonpartisan Pew Research Center, there was nearly 2-to-1 support for the government "potentially investing" billions to try securing the markets.