WHEELING - "Corporate welfare" is how West Virginia University economics professor Russell Sobel describes the planned $700 billion federal government bailout of troubled Wall Street investment firms.
But Brian Sommers, chief investment officer for McKinley Carter Wealth Service in Wheeling, believes the government must intervene to provide a continued flow of credit to banks to prevent job losses.
As U.S. senators and representatives worked with President Bush in Washington, D.C., on Thursday to finalize a taxpayer-funded bailout for certain Wall Street firms, economists and investment officers continued debating the merits of such action.
"There will not be a depression if this plan does not go through; there is no panic in financial institutions that have used sound business practices," Sobel said.
Sobel said providing the failing investment firms with a bailout will only encourage the companies to continue with the risky business that caused their problems.
"These companies will just be depending on the government to bail them out again whenever there is another slowdown. Companies that make bad business decisions should have to live with those decisions and go out of business," he said.
And though Sommers said he normally opposes significant government intervention in the economy, he believes this bailout is necessary.
"If they (government) do not do anything, the economy will slow drastically. Even though this plan is not perfect, the government needed to step in on this," he said.
Sommers also said the bailout will help stabilize the economy to the benefit of all those involved.
"This is not just a Wall Street bailout; this is a 'Main Street' bailout," he said.
Sobel said the main problem with the bailout is that U.S. taxpayers will be picking up the tab for private companies.
"(President) Bush makes it sound like he can fix this by getting money from the 'Tooth Fairy,' but this money is coming from you and me. The U.S. taxpayers should not have to pay for the mistakes of big business," he said.
Sobel believes unusually low interest rates and outright fraud are likely the reasons for the current Wall Street problems.
"The Federal Reserve held interest rates too low for too long, which encouraged people to take out loans they could not afford," he said, adding that anyone committing fraud should be punished.
Sommers said accounting rules established by Congress need to be changed to help prevent such instability.
"They (Congress) should also start regulating investment banks the way the regulate commercial banks to prevent the investment banks from getting too far off course," he said.
Sommers said commercial banks - such as Bank of America and WesBanco - fall under the requirements of the Federal Deposit Insurance Corp. that insures deposits of up to $100,000. But investment banks - such as Merrill Lynch and Morgan Stanley - are not regulated by the FDIC.
Members of Congress representing the local area shared their views of the bailout plans Thursday via news releases.
U.S. Sen. Jay Rockefeller, D-W.Va., a senior member of the Senate Finance Committee, said there are likely very tough times ahead.
"This plan is intended to prevent economic catastrophe but it alone will not put us on the path to prosperity. We must immediately turn our attention to broader economic recovery, from health care, to increased wages, to expanded job opportunities, to major public infrastructure. The people of West Virginia deserve lasting solutions."
Congressman Zack Space, D-Ohio, stressed that the welfare and well-being of American taxpayers must be of paramount importance in the creation of the final version of the economic rescue bill.
"There is absolutely no good choice in this situation, and I consider it an insult that the very (Bush) administration who have sunk our economy through deregulation is now insisting that we must help avoid the economic crisis," said Space.
Congressman Charlie Wilson, D-Ohio, said the government intends to return the assets it acquires when they can be resold to the private sector for a profit.
"Since we will be part owners, we can say 'no more' to golden parachutes for executives. In this bill we now include tough executive compensation requirements for all those who want to participate in the program," he said.
Congressman Alan Mollohan, D-W.Va., could not be reached for comment Thursday.