Time for another economic stimulus plan?

October 8, 2008 7:14:34 PM PDT
Wednesday the Federal Reserve and other central banks around the world simultaneously cut interest rates. The hope is to prevent the financial crisis from becoming a complete global meltdown.

Treasury Secretary Henry Paulson offered assurances that he is moving rapidly. However, he warned the markets are clogged, more financial institutions will fail, and "the turmoil will not end quickly."

Wall Street, already having an up and down day, was 100 points up when Paulson began to speak. It finished nearly 200 points down at 92.58.

From Iceland to Russia, to Germany and the United Kingdom, investors are suffering, too. Their banks that bought bundled subprime loans cannot survive without cash infusions from government. And now the pain is spreading to European factory workers.

The BMW factory in Leipzig, Germany is shutting down for four days -- the result of a 15 percent worldwide drop in sales in September.

Twenty-thousand of its cars made for the U.S. market will be diverted instead to Russia or China.

One BMW worker says the four-day shutdown is better than layoffs, but anxiety remains about the impact of the U.S. financial crisis.

Wednesday, House Speaker Nancy Pelosi called for another stimulus plan to give the economy a booster shot. She put a $150 billion price tag on it.

Peninsula Congresswoman Jackie Speier supports the idea.

"We do need more stimulus in that we have so many people out of work now -- 700,000 Americans out of work," said Speier.

As the Treasury Department gears up to hire agents to buy up toxic securities from banks, Democrats continue to raise conflict of interest concerns.

"If you're going to have the very same people who created the problem then deciding how it's going to be resolved, especially if they may be working for firms that have a stake in what the outcome is. Conflicts of interest is a very serious issue," said Democratic Rep. George Miller of Concord.

Congressman Miller says it will take vigilance and multiple layers of oversight to prevent that from happening.

Kirk Hanson is specialist in business ethics at Santa Clara University.

"Sometimes you do have to fall back on the expertise of these people who are the only ones who really know how to get the job done. But what you do want to do is have very effective oversight on them, have great transparency about every transaction that they do, then you can have some confidence in the process," said Hanson

It is still not known how many billions it will take to stabilize the financial markets.

"There is no alternative. We can't sit this one out. You cannot watch the largest, most important financial system in the world just collapse," said Miller.

Wednesday's close of 92.58 is the lowest since August 11, 2003. It took over four years for the Dow to reach its all-time high of 14,164 one year ago tomorrow -- October 9th -- and just shy of a year to erase it. That's a drop of 4,906 points, or just over 34.5 percent.


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