What Stimulus?

Everyone wants to get back to business as usual, but with each passing day it becomes clearer that business as we once knew it not coming back for a long, long time. Lately, I started to think that we were getting close to bottom—I heard of some hirings, I heard about some deals that seemed positive, etc., but recently I've seen more news that would seem to indicate I was mistaken.

According to a recent Wall Street Journal article, the credit markets are expected to freeze up even more in coming months. Analysts say part of the problem is the government bailout. This huge program to unfreeze the credit markets and stabilize the U.S. banks has yet to take any real form, which is making investors even more uneasy. Additionally, debt holders worry that the money the government gives out could put the Fed's interests ahead of creditors. In a lot of cases, it just increases the uncertainty, and investors are rarely comforted when they have to look to Washington to get their financial picks.

I am not against the government trying to help bring our markets back, but it seems their efforts thus far has yet to be really helpful. There’s $1 trillion available to “rescue” us, yet nothing is getting better. I also suspect it’s going to take years before the stimulus package will make a difference.

Middle-market companies, based on a recent poll, would seem to agree. According to a survey by Forbes Insight and CIT Group, about 75% of middle-market companies said they expect their ability to secure financing to remain the same as it is now or worsen over the next year. Additionally, most middle-market companies expect it’s going to be more than two years before our economy returns to growth and at least one to two years before the financial markets turn around.

So not only is the government’s bailout plan costing future generations plenty, it is now having the opposite effect of what was intended. That being said, what was the alternative?

Danielle Fugazy
danielle.fugazy@sourcemedia.com