Advisers pin hopes on rescue package

Financial advisers, economists, and others fear that the country may plunge into a deep recession — and possibly even a depression — if congressional leaders don’t hammer out an alternative rescue plan following Monday’s failed vote.
SEP 30, 2008
Financial advisers, economists, and others fear that the country may plunge into a deep recession — and possibly even a depression — if congressional leaders don’t hammer out an alternative rescue plan following Monday’s failed vote. “We hope congressional and administration negotiators will immediately regroup and find common ground upon which they can build a new agreement,” John Courson, chief operating officer of the Mortgage Bankers Association in Washington, said in a statement. “Restoring liquidity to the credit markets is crucial to both stabilizing Wall Street and keeping the U.S. economy moving forward.” At least one financial planner worries that if no action comes soon, the consequences could be dire. “If we continue down this path at this rate or faster, we could be moving toward a depression or, at the very least, a deep recession,” said Geoffrey VanderPal, a certified financial planner at Elite Financial Planning Group of America Inc. in Las Vegas, which manages more than $100 million in assets. “It’s like a snowball moving down a hill,” he said. There’s a misconception that a rescue package would simply bail out greedy Wall Street types who got the country into the mess in the first place and would do nothing for Main Street, Mr. VanderPal said. “It’s not just about supporting fat cats on Wall Street; this really affects everyone. We’re in a credit crunch, and for middle America — the people who need access to credit cards, home loans, automobile loans, small businesses — those people will be most affected by this in the long term,” he said. The scuttled vote was “an unfortunate display of the political posturing that many of us find so frustrating,” Jeff Diermeier, president and chief executive of the CFA Institute, a Charlottesville, Va., association of chartered financial analysts, said in a statement. “Congress must come together, provide a rescue package and reverse the panic that pushed the Dow Jones down more than 700 points.” Mr. Courson concurs. “The credit crunch is not only preventing financial institutions from being able to access capital but is also preventing large and small businesses from being able to borrow money — money they use to operate their businesses, upgrading facilities and equipment, and hiring and paying workers,” he said. “If businesses don’t have access to that capital, they will stop growing, and the economy will stagnate.” Mr. VanderPal allowed that Monday’s package wasn’t perfect. He’s hoping congressional leaders will hammer out a new deal that includes provisions requiring anyone who holds the mortgage paper to freeze adjustable rate mortgages for five years at the rate at which the original ARM was originated. “I think that would help turn around the housing market over time and turn around the credit crunch and economic issues we’re currently suffering from.” Tom Barrack, chief executive of Colony Capital LLC, a private-equity firm in Los Angeles, said he’d prefer to see the government invest $700 billion to $800 billion in failing financial institutions in the form of hybrid preferred stock, subordinated debt or capital certificates. The troubled assets would then be transferred by the institutions into a “good bank, bad bank” structure and liquidated to third-party buyers in a true auction. This proposal would provide liquidity to the banks and a true write-down of troubled assets, with taxpayers getting potential benefits from a corrected banking system over time, Mr. Barrack said. The Dow Jones Industrial Average was up more than 300 points in mid-afternoon trading on the hope a new deal will be negotiated.

Latest News

Advisor moves: Atlas tops $1B as Wells Fargo, UBS add bank veterans
Advisor moves: Atlas tops $1B as Wells Fargo, UBS add bank veterans

Wells Fargo adds two bank-channel recruits, UBS lands a JPMorgan Chase veteran, and a multi-family office lifts Atlas past $1B

Advisor mom’s son used her password to log into clients’ accounts, sell deal with conflicts, according to Washington state
Advisor mom’s son used her password to log into clients’ accounts, sell deal with conflicts, according to Washington state

“The state comes down on you in years when you make 40% returns for clients,” said Bill Swayne, the advisor and son of Candace Swayne.

Osaic in talks with Anthropic as AI reshapes advisor workforce
Osaic in talks with Anthropic as AI reshapes advisor workforce

The Independent broker-dealer giant has had “active conversations” with the Claude maker, which is days away from its expected IPO

The retirement milestone advisors aren't tracking
The retirement milestone advisors aren't tracking

For Gen X clients entering life after work, answering the financial question isn't enough to solve the entire retirement equation.

Wealthtech firms target stock pay, pensions and heirs for advisors
Wealthtech firms target stock pay, pensions and heirs for advisors

Tools from Grantd, Income Lab and Healthspan Wealth aim to keep RIAs involved in clients’ biggest money decisions

SPONSORED Best Practices for Engaging Women Around Alternatives

Growing wealth, evolving priorities, and untapped opportunities are reshaping how women approach long-term investing.

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.