Economic Experts Disagree on $700 Billion Bailout

The government has proposed a massive rescue plan, but is it the right move?

September 25, 2008, 7:56 AM

Sept. 25, 2008 — -- It's the $700 billion question on Capitol Hill: How to bail out Wall Street.

At least one legendary investor believes the government will get it right and is putting his money where his mouth is.Investor Warren Buffett just promised $5.5 billion to Goldman Sachs. "I am to some extent betting on the fact that the government will do the rational thing here and act promptly," Buffet told CNBC.

Former General Electric chief and business icon Jack Welch agreed.

"I think it's critical, absolutely critical," Welch told "Good Morning America." "This economy is slowing dramatically. There's no credit available."

And he responded to some critics who say the plan gives too much control of taxpayers' money to Treasury Secretary Henry Paulson.

I think we're so fortunate to have Paulson, to have [Ben] Bernanke," the Federal Reserve Board Chairman, "working on this stuff."

Welch said that he believes the bailout cost to be less than the estimated $700 billion -- more like "plus or minus $100 or $200 billion."

Former Clinton Labor Secretary Robert Reich is not so sure.

"The initial bailout package from Paulson -- I give an F," he told "Good Morning America." "One thing you never do in politics is go with fait accompli. You never ask for a blank check."

Both Welch and Reich do agree on one thing, though. They say the key is for everyone, especially the average investor, to remain calm.

"Don't panic. Don't sell at the bottom. Don't jump out," Welch said. "It will work out. Now it might not work out next week, next month -- we're going to be strong again."

The brokerage firm Charles Schwab took out an ad this week urging investors not to panic while the lawmakers pound out a deal.

Both Welch and Reich believe that new regulations should be included in the bailout package to reform compensation packages and CEO bonuses for firms accepting taxpayer bailout money.

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