The failure of US lawmakers to pass the $700 billionfinancial bailout package ? and the historic plunge on wall street Monday ? arebeing watched closely around the world.
South African economist David Shapiro, acting CEOof Sasfin Securities, says this crisis is unlike any other. From Johannesburg,he spoke to VOA English to Africa Service reporter Joe De Capua about WallStreet's 777-point drop Monday.
"What you have to realize is that is the biggestdrop in history. In fact, the drop was greater than after 9/11. And also whatyou have to remember is that it's (stock market) already been under pressure.The depth that markets have fallen is quite incredible," he says.
Asked whether he was surprised by the failureMonday to approve the legislation in the House of Representatives, Shapirosays, "I was surprised because I have great respect for (Treasury SecretaryHenry) Paulson. The work that he has done to try and turn things around -- hehas worked tirelessly. I have a great respect for (Federal Reserve ChairmanBen) Bernanke. I think they are clever men. They understand the market thatthey're in. They didn't create it and what they're trying to do is to correctwhat's gone wrong in the past. They're almost as ashamed as everybody else isabout Wall Street, but that doesn't help anybody. The thing is to try andresuscitate the global economy -- first of course, to resuscitate the USeconomy?. But they had warned Congress that if you don't let this package gothrough the consequences will be dire."
Shapiro says warnings came from elsewhere aswell. "Even respectable magazines like The Economist have come out and said,look, we don't know what the perfect package is, but they say some package hasto be passed. It's better to have a bad package than no package at all," hesays.
As for those advocating free market principlesduring the crisis, letting the market take its own course, Shapiro says, "It'stoo late for that. To get free market adjustments, for example, adjusting theiraccounting laws?bringing in some tax concessions and all issues around that aregoing to take weeks and months to push through. By which stage, I think bankinglending would have frozen up and the US economy would have just ground to ahalt?. We need to bring confidence again into the US economy. We need bankersto feel that they will be able to rebuild their balance sheets."
He says it's possible a bailout package couldeventually yield a profit for the American taxpayer. He says as the crisiscontinues, investors will turn their attention to other large economies, suchas India and China, for profitable ventures.