UAB Expert Commentary: UAB Business Professors on Toughest Economic Challenges for Country’s New President

“One of the biggest challenges for the new administration is the management of the financial crisis bail-out plan. The money has been approved, but nothing has been paid out yet. There is still no official procedure for implementing the bail-out; we don’t know how the money will be distributed.

November 5, 2008

ANDREAS RAUTERKUS, Ph.D.

Assistant Professor of Finance

"One of the biggest challenges for the new administration is the management of the financial crisis bail-out plan. The money has been approved, but nothing has been paid out yet.  There is still no official procedure for implementing the bail-out; we don't know how the money will be distributed.

"If the new president and new staff that he'll appoint at the Treasury want the plan to work as painlessly as possible for the taxpayers, the procedures have to be put in place as fast as possible. However, the president has to be objective and has to set a fair price for the "toxic" assets or bad loans that the government has suggested it will buy up as part of the bail out.

 "If this is not done right, it could mean that a big bill will be presented to American taxpayers in the not so distant future, meaning taxes would have to be raised significantly over the long term to pay off that bill."

BOB ROBICHEAUX, Ph.D.

Chairman of the Department of Marketing and Industrial Distribution

"The newly elected President of the United States will have to take on a badly damaged banking system, insecurity in the stock market, rising unemployment and extreme pressure on Social Security as 75 million Baby Boomers approach retirement.       

"The greatest challenge he faces, however, will be the reconciliation of a nation of 300 million persons who are deeply divided into two camps: those who favor continued reliance on Mixed Capitalism and those who are ready to embrace a model favoring historic government intervention and oversight. Never before in my six decade life have I heard so many people publicly demand that our government intervene in our economic lives and assume responsibilities for redistributing domestic wealth while nationalizing essential sectors in our economy like health care and energy. 

"The president must decide whether to lead the nation's current Mixed Capitalism economy on a slow road toward economic recovery or to radically change the country's economic model, following the growing numbers that demand greater central government control and less individual freedom and responsibility in finance, health care, energy and other sectors."

LARY COWART, Ph.D.

Chairman of the Department of Finance, Economics and Quantitative Methods

"The country's new president faces the most significant mortgage meltdown we've seen in both the residential and commercial sectors, and righting the ship will be one of the new administration's toughest challenges.

"On the residential front, the president and his advisors will need to quickly enact the bail-out legislation that has been approved to free up the credit availability, because for a majority of Americans it is nearly impossible to secure a home loan right now.  For those already in the housing market, the next president needs to develop policies to stabilize home prices, because foreclosures nationwide are dragging down home values, and with them go the economy and levels of personal wealth.

"On the commercial front, the next president faces the threat of a real estate meltdown.  A lack of credit to refinance commercial mortgages, slowed retails sales and potential business closings could all negatively affect the commercial real estate market over the next 12 to 18 months."