A record drop in the Dow Jones average — and the possibility that there could be more financial pain to come — had normally calm investment advisers in Nashville warning of dire consequences for the economy and blaming Washington for a lack of leadership on Monday.
"The markets are driven by greed and fear, and fear is winning at this point," said M. Rush "Rusty" Benton, head of the WealthTrust, an investment firm in Nashville.
"What they're not communicating is how dire the results would be if we don't fix this financial system. It's a failure of democracy," Benton added.
While other taxpayers applauded the House vote as sending a message to Wall Street that its executives must be responsible for their own financial mistakes, bankers, investment advisers and money managers said the financial fallout could spark more job losses and hurt consumers.
Some analysts warned of a severe recession or worse unless Congress reverses field and approves some sort of financial relief later this week.
"People are upset. They view it as a bailout of Wall Street. I don't think they really understand how much help this would give to the person on Main Street," said Fred McLaughlin, senior vice president at Robert W. Baird & Co., an investment company.
But Tom Lawless, a bankruptcy lawyer and chairman of the Davidson County Republican Party, said warnings of catastrophe in the absence of a rescue package have been exaggerated.
"It may be the CEOs in large financial institutions who are concerned, but perhaps they should be," Lawless said. "They might look in the mirror and say, 'What can I do to improve this?' It's called tightening your belt. Live within your means."
Ability to borrow at riskOther analysts said the ability of businesses and the average consumer to borrow money is very much at risk, though, and further tightening of credit could cause the economy to collapse into a deeper recession.
"Money is the lifeblood of the economy and right now the economy is on life support and needs a transfusion," said Brett Defore, a financial adviser at Morgan Keegan & Co.
"The financial system is not functioning,'' said Tony Thompson, the Nashville-area president of First Tennessee Bank. "If credit does slow, ultimately that has an effect on job creation and business investments — and that's not good."
Not all local bankers supported the proposed $700 billion Wall Street bailout, though.
Terry Turner, president and chief executive officer of Nashville-based Pinnacle Financial Partners, said he thought Congress was "running too fast to put together a very complicated package" and needed to weigh the consequences of government ownership of some financial companies.
"How is the government going to regulate businesses it's an owner in?" he asked. "I think it's very far removed from basic capitalism."
Peyton Green, a bank analyst at FTN Midwest Securities, said investors are worried about other banks failing or being absorbed by competitors.
"It's a very fearful market right now,'' Green said. He said investors saw Wachovia Bank get eaten up by Citigroup over the weekend and they're worried who might be next.
Banks, real estate sufferThat anxiety caused huge losses in the stocks of a number of banks and other financial companies, including some of the top names in Middle Tennessee, on Monday.
Regions Bank and First Horizon — the parent company of First Tennessee Bank — each saw double-digit losses in stock values in Wall Street trading Monday.
Regions' shares fell a massive 41 percent on the day, closing at $8.25 per share; and First Horizon fell more than 35 percent to close at $7.25 per share.
Meanwhile, builders, developers and lenders here say the real estate market is unlikely to bounce back until the credit markets improve, and that could take congressional action.
Middle Tennessee developers are having trouble lining up the temporary loans they need to start construction of new projects.
"Banks are getting pressured, so they're laying pressure on developers to get permanently financed," said Todd Friedenberg, a principal in the Nashville office of Q10/Vista Commercial Mortgage Group.
"It's very difficult right now to go out and get a deal done," said Dudley Parker, a partner in PGM Properties, a Brentwood commercial developer. "A lot of it has to do with we don't know … what Congress is going to pass."
Without a deal, few in the real estate industry here can imagine how the market will right itself. "I hope Congress will find a way to pass this kind of legislation," said Charles Carlisle, chief executive of Bristol Development Group, a Franklin firm that is trying to arrange financing for a Germantown apartment project. "Commercial real estate depends on bank financing."
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