Bailout does little to allay fears

A Wall Street bailout plan has been signed into law in a bid to revive the U.S. economy, but local consumers and business owners remain uncertain about money issues as some of their neighbors lose jobs, gas prices remain stubbornly high and families search for ways to trim the household budget.

"Nothing is secure no more,'' said Patsy Frazier, a retired General Motors assembly line worker who worries whether the company will make good on her pension. "This is going to affect lots of people. If the banks aren't lending no money, that's going to affect people. Lots of businesses will be going out of business."

Fear and anger were prevalent during a whirlwind week in Washington and on Wall Street as Congress on Friday finally passed a $700 billion bailout plan for banks and other investment companies in an effort to stave off financial crisis.

As the country's political leaders pushed for radical action — and called the current economic crisis the worst since the Great Depression — consumer confidence in Middle Tennessee reached an all-time low, according to a survey of households in Davidson, Williamson and Rutherford counties by the Middle Tennessee State University economics department.

Taxpayers continue to have questions about the wisdom of the Wall Street bailout bill, which lets the federal government buy up to $700 billion in distressed financial assets and later resell them, hopefully at a profit.

"Government can't run public housing good,'' said Kerry Dugan, a 50-year-old salesman.

"Why would I think they could run the banking business better?"

Others had split opinions. Shirley Perry, 69, said she was both in favor of the bailout bill and against it.

"It's full of garbage,'' said Perry, a Nashville resident, pointing to a $3 million tax break for the manufacturers of toy arrows, one of several tax provisions added to the bill in the Senate at the last minute as sweeteners to win more support.

On the other hand, Perry said, she was worried that if the bill had failed, a deeper economic disaster might have followed. "I've got friends in Michigan who have been out of work for two years,'' she said.

Investors count losses

Chip Akin, a retired regional manager for 3M, said he lost $24,000 in Fannie Mae preferred stock when the company was taken over by the government.

He supported the bailout package as a way to inject liquidity into a frozen credit market, ensuring that businesses are able to continue to make payroll.

"Right now, we're in unknown territory,'' he said. "We've never been faced with this."

All the uncertainty is affecting consumers' willingness to spend. Forty-nine percent of Middle Tennessee consumers say they've cut their spending on eating out, 48 percent have cut back on entertainment expenditures, and 58 percent have cut back on travel, according to an MTSU Consumer Confidence survey conducted last Monday and Thursday. The telephone survey of 411 adults in Davidson, Rutherford and Williamson counties has a margin of error of plus or minus 4.8 percentage points.

"I think right now a lot of people are going home and looking at their 401(k), and thinking, 'Oh my God, I can't spend any money,' " said Gregory Burns, CEO and chairman of Nashville-based casual dining restaurant company O'Charley's Inc.

That's not good news for people in the food, clothing or car businesses, Burns said. O'Charley's had a net loss of $7.8 million in the second quarter and sales at restaurants open at least a year in the company's three restaurant concepts declined.

Holiday shopping may become a nightmare for retailers this Christmas, analysts say. Columbus, Ohio-based management consulting and market research firm TNS Retail Forward has predicted holiday sales could be the weakest since 1991.

"People are not going to spend this holiday if they don't know if the dollars they have in the bank are going to be safe," said Mike Kraus, retail adviser of Allbusiness.com.

In addition, mom-and-pop retailers may have trouble getting loans to stock inventories, he added.

Sectors in the retail industry most hurt include apparel and big-ticket items such as cars and furniture, because consumers do not see those things as necessities, analysts said.

Nolensville Road's Farrar Furniture, founded in 1933, said sales at the mid-range furniture store declined 30 percent last month — hurt by the gas shortage and consumers keeping a tight lid on their pocketbooks, owner Jack Farrar said.

"At the moment I don't see an end in sight to this one, but we will get some better answers as these measures go through," Farrar said.

Consumers do without

Danielle Throneberry, 25, says instead of dining out she makes meals at home. Since last November, she has watched her small portfolio of stocks drop 25 percent in value. She still needs to pay her mortgage for her condo as well as a car loan.

She planned for months to sell her high-end Green Hills condo, hopefully at a profit. But as the economy spiraled lower she reconsidered what's possible. "It really forced me to live a different lifestyle than I envisioned for myself," she said.

To keep up with mortgage payments, Throneberry cut off her Internet, stopped cable TV and stopped shopping as much. And instead of living minutes from her work in Green Hills, she's now renting out her condo and living in Murfreesboro with her brother, undertaking a 45-mile commute.

"My confidence level is on hold right now," Throneberry said. "This is the first point in my life that the big world does impact how you live your little life."

Home purchase delayed

Trent Klingensmith, 47, president of Junior Achievement of Middle Tennessee, said he has put off buying a home in Brentwood because of the instability of the financial markets and a troubled job market.

"That's too big of a risk now," he said.

Klingensmith said he has seen his retirement investments drop in value 30 percent. He hasn't moved any of his investments, in the hope that the stock market will rebound.

Some small-business owners said the credit environment is making it harder for them to get loans.

"(Bankers) are digging through (the documents) with a fine-tooth comb rather than glancing over it," said Adam Leibowitz, a principal at Nashville-based real estate development company Double A Development.

"In the past, you could call up somebody, and it was approved based on your relationship," said Andy Neuman, another principal with the firm. "Now that is not the case."

Tonya Jones, the owner of Mark IV Enterprises, a commercial building contractor here, said she is working on a dozen projects, which is normal for her. U.S. Bank is still supplying her with credit, she said.

"It's not a crisis,'' said Jim Brown, Tennessee state director of the National Federation of Independent Business, a small business group. "We're not hearing from our members yet of challenges in getting loans."

And although consumers in Middle Tennessee are gloomier than they've been in years, an increasing number expect the national economy to improve in the next six months. A full 40 percent in the MTSU poll said they expect business conditions to improve in the next half year, compared with 25 percent who thought so in May, the last time the poll was conducted.

"Too many people are panicking,'' said Nancy Neely, a 60-year-old from Bellevue, who estimates she and her husband have lost hundreds of thousands of dollars in stock investments, adding she is hopeful that people will calm down in the weeks ahead.

"I don't think anybody is going to be jumping out of windows,'' she said. "I'm hoping the CEOs jump out of windows."

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