Rutland Herald - Welch Meets With Vt. Leaders On Economy

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Rutland Herald - Welch Meets With Vt. Leaders On Economy

U.S. Rep. Peter Welch returned to the Vermont Statehouse on Thursday to meet with key state financial officials and other leaders as lawmakers in Washington ponder their next moves to rebuild the national economy.

Welch, Vermont's freshman Democrat in Congress, told the small group of experts gathered in the Senate Finance Committee room that officials in the Bush administration have been "lurching from crisis to crisis" this fall.

Calls by top federal financial officials to quickly pass a $700 billion Wall Street bailout — a bill that Welch voted for after the U.S. Senate made major changes to the plan — were initially received with high skepticism from Democrats, Welch said.

"At first it seemed like the bogus WMD claim," Welch said, referring to the weapons of mass destruction that were never found in Iraq. "But it became clear that things were really severe."

Vermont officials advising Welch on Thursday included representatives from the state who oversee the banking system, lawmakers involved in state budget creation and officials from the real estate, education and banking sectors.

State Treasurer Jeb Spaulding, a Democrat, told the panel that Vermont weathered the housing implosion well and he has seen signs that steps taken in Washington over recent months have eased the credit market a little, making it easier for municipalities and state to borrow money.

"There is some cause for hope in the lending market," he said.

But one area to be worried about is how the economic downturn will hurt low-income loan programs for housing and education, Spaulding said. These institutions survive on the spread between what rate they can borrow at and what rate they can lend at, he said, and that spread is getting much smaller.

"They are really being squeezed," Spaulding told Welch.

Paulette Thabault, commissioner of the Vermont Department of Banking, Insurance, Securities and Health Care Administration, said Vermont has one of the lowest home foreclosure rates in the country. Many of those losing their homes here are hurt not because of bad loans from banks, she said, but because of medical problems, divorces or job loss.

But that doesn't mean these homeowners don't need help, she added.

"They still need help," Thabault said. "They need a different kind of assistance than has been offered to date."

Tom Kavet, an economist from Williamstown, stressed that state and national economies are so tightly connected with the global economy that any solution to this financial crisis needs to come from that larger perspective.

He also said what some economists haven't said yet: We are now in a recession and probably have been there for close to one year. Vermont officials need to keep an eye on their largest companies to watch for trouble, he said, such as one of them suddenly selling off assets to stave off bankruptcy and bring in new cash.

"It doesn't have to be the Great Depression all over again," Kavet said. "It's a severe recession, but it doesn't have to be the end of the world."

Wayne Granquist, owner of investment consulting firm Granquist Associates, said his worry is that the system of second homes in Vermont will collapse as the economy worsens. Million-dollar homes are now selling for several hundred thousand dollars less, he said, and people are having problems finding buyers.

"If the second home market collapses, it will have a severe impact on local property taxes," he said.

Sen. Susan Bartlett, D-Lamoille, chairwoman of the Senate Appropriations Committee, said she gets several calls each week from Vermonters who lost their jobs and are worried of losing their homes as well. She warned that municipalities will face a crunch as less and less people are able to afford their property taxes.

"I think we will see lots of delinquencies," Bartlett said. "What happens to a town when suddenly they have 25 percent less cash flow?"

One way to boost Vermont's economy would be to loosen up federal requirements that the state match funds for road and bridge projects. There are millions of dollars in federal funds waiting to go to projects here in the state, Bartlett said, but Vermont can't afford to match those funds to kick start the projects.

If the federal government dropped that match requirement, it would "open the floodgates in all 50 states," Bartlett said, "and it wouldn't cost the federal government any money."

Vermonters are angry and frightened by the poor economy and the prospects of losing their homes or retirement funds, said Sam Matthews, the executive vice-president of the Central Vermont Economic Development Corp.

She, like several others on the panel Thursday, endorsed massive public investments in infrastructure and further attempts to stabilize fuel costs as key to helping working families and small businesses.

But she said there was one more thing Vermonters want: Accountability brought to the executives and business leaders who helped bring this economic mess to the boil is it now at.

"Just chastising them in front of Congress is not going to help," she told Welch.

The congressman recalled a committee hearing months ago where top business executives were grilled on their bonuses after losing billions of dollars of shareholders' money. Welch said these executives defend the money they walk away with and always have experts on hand to explain why they deserve this money.

"In the world they work in, it makes sense," Welch said. "But it is not rationale in the world the rest of us live in."

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