Hawai’i contemplates getting through the bailout blues

News Report
Travis Quezon

As the summer comes to a close, the future of the financial market is looking anything but bright—leaving Hawai'i residents feeling an immediate concern about what happens next.

This week, the federal government gave insurance giant AIG another $37.8 billion loan after it had used up the $85 billion emergency credit that it received last month.

Recently, Democratic presidential candidate Barack Obama criticized AIG executives who spent $440,000 on an insurance agent gathering at a resort in California for not spending responsibly.

Compounded with the $700 billion bailout plan approved last week to purchase troubled mortgage-backed securities from lenders, the perception for some Hawai'i residents is that tax-payer money isn't going to directly help the tax-payers.

O'ahu pilot David Strode says he is worried that the bailout money isn't going to filter down to the middle class.

"It's like we're supporting a corrupt third world government," Strode says. "The money is not going to the right places, and in the meantime the stocks are falling."

Today, the Dow Jones Industrial Average fell 3.6 percent to 9,955.50 points, the lowest it has been since October 2004.

Strode says he wishes Congress would have spent more time planning out its strategy instead of quickly agreeing to the bailout last week.

It is a concern that initially kept Hawai'i Representatives Mazie Hirono and Neil Abercrombie from voting for the first version of the bailout plan presented to Congress. Hirono and Abercrombie felt the bill did not go far enough to protect taxpayers and assist homeowners facing foreclosure.

In a statement explaining why she agreed to the revised plan, Hirono said, "This package is much more balanced in favor of helping everyday people, middle-class families, and small businesses. The bailout package we considered on Monday was simply too geared toward Wall Street and the corporations whose irresponsible practices helped create this crisis in the first place."

Hirono cited the Alternative Minimum Tax relief provision, renewable energy tax credits, and a reauthorization of the Qualified Zone Academy Bonds program, which helps school districts with low-income populations save on interest costs with financing school renovations and repairs, as reasons for approving the revised bailout plan.

"Prices are being driven down because they're afraid to buy, and they know they can get a better deal from us, which is true."

Abercrombie said in a statement that he supported the revised bill because "it increases [Federal Deposit Insurance Corporation]'s coverage from $100,000 to $250,000 per individual account holder, provides opportunity for additional help with mortgages, and offers income tax relief for 91,000 Hawai'i households."

When that relief comes to Hawai'i taxpayers is still not certain. And for local realtors like Kevin Gendrano, the instability of the market is something that is having immediate effects on the stability of his everyday business.

"Right now, the way the market is," Gendrano says, "it's definitely affecting the buyer right now. Prices are being driven down because they're afraid to buy, and they know they can get a better deal from us, which is true."

Gendrano says that a recent sale collapsed when a buyer refused to agree to a counter offer that in a more stable economic situation would have been considered very low.

"This was [only a difference of] like 3 or 4 thousand dollars," Gendrano says. "I was very shocked."

While Congress agrees that the bailout plan is only the first step in a long road to recovery, it is the everyday worker who is going to need immediate attention in the coming months.