US Private Sector Doubts Effectiveness of Government Response to Crisis

Large US companies and financial institutions are sceptical about the effectiveness of many government programmes and actions taken in response to the financial and economic crisis and they give low marks to the performance of President Barack Obama. However, these important private sector entities appear to have retained their faith in one Washington institution: the Federal Reserve and its chairman, Ben Bernanke.

More than half the 231 large companies and financial institutions participating in a Greenwich Market Pulse survey in late July think the US$787bn economic stimulus package proposed by the Obama Administration and passed by Congress earlier this year is proving ineffective; only about a quarter rate it as effective.

“Whether it reflects an expectation that the economy is on the road to recovery or a belief that the original economic stimulus plan was ineffective, fully three quarters of large US companies and financial institutions would oppose a second round of fiscal stimulus,” said Greenwich Associates consultant Steve Busby.

Companies and financial institutions are much more sanguine about the direction of US monetary policy since the start of the crisis, which is viewed as effective by more than 60% of survey participants overall and by almost three-quarters of investment managers.

US companies and financial institutions give mixed assessments of government actions to rescue the financial industry, including TARP, PPIP, CPP and other programmes and interventions. Overall, respondents break down into three comparable groups, with about one third each rating these programmes as effective, ineffective and neutral. Respondents were even more critical of the government’s auto industry bail-out, which was rated as ineffective by three-quarters of all US companies and institutions and 85% of US investment managers. Companies and financial institutions are nearly as sceptical about the prospects for the current proposals for health care reform. Two thirds of US respondents say the proposed reforms will be ineffective, compared with only a quarter who think the reforms will prove effective over the long term.

Almost half of large companies and financial institutions in the US give negative ratings to President Barack Obama’s performance in responding to the financial/economic crisis, including more than a quarter who rate his performance as ‘very poor’. Only about 30% rate the president’s performance as ‘excellent’ or ‘good’, with 22% neutral.

At the opposite extreme, almost 65% of large US companies and financials give positive ratings to the performance of Federal Reserve chairman Ben Bernanke, including 20% who would rate the performance as ‘excellent’. Only 12% of survey respondents give the Fed chairman’s performance since the start of the crisis a negative rating.

Almost 60% of large US financial institutions and corporations would favour reforming federal bank regulation by dissolving the Office of Thrift Supervision and empowering a single regulator to oversee all federally chartered banks. Although support for these reforms is much lower among banks themselves, the 43% level of support tops the roughly 20% of banks opposed by a considerable margin.


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