U of M business professor says government bailout crucial

MEMPHIS, TN (WMC-TV) - As business professor at the University of Memphis, Dr. John Gnuschke has been paying attention to the economy and the governments effort to bail out floundering firms.

"Absolutely necessary. They're necessary to stabilize markets and give people enough confidence to keep them from fleeing from the marketplace," Gnuschke said.

Gnuschke said the current economic atmosphere began in 2005 with the housing downturn. Now, the treasury is trying to convince congress to fund billions of dollars of bailouts to alleviate fear.

"If everybody became afraid that they were gonna lose all their money in the stock market, that in fact could occur," Gnuschke said.

Gnuschke said a stock market crash is highly unlikely, but a government bailout is crucial to restoring investors confidence.
"Last thing we wanted was a financial market meltdown because that impacts every company, every person," Gnuschke said.

Not everyone agrees.

Some economic experts believe the bailout would simply cost taxpayers more, and that it only encourages other firms to take risks expecting a government safety net.

Gnuschke dismisses the notion.

"Nobody likes it. Nobody wants the government to be involved in their business. Unfortunately this is a temporary action that's necessary to stabilize the markets," Gnuschke said.

Congress must approve the government's spending of billions to bail out private firms. Experts expect that approval by early next week.

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