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Senators Larry Craig and Mike Crapo, after acknowledging Idaho has been mostly unharmed so far by the nation's souring economy and bursting housing bubble, said failure by Congress to intervene could be devastating.
"The potential consequence of a failure to act could impact Main Street Twin Falls, Idaho -- the ability of the car companies there to get the credit to sell the cars, the ability of banks to extend lines of credit to small businesses," Craig said in an interview in his office in Washington.
Crapo, who sits on the Senate Banking Committee, said average Idahoans would see reductions in their resources, including 401K plans, and savings accounts.
"If the dire things that are being described by the experts ?- occur, then what you would have is runs on banks, and you would have hundreds and hundreds of bank failures which would presumably put pressure on across the marketplace and not just in the United States but globally," he said. "And then what would happen is people would not be able to gain access to their own money."
Lack of credit, he added, would impact not only consumers but also entire industries such as manufacturing and technology, two of Idaho's strongest.
"Credit would not be available -- the average person, the small businesses up to the large businesses," Crapo said. "It would just start rippling more broadly throughout different pieces of the economy and each time that would happen there'd be a ripple effect and it would just get worse and worse."
Congress, which was to adjourn this week to give members time to campaign before the November election, has been gridlocked for the past week as Democrats and Republicans have negotiated a plan for federal help in stabilizing the economy.
The focus is the $700 billion bailout plan pitched by Treasury Secretary Henry Paulson, and President George W. Bush on Wednesday urged public support for the plan.
Support varies, both nationally and in Idaho. Crapo and Craig both said most of their constituents are opposed to the bailout -- aides in their offices fielded phone calls nonstop Friday -- although Craig said many are "moderating" their views as the plan is explained.
Craig said he spoke to someone Thursday night involved in a "substantial financial merger" in Idaho who was told by a bank that it might need to use a branch outside Idaho.
"He said, 'The bank in Idaho we're dealing with has all of a sudden said 'whoa.' A month ago? No problem. Today they're saying we've got to move this to our San Francisco office,'" Craig said, noting he couldn't disclose the companies involved. "I can tell you that's an example of a credit crunch."
Both senators said their support for a bailout is contingent on significant protection of taxpayers' investment while executives of failed firms are not allowed to benefit.
The deal includes those provisions, along with a requirement for increased transparency, with a board to oversee the Treasury Secretary, Crapo said.
Crapo said he would like to see a "preferred debt position" in which taxpayers are the last to suffer any losses and the first to gain from any profits.
Other provisions under consideration, which Crapo oppose, include "cramdowns" that push distressed mortgages back into the economy, and incentives for new housing.
The crisis came closer to Idaho Thursday as federal regulators seized the assets of Seattle-based Washington Mutual, which became the largestU.S. bank ever to fail.
Crapo said he's generally opposed to regulation but the current crisis warrants intervention to avoid what experts describe as a "complete economic collapse."
Still, he said he doesn't support the current plan.
"If I were to vote today my vote would be 'no' on what's on the table right now," he said. "But what I am telling you is that I am probably convinced that this is a circumstance in which Congress justifiably needs to take action and in which I believe Congress should take some action."
Craig said he's not ready to say how he'll vote because the plan has not yet been finalized,but said he'd be surprised if Congress doesn't act.
The alternative, he said, could be unemployment rates of 10 percent to 12 percent.
"I call this the 9-11 of the financial community," he said.
To see more of The Times-News, or to subscribe to the newspaper, go to http://www.magicvalley.com Copyright (c) 2008, The Times-News, Twin Falls, Idaho Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
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