By Phyllis Groner
Two Westporters who are leaders in the finance industry told a packed Westport Public Library audience tonight that the economy will only improve when public confidence is restored in the financial system. 
Taking part in tonight’s Wall Street discussion at the Westport Library were (l-r) Marc Lasry, chairman and CEO of Avenue Capital Group, David Komansky, retired chairman of Merrill Lynch, and Jim Cooper, senior editor and economist at Business Week. (CLICK TO ENLARGE) Phyllis Groner for WestportNow.com
“Confidence is what we need today,” said David Komansky, retired chairman and CEO of Merrill Lynch.
Added Marc Lasry, chairman, CEO and co-founder of Avenue Capital Group, a New York-based distressed fund: “This is only going to stop when people stop being scared.”
Komansky said he had not had a chance to review in detail plans announced in Washington today by Timothy F. Geithner, the Treasury secretary, to rescue the nation’s financial system but said he had already sensed things might be getting better.
“Personally, I am beginning to see light at the end of the tunnel,” he said.
Komansky said the roots of the crisis were fairly easy to identify. “What went wrong?” he asked. “The hedge funds ran amok and blew up the market.”
He added, “The rubber band was stretched so tight it eventually snapped.”
Lasry, who said he oversees about $18 billion in investments with 40 percent in cash, said, “The biggest factor was credit…liquidity was too high. Bear Stearns was leveraged 40 times. Can you imagine what your rate of return has to be with leverage?”
Lasry, who maintains a summer home in Westport, said he sees a tremendous risk of “massive inflation” ahead as the government seeks to spend its way out of the current economic crisis.
Marc Lasry: “Go buy assets today.Five years from today assets will be worth thousands because inflation will go through the roof.” (CLICK TO ENLARGE) Phyllis Groner for WestportNow.com
“Go buy assets today,” he advised. “Five years from today assets will be worth thousands because inflation will go through the roof.”
Both men acknowledged the government is faced with an unprecedented challenge to lead the world out of the economic crisis.
“I think the government should focus on the immediate, short term problem not the longer term issues with the recovery plan,” Komansky said.
Lasry said if he were designing the government rescue plan, he would eliminate all taxes for people earning $50,000 or $100,000 a year and lower interest rates on all mortgages to 4 percent.
He also said it is important that the government be able to describe what it is doing with clarity. “No one is explaining it to people,” Lasry said.
David Komansky: “I think the government should focus on the immediate, short term problem not the longer term issues with the recovery plan.” (CLICK TO ENLARGE) Phyllis Groner for WestportNow.com
Another unknown is how long it will take to recover, he said, adding: “The question is will we have time to be right?”
Both men said the United States must lead the world out of this crisis.
“The rest of the world cannot recover unless the U.S. recovers,” Lasry said. “This is not about globalization—it’s about Americanization.”
Asked his opinion of government efforts to regulate CEO salaries of firms getting taxpayer funds, Komansky said: “I don’t like it one bit, but when you take the people’s money you must accept regulation.”
Jim Cooper, Business Week senior editor and senior economist, moderated the 90-minute discussion.
He opened the evening by observing: “Credit is like oxygen….right now the economy is gasping.”
—Dave Matlow contributed reporting for this story.
Remember – conservatism can never fail it can only be failed.
If the banks are insolvent they should be forced to go through the same exercise the Three Bears went through in the fall. I
‘Komansky said the roots of the crisis were fairly easy to identify.
It seems Mr. Lasry is advocating something along these lines, (see article from today’s Wall Street Journal linked below) and not what the current president and democrats are pushing on us. Opposition is very high to such a tremendous and unprecedented spending bill, and as Wall St. showed us today, they don’t think much of it either.
Lets do something that we know will and has already proved to work. If spending trillions of dollars, that you must borrow from your children and grandchildren would work, than the Soviet Union would still be around today.
See Reaganomics vs. Obamanomics at
Link: http://online.wsj.com/article/SB123431484726570949.html