Investors would have passed rescue bill
The majority of institutional investors around the world think the $700bn (€487bn) bailout plan rejected by US politicians yesterday would stabilise financial markets, according to research published today.
Out of 905 institutions surveyed by Greenwich Associates, a Boston-based financial consultancy, 561 respondents think the plan would have a good chance of restoring stability to financial markets. Out of 905 respondents in North America, Europe and Asia, 10% were "very confident" about its impact, while 52% were "somewhat confident".
However, a quarter said they were "not at all confident" that the plan would restore order to global markets, and 15% sat on the fence.
Steve Busby, a consultant at the company, said: "If the vote on the bailout had been held among the institutional investors and companies that rely on functioning financial markets to conduct their business instead of in the US House of Representatives, it would have passed."
The crisis has tested investors' trust in the free markets. Nearly two thirds of respondents said that some form of government intervention is necessary to shore up the markets, and less than a quarter said they were confident that the free market could correct itself, according to the research.
About a quarter of North American respondents were confident about the self-healing properties of the free market, but only 13% of European respondents shared their confidence.
Further pessimism came to light in the majority belief that global financial markets will fall until the third quarter of 2009 at the earliest. Nearly a quarter believe the market will fall for one to two years, and one in twenty said markets will take even longer to recover.
The survey respondents also predict, on average, that the economic downturn will last at least 18 months: only a quarter said the global economy will recover within the next year.
The survey was published after the US House of Representatives voted against a $700bn bailout plan yesterday, after which US markets plunged thanks to falling financials stocks.
--write to pcraig@efinancialnews.com
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