US Private Sector Doubts Effectiveness of Government Response to Crisis

Large U.S. companies and financial institutions are skeptical about the effectiveness of many government programs 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 at least 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 $787 billion 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. (Twenty-two percent gave a neutral response.)

“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 U.S. companies and financial institutions would oppose a second round of fiscal stimulus,” says Greenwich Associates consultant Steve Busby.

Companies and financial institutions are much more sanguine about the direction of U.S. 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.

U.S. companies and financial institutions give mixed assessments of government actions to rescue the financial industry, including TARP, PPIP, CPP and other programs and interventions. Overall, respondents break down into three comparable groups, with about one third each rating these programs 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 U.S. companies and institutions and 85% of U.S. investment managers. Companies and financial institutions are nearly as skeptical about the prospects for the current proposals for health care reform. Two thirds of U.S. respondents say the proposed reforms will be ineffective, compared with only a quarter who think the reforms will prove effective over the long term.

U.S. Companies and Institutions: Low Marks for Obama, Praise for Bernanke

Almost half of large companies and financial institutions in the United States 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 U.S. 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.

Companies and institutions rate the performance of Treasury Secretary Tim Geithner as somewhere between Obama’s negative review and Bernanke’s accolades. While only 30% of respondents give Geithner a positive rating, his negatives are lower than those of the president at 42%, owing to a larger (29%) proportion of neutral responses.

“When given the opportunity to comment on the performance of other politicians and regulators, many respondents took it upon themselves to let us know that they would give Congress the lowest possible ratings for its performance in responding to the crisis,” notes Greenwich Associates consultant Frank Feenstra.

Strong Support for Single Bank Regulator, Broad Opposition to Consumer Protection Agency

Almost 60% of large U.S. financial institutions and corporations would favor 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.

Opinion breaks decidedly in the opposite direction when it comes to the creation of a consumer protection agency with power over the sale of mortgages, credit cards, savings accounts and annuities. Half of large U.S. companies and financial institutions oppose the creation of such an agency, including a quarter who say they are “strongly opposed.” Thirty percent of respondents are in favor of this proposal, with 20% neutral.