W. James McNerney, Jr.
chairman, president & ceo, the boeing company
W. James McNerney, Jr., Chairman, President & CEO of The Boeing Company, addresses the Boston College Chief Executives' Club of Boston at the Wharf Room at the Boston Harbor Hotel.
No choice but intervention, say local executives
Top executives say they are deeply concerned about the turmoil on Wall Street, with some calling a government bailout of the nation's foundering investmnet companies the only way out of the current financial crisis.
"We need to do something," said Joe Tucci, chief executive of Hopkinton tech giant EMC Corp., one fo the state's largest employers. "We can't let the financial system go into financial crisis."
John Hamill, chairman of Sovereign Bank New England, called it a "serious situation" that requires swift action.
"I think some of the suggestions to alter the plan will be adopted," he said. "And I think the effects of the plan will be very positive."
Hamill and Tucci were among a few hundred business leaders attending the Boston College Chief Executives' Club luncheon at the Boston Harbor Hotel yesterday, where the buzz was all about the proposed bailout. Similar conversations are taking place in corporate offices all over town this week as the $700 billion bailout plan is debated on Capitol Hill in Washington.
Chalres K. "Chad" Gifford, the former FleetBoston Financial chief executive who serves on Bank of America Corp.'s board, said he supports a rescue package.
"It's imperative, given the kind of financial system that we have built, that confidence is restored," Gifford said. "If we fail, it's financial chaos."
But while many executives grudgingly accept the need for action, that doesn't mean they don't have misgivings.
Clockwise, from bottom left: Fr. William P. Leahy, S.J. (President, Boston College), The Honorable Thomas M. Menino (Mayor, City of Bosotn), Robert Reynolds (President & CEO, Putnam Investments), James Taiclet (Chairman & CEO, American Tower Corporation), The Honorable Therese Murray (President, Massachusetts Senate), Wyc Grousbeck (Governor, Boston Celtics), Thomas May (Chairman, President & CEO, NSTAR), Ronald Sargent (Chairman & CEO, Staples), Salvatore DiMasi (Speaker of the House, Massachusetts House of Representatives), David Barrett (President & CEO, Lahey Clinic)
Jerry Rappaport Jr., a Boston real estate developer, said he reluctantly supports the bailout, provided there are caveats to help taxpayers recoup as much of the $700 billion as possible. Though Rappaport wishes the government had acted sooner to stem the problems, it would be a "travesty and irresponsible" to let the financial system fail, he said.
"The economy is in as bad a shape as I've ever known it," said Rappaport, president of New Boston FUnd Inc., a Boston real estate investment and development firm.
Wyc Grousbeck, chief executive of teh Boston Celtics and a venture capitalist, said, "I consider myself a free market guy, so a massive government intervention into the free markets makes me wonder and makes me worry whether that's the best use of $700 billion." But Grousbeck said he doesn't have an alternative. "I'm totally at sea, and I don't have any recommendations for anyone."
Boeing Co. chief executive W. James McNerney, another free market supporter, said government intervention is the only way out.
"It's tough, tough medicine," McNerney said after delivering the keynote speech at the Boston College luncheon. "It's philosophically disagreeable to free market types like some of us, but necessary in my view."
Tucci and other Massachusetts executives said Congress should restrict how the bailout money can be used, to ensure most of it is eventually returned to taxpayers. He suggested some of the funding could be structured as loans to foundering businesses.
The stock market drop and other bad financial news have prompted consumers to cut back on optional spending and to look for more bargains, business leaders said.
Laura Sen, president of Natick-based BJ's Wholesale Club, said many companies are feeling the effects, although discount retailers like BJs have actually benefited.
Others said the turmoil on Wall Street has made it tougher to borrow money or sell stock to the public, which could curb their expansion plans.
The press crowds Mr. McNerney.
For instance, ZipCar Inc., the Cambridge car-sharing company, said it has put off plans to go public, even though investment bankers consider the company a good candidate for an initial public offering of stock, because it is so hard for companies to go public now. "If we don't think we can go out, [the IPO market} looks pretty tough," said ZipCar chief executive Scott Griffith.
Individual investors are also pulling their money out of the stock market in droves, executives said, opting for safe investments like certificates of deposit and savings accounts, which are federally insured.
John Murphy, chief executive of Oppenheimer Funds Inc., said the New York mutual fund company has a long history of growth. But for the past two months, he said, investors have been moving their funds out of Oppenheimer. Murphy considers that a strategic error.
"Customers are getting out of the market right now instead of staying in them. They are locking in their losses," Murphy said.
And while quick passage of a bailout plan may eventually help coax investors into thinking long-term again, executives said congressional action is not likely to immediately quell the wide-spread anxiety.
"I think it will take the better part of a year to work out these issues," said Sovereign's Hamill.
In his speech yesterday, Boeing's McNerney urged Boston's business community to support international free trade agreements, upgrades in the air traffic control system, and other changes that could ultimately help the airplane industry, which has been hard hit by rising fuel prices and a downturn in travel because of the sluggish economy. But following his talk, the first question was abotu the turmoil on Wall Street. If teh audience was seeking some nuggest of reassurance from McNerney, it wasn't there.
"The overall financial situation, particularly in this country, is very difficult," he said.
Article by Ross Kerber
Thursday, September 25, 2008