Apr 15 2009

Alabama Sen. Richard Shelby cautious about economic recovery Senator says worst may still lie ahead


On a day when President Barack Obama was offering cautious optimism about the state of the nation's economy, Alabama's senior senator, Richard Shelby, was offering essentially cautious pessimism.

"We're in a world-wide recession," Shelby, a Republican, told the Kiwanis Club of Birmingham during a lunchtime speech. "In Alabama our cup is not totally empty, but neither is it overflowing. We have 155 million employed in America but I wish we had 7 or 8 million more. I'm just not sure the economy has bottomed out yet. I wish it were so. But we must be cautious."

Shelby's more dour view of the economy was in contrast to that of Obama's. In a speech Tuesday at Georgetown University, the president sounded a little more hopeful than Shelby, although he stressed that "by no means are we out of the woods."

"There is no doubt that times are still tough," Obama said. "But from where we stand, for the very first time, we are beginning to see glimmers of hope. And beyond that, way off in the distance, we can see a vision of America's future that is far different than our troubled economic past."

Shelby seemed to have that past on his mind, as well, when he told the overflow lunchtime crowd of more than 300 at the Harbert Center that much of the blame for the nation and the world's economic troubles was due to "greed and hubris in America and on Wall Street."

Shelby cautioned that the ailing national economy will not heal until what he called an excess in real estate is absorbed, especially in California, Florida, Nevada and even along the Alabama Gulf Coast.

Another key component in lifting the economy out of recession will be for the banking industry to get its economic house in order, he said. Shelby said it is critical for banks to begin lending again, and probably necessary for some of the nation's largest banks currently being propped up by taxpayer money to close their doors.

Critical of bailouts:

As has been the case since the beginning of the economic crisis, Shelby was particularly critical of government bailouts given to American car manufacturers and some banks. Shelby said General Motors and Chrysler should not receive more bailout dollars and likely will have to reorganize through bankruptcy if they have any hope of surviving.

Shelby scoffed at the notion held by some in Congress and some economists that companies such as GM and some of the nation's largest banks are too vital to be allowed to fail.

"I don't believe anything is too big to fail, anything," Shelby said.

During the question and answer period following his speech, Shelby was taken to task by one man who questioned Shelby's view that banks are not lending money,

"There are 115,000 banks and bank branches ... and walk into almost any one of them and I promise you you will find a manager wanting to lend money," Steven Reider told Shelby. Reider's company, Bancography of Birmingham, provides consulting services and software tools to financial institutions to support the positioning of their branch, research, product and brand strategies.

Shelby told Reider that, while community banks, smaller banks and savings and loans may well be making loans, many of the nation's biggest banks are not. Shelby said those large banks are home to the vast majority of depositors.

Shelby was critical of the Obama administration and its economic game plan. He forecast that the Obama administration will seek tax hikes on what he called "those who work hard and do well ... and already pay over 50 percent of what they earn in taxes," a clear reference to the wealthy.

He also predicted that the Obama administration will become the most liberal administration in the nation's history.

"I don't believe we can tax and borrow our way to prosperity ... but that is the philosophy of the administration," Shelby said.