STEVE INSKEEP, host:
And while Members of Congress discussed what to do next, traders continued trading stocks. Overnight most Asian markets had a volatile time. Japan's stock market, main stock market was down several percent. Russia suspended trading entirely. Other markets have recovered. We are joined now by NPR's Chris Arnold to talk about what happens next. And Chris, the question on many people's minds is, now that this package is going to fail, are all the dire predictions going to come true? Is the economy going to collapse?
CHRIS ARNOLD: Well, you know, no, the people should go to work today, you know, the doors will be open, the lights will be on. You know, don't pull all your money out of the bank or anything. But the banking system is having some huge problems here. Basically, banks are too scared to loan money to each other right now. They're worried that other banks are going to fail and they are going to lose their money and that credit is like oxygen in the economy. So if that continues, the economy is going to start gasping for air basically, and the stock market's take on this yesterday was very clear. The Dow fell nearly 800 points in a single day. The S&P 500 index was down nearly nine percent. That's the biggest drop since the market crash of 1987, so the market did not like this.
INSKEEP: Even though that's what the experts are saying, it appears clear that many voters, who put this members of Congress in office are not happy with this plan. What are the risks to them of not passing this, really?
ARNOLD: I talked to lots of mainstream, sober, reasonable economists all the time and some of them right now sound as worried as I can remember hearing them. Some say, if the government doesn't do something soon, like within days or a week, they're afraid that, you know, we could start down a road that could lead us towards a really severe recession, with much higher unemployment than we've seen so far, much higher unemployment than we've seen so far. Really bad stuff for Main Street, not just Wall Street and, you know, we're already seeing a lot of banks in trouble, some have gone under. We could see a lot more bank failures, you know, the stocks of a bunch of different banks were down again yesterday.
And they are, you know, banks are already starting to charge each other interest rates with enormous premiums on them. So that it's costing them more money to move money around and as that spreads through the system, home loans get more expensive, car loans get more expensive and it squeezes businesses. You know, they have to lay people off. You know, and that just ripples through the economy in all kinds of ways. It gets harder to pay your mortgage. You know, there's more foreclosures and this cycle gets going where that hurts more banks, it drives down home prices, it hurts the economy more. You know, we really don't want to get on a treadmill like that.
INSKEEP: If this is been developing for the year though and the economy, by most measures, seems still to be growing, if barely, is there any reason that we couldn't wait another week or another month or until after the elections, say?
ARNOLD: Nobody knows for sure what's going to happen tomorrow or, you know, even today, right now. And people shouldn't totally panic about this. But you know, at the same time, we probably shouldn't be lulled into a false sense of security that like, you know, well OK, it's been dragging on for a year, so, you know, where's the fire kind of thing. But some very smart people think, we might be entering a tipping point moment in all this. The government didn't just start out with this bailout as a way to deal with this. It tried lots of other stuff first. It's been spending huge amounts of money on, you know, the Bear Stearns bailout, the Lehman Brothers implosion, AIG. It's done interest rate cuts. And none of that has solved this problem.
So, now, you know, that the banking system is getting into a real panic about that and things are, you know, worse than they have been. One of the more compelling points here is that, we've got the Federal Reserve chairman Ben Bernanke, he is an academic who spent his life studying the causes of the Great Depression. And one big cause is that the government didn't act soon enough back then. So he's basically, been warning lawmakers that, you know, look, we're at this tipping stage point. We don't want to let this drag on and on and snowball, and he's been saying we need to act now.
INSKEEP: Can he tell lawmakers confidently that it's not too late and this bailout will work?
ARNOLD: Well, some people are worried about that. You know, OK, we go ahead and do this and spend $700 billion, it probably wouldn't cost all of that in the long run. But you know, would that even fix the problem. One thing there that- the original plan has changed a lot from what the administration first proposed. And there's a lot more oversight. You know, Congress can keep tabs on this and redirect it as it's going. Some say the wording there still isn't strong enough but that's won over some critics and there's some thinking that if the government goes further in that direction, to more directly help regular Americans, maybe more politicians will sign on.
INSKEEP: Chris, thanks very much.
ARNOLD: Thanks, Steve.
INSKEEP: NPR's Chris Arnold.