Nathan L.

Baker City businesses are feeling the pain of an economic downturn

caused in part by the nationwide sub-prime lending mess, regulatory

lapses and roller-coaster property valuations.

Many local business owners opposed the $700 billion government bailout

approved by Congress last week, but they're hoping it will keep the

national economy from sinking further into recession, dragging their

businesses along for the ride.

"Our business definitely rides with the ups and downs of the economy.

We don't sell milk and eggs," said Keith Shollenberger, who owns

Marilyn's Music Plus in Baker City with his wife, Marilyn.

With high fuel prices taking a big bite out of consumer's pockets and

driving up the cost of food and other necessities, Keith Shollenberger

and other Baker City merchants said sales have dropped off for


At Marilyn's Music Plus, that translates into sagging sales of guitars,

drums, keyboards and other instruments, Shollenberger said.

At the Open Door Christian Store and The Christmas Corner, owners Ray

and Tamara Uriarte said sales started dropping off in August and remain


"I love this country, but bailing out those people who have created this mess is wrong. We'd be better off to take our medicine now and do what we've got to do to get back on the right track," Ray Uriarte said.

He said he believes the nation's financial troubles have been building up for decades due partly to America's transition from an industrial economy to a computer economy.

"We've gone from being the greatest industrialized country in the world to computer button pushers," Uriarte said.

He sees the $700 billion bailout as a waste of taxpayer money that could have been put to better use rebuilding the nation's steel, lumber, mining and manufacturing industries, and in the development of domestic energy sources to break the nation's addiction to high-priced foreign oil.

"I have not seen investors this nervous since October of 1987, but I believe the future is bright for long-term investors in quality stocks or stock mutual funds," said Kirk Dennis of Financial West Group in Baker City.

"Those short term investors in the stock market will be disappointed," he said.

Matt Cunningham, owner of Cunningham Financial Group, said he is asked daily to explain what happened to the financial markets by customers and others who have seen their stock investments and value in their retirement plans melting away.

"This is not a Wall Street bailout. It is a congressional bailout," Cunningham said.

He pins blame for the mortgage crisis on members of Congress, the Clinton Administration and those in charge of Fannie Mae and Fannie Mac in 1999 who he believes laid the foundation for the mortgage meltdown by pushing home loans to people who lacked credit worthiness and the down payment traditionally required to qualify for home loans.

"They are bailing themselves out for encouraging the banks to make high risk loans by saying they would buy them from the banks if people defaulted," Cunningham said. "This was not a free market problem, because the free market didn't cause it.

"It was caused by federal economic policy that encouraged poor lending. The people who deserve the bulk of the blame are Barney Frank and the Senate Finance Committee and the executives at Fannie Mae and Fannie Mac, who turned a blind eye to the looming disaster," Cunningham said.

He said a three-pronged approach ran up housing prices to unsustainable levels.

The three prongs included a tax exemption for capital gains on real estate sales, low interest rates and poor lending standards which created housing demand, and restrictive land use laws which limited supply.

Despite warnings over the past five or six years from Alan Greenspan, former chairman of the Federal Reserve Board, and others, Cunningham said Congress and the executives running Fannie Mae and Fannie Mac failed to take action to rein in the sub-prime lending markets.

Cunningham said he believes the financial markets could have been shored up for a small fraction of the $700 billion bailout if Congress had taken up a plan called The Common Sense Fix circulated by House Republicans that sought to purchase insurance to cover bad loans and also called for requiring any mortgage that is more than three months delinquent to a 6-percent fixed rate.

"That plan came from Dave Ramsey and House Republicans, but it was never even brought up for discussion," Cunningham said.

He contends Ramsey's plan could have restored confidence in the financial markets and dealt with the vast majority of bad mortgages for $700 million instead of the $700 billion. Cunningham said the bailout partially addresses credit cash flow problems and regulatory lapses at the heart of the financial crisis.

However, in the long run Cunningham believes the government's bailout will fail and the free market will eventually adjust and find a way to restore balance to the financial markets.

"The bailout plan won't work because government is not the answer, and we cannot tax our way into prosperity," Cunningham said.

Andrew Bryan, a member of the Baker City Council and an owner of Mad Matilda's restaurant and coffee house, said he believes the bailout may have started out as a good plan for dealing with the effects of the sub-prime lending mess, but "when the politicians got ahold of it, look what it took to get something through Congress - look at all the sweeteners they tacked on," Bryan said.

Ultimately, whether the bailout was the right move or not, Bryan said the American people have the power to restore balance to the economy.

"Most of us are starting to do what we should have been doing all along - not buying all the stuff made in China we didn't need," Bryan said. "Most of us have been living above our means."

He said soaring gas prices probably played a role in the mortgage meltdown, because it took a big bite out of people's budgets.

Ultimately, he said government itself may be the biggest problem when it comes to the tightening cash flow.

"The federal government itself is sucking the life out of cash flow" through excessive government spending and borrowing, the wars in Iraq and Afghanistan, and an energy policy responsible for transferring $700 billion a year from America to the Middle East for oil and gas.

Meanwhile, effects of the recession and financial market crisis are hitting some Main Street businesses harder than others.

At the Scrapbook Emporium, owner There'sa Treanor said she's seen "a huge decline in credit card use."

"The credit crunch is everywhere. It hits us both in the business and on the personal side," Treanor said.

"I know things are on a downward spiral and something has to be done, but I don't know if the bailout is going to do anything to help regular folks like us," she said. "From what I've seen here in our business, the rise in gas prices caused everything to go downhill.

"High gas prices have affected the whole economy. The high gas prices caused increases in food prices and everything else people have to buy," Treanor said.

Treanor said she has had to cut back on groceries to make ends meet in the face of rising fuel and food costs on one hand, and sagging sales in her scrapbook store on the other hand.

Some of her customers have also been hit with soaring mortgage costs after their initial low interest rates ended, Treanor said, adding that shady credit card practices are also part of the problem, especially the practice of luring people to open accounts and make purchases with low or zero percent interest rate offers, then jacking rates up to 15, 18, 24 or even 31 percent.

Angela Feldmeier, a customer at Scrapbook Emporium, said her biggest concern about the financial crisis is the impact it has had on the 401(k) retirement account she and her husband have been contributing to for their retirement.

"We lost $600 in one day from our 401(k) account when the stock market plunged after the first bailout plan failed," Feldmeier said. While half of that loss has since been recouped, Feldmeier said their account had already dropped by $1,200 in August, so as of the first week of October the balance in their retirement account is about $1,500 less than it was two months ago.

"Why are we bailing out the bankers? They're the ones who caused this," Feldmeier said.

Tabor Clarke, owner of J. Tabor Jewelers, said Tuesday that he hasn't seen any downturn in businesses so far.

"I certainly haven't seen any adverse effects as of yet, but between now and Christmas we'll find out," Tabor said.

He said Baker City is a long way from Wall Street, and it will take a while for problems in the financial markets to trickle down.

"I think it will take a little bit longer for those repercussions to reach Baker City, but eventually it will," Clarke said.

At Davis Computer Services, technician Kelly Kenworthy said she'd rather see the $700 billion go to victims of the Wall Street financial scams rather than people who took advantage of the lack of government regulations on the banking industry.

"Personally, I think it's stupid to give them $700 billion," Kenworthy said.

Kenworthy said she doesn't understand how government officials can come up that much money to help Wall Street financiers, but they haven't been able to find the resources to keep their commitment to Social Security recipients, resolve the health care crisis or help feed and house hungry and homeless people across the country.

"I haven't seen the credit crunch on Main Street that the politicians keep talking about," Kenworthy said. "Things seem to be going OK here, and our customers don't seem to be having a problem using their credit cards."