Depending on whom one listens to, the recently enacted stimulus package is either way too minimalist to have any expansionary effect or is a seriously misguided policy that will cause more harm than good. The guess here is that it is neither; rather, it's just another bill from Congress with a few good intentions, like the creation of a new national power grid and a middle-class tax cut, but one that will come up short.

Many serious observers, like the Financial Times' associate editor Martin Wolf, think the stimulus is far too flimsy to rekindle the U.S. economy. As he tells editor-at-large Andy Gluck in a fascinating interview on page 29, the $787 billion bill might work if it were all spent in 2009. Others like Alan Greenspan and Nobel laureate Paul Krugman also think more spending is necessary.

But in mid-February, I had breakfast with someone who has a decidedly different perspective, and I didn't take his views lightly. After all, First Pacific Advisors' CEO Robert Rodriguez is the only manager to win Morningstar's manager of the year awards in both the equity and fixed-income categories. (He shared the latter award with longtime associate Tom Atteberry.)

The public is rightfully skeptical of the latest stimulus for a very good reason. They've seen the results of the 2008 stimulus and TARP, both of which have been decidedly unimpressive. Ordinary Americans may not be able to articulate their skepticism with Rodriguez's flair, but they share a similar "show-me" attitude.

Rodriguez notes that since the Bear Stearns collapse, the government has provided capital infusions and guarantees of $8.6 trillion, and Keefe Bruyette & Woods bank stock index has crumbled by another 65%. Many of the nation's largest banking institutions appear to be dead men walking. Their problem isn't liquidity; it's their basic solvency and the destruction of capital.

Any crisis has a silver lining, and Rodriguez expects Americans' savings rate to climb from 2.8% to 8%, adding
$600 billion in annual incremental savings. That's a great windfall for financial advisors but hardly enough to purchase all the debt that the Treasury will be issuing. If we are expecting China, the U.K. and offshore hedge funds to absorb the rest, we might want to think twice. If you hadn't noticed, these three largest nondomestic Treasury buyers are all having a few problems of their own.

But there's a bigger problem. The TARP legislation and both the 2008 and 2009 stimulus bills are designed to get banks lending and consumers spending and borrowing again, which Rodriguez says are exactly the things that got us in this mess. Ironic though it is, even the few well-heeled folks who have not been affected by this crisis don't want to take advantage of all the bargains out there because they don't want to be perceived as jerks.

Moreover, the notion advanced by National Economic Council Chairman Larry Summers that somehow the government magically can plug, like a hole in a dam, the $1 trillion or $2 trillion capacity shortfall in the American economy stretches believability. As Rodriguez says, it's a grand experiment.

Evan Simonoff, Editor-in-chief
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