Local economic analysts said Monday that they are cautiously optimistic about the future impact of the $700 billion bailout of the financial industry that was approved by Congress last week.

University of Utah law professor Christian Johnson said the plan seemed to be a reasonable solution to the economic problems that are affecting Utah and the nation. His comments came during a public panel discussion held at the university's law school, before a packed room of about 200 people.

"Time will tell, but Congress had to do it to make things work," said Johnson, an expert on markets, banking and derivatives. "It's going to work, but the question is: Is it worth the cost?"

Johnson, along with Ralph Mabey, a U. law professor and retired federal bankruptcy judge, said the bailout plan was needed to keep the national economy going.

The plan's provisions "will help protect the capital of entities from which we need to borrow money and reduce the fear abroad, such that people will be willing to conduct business in a normal way," Mabey said.

But Christopher Peterson, a U. law professor and scholar on subprime and predatory lending, questioned the wisdom of the federal government borrowing money to rescue the financial industry.

"If you're in a hole, the way that you get out of the hole is to stop digging," he said. "We just keep borrowing more and more money in different sectors of our economy, but it's time for us to start focusing on thrift and to impose comprehensive regulation of the consumer finance industry."

He said the origin of the banking crisis dated back several years, when "new commercial practices crept up into the gaps in existing regulation, and a substantial market was unregulated."

Mortgage brokerages and originators put together giant pools of mortgages without paying careful attention to whether those loans would pay out, he said. "That injected all sorts of bad debt into the markets, which is now rippling out and causing all the problems that we're seeing now."

Johnson said that if the bailout succeeds, it should fuel credit markets so that companies can hire more people and "get the economy moving like it should."

But Peterson said it will take time to determine whether the bailout plan has worked. "This is a complicated problem, and folks want it to be simple, but it's not," he said.

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