More than 60 per cent of institutional investors, large companies and pension funds around the world think the USD700bn government bailout initiall
More than 60 per cent of institutional investors, large companies and pension funds around the world think the USD700bn government bailout initially rejected on Monday by the US House of Representatives would have a good chance of restoring stability to financial markets if implemented, according to a survey from Greenwich Associates.
"If the vote on the bailout had been held among the institutional investors and companies that rely on functioning financial markets to conduct their business instead of in the US House of Representatives, it would have passed," says Greenwich Associates consultant Steve Busby.
Over the past six days, Greenwich Associates surveyed 905 institutional investors, large companies and pension funds in North America, Europe and Asia about the US government plan to rescue financial markets by buying up troubled financial assets. Almost 10 per cent of survey respondents say they are "very confident" that the plan will succeed at restoring order in global markets.
A majority 52 per cent give the plan a more qualified endorsement, saying they are "somewhat confident" that it will succeed. Almost 25 per cent of survey respondents say they are "not at all confident" that the plan would have the intended effect, while 15 per cent say they are uncertain.
Regardless of their take on the specific legislation in front of Congress, nearly two-thirds of survey respondents believe that some form of government intervention will be required to shore up markets.
"Less than a quarter of respondents say they are confident that the free market can correct itself," says Greenwich Associates consultant Peter D’Amario. "But at 23 per cent, respondents in North America have more faith in the free market than their peers in Europe, only 13 per cent of which say they have confidence that the market can right itself on its own."
On average, the institutional investors, companies and pension funds surveyed do not expect global financial markets to bottom out until the third quarter of 2009 at the earliest. While one-third of respondents believe markets can recover within the next six months, 35 per cent think the downturn will last between seven and 12 months and nearly a quarter believe the market will not hit bottom for one to two years. More than 5 per cent think financial markets will not recover for two years or more.
Respondents are equally pessimistic about the prospects for the global economy. More than three-quarters of respondents believe they will not see a positive turn in the global economy for at least one to two years, and more than 20 per cent think they’ll have to wait more than two years for a recovery. On average, survey respondents predict that the economic downturn will last at least 18 months. Only a quarter of respondent think the economy will recover within the next year.
Institutional investors, large corporations and pension funds see the current financial crisis as a systemic collapse involving missteps from many different players. On a global basis, investors name investment banks, mortgage underwriters and ratings agencies as the main culprits, with between 60 and 63 per cent of respondents naming each as being primarily responsible for the crisis. Slightly more than half of respondents cite government institutions and regulators, with smaller shares assigning blame to consumers and changes in accounting regulations.
"What is striking is the fact that survey respondents assign blame to nearly every party up and down the financial chain, from the individuals who took out mortgages they couldn’t afford and the mortgage underwriters that encouraged them to the investment banks that packaged the loans into securities and the agencies that rated them," Busby says.
Perceptions of blame vary from region to region, however. Respondents in North America were more than twice as likely as participants in other regions to blame consumers for the crisis. More than 45 per cent of North American respondents say consumers are to blame for the mess, and 73 per cent of these respondents name mortgage underwriters as being primarily responsible for the crisis.
In Europe and Asia only about 20 per cent of respondents say consumers are to blame for the crisis, and respondent in both regions rank mortgage underwriters well behind investment banks and ratings agencies when assigning blame for the meltdown.
