Is $700 billion too much?

John Boschen, associate dean at the College of William & Mary Mason School of Business, said he is in favor of government intervention to shore up the financial markets. "But $700 billion is a nuclear option.

"There are things you can do that are not so dramatic," Boschen said. "We are headed into a recession, regardless. I don't think the recession will be a lot worse if this proposal is watered down."

Maybe $200 billion would be enough to take the worst of the toxic mortgage-backed assets off the books and get the financial system back on track, Boschen said.

Boschen was among several college professors in Virginia or with ties to the state who said yesterday they were concerned about the size of the rescue plan.

"No one has any idea of what it will take to restore confidence in the market," said Peter Rodriguez, associate professor of business administration at the University of Virginia Darden School of Business. "We know it will take something big, and we don't want to play chicken with the Great Depression."

But a blank check for $700 billion may be too big, Rodriguez said. "It's too many zeros."

The first bailout plan, which was defeated in the House of Representatives Monday, wasn't specific enough and it left too much room for abuse, Rodriguez said. "I am glad we are rethinking it and trying to improve. . . . Still, it's a spooky situation."

The financial system seems to be reaching an unprecedented level of stress, he said. "It could spill onto Main Street and affect every bank and every community."

The severity of the situation had to be addressed, he said. "People not just in the U.S. but around the globe need to know that the payment system will work, the dollar will make it."

George F. Spagna Jr., a physics professor at Randolph-Macon College in Ashland, ran the numbers on $700 billion. If you were to spend $1 every second, it would take 22,152 years to go through all that money.

"Something has to be done, but I am not convinced that this is the best thing," Spagna said. "It's difficult to know how much money it will cost to solve this problem. . . . If the government were to use it and it didn't work, what then?"

The federal budget is $2.9 trillion, he pointed out, and $700 billion is a quarter of it.

Liquidity needs to be restored to the financial system, Spagna said. If companies can't borrow money and they can't make payroll, the situation could spiral out of control, hurting large and small companies, he said.

Not so fast, said Elizabeth Nowicki, associate law professor at Tulane University School of Law, formerly a faculty member at University of Richmond.

"This sort of widespread bailout is a bad idea," she said. "I am not surprised, but troubled that legislators are acting so quickly and with such a void of information."

The details of the bailout plan still haven't been released, she noted.

The general concern is the nation is heading toward a depression or a financial calamity, Nowicki said. "But can that be qualified? Is that really going to happen?"

The situation today is different than it was in 1929, when the Great Depression hit, she said. Thousands of banks went belly-up. Investors lost money.

There was no deposit insurance then, Nowicki said. Also, the economic conditions and fundamentals underpinning the Great Depression do not currently exist, she said. The economy has not contracted as it did then.

Besides, "if the credit markets tighten up, that might be a good thing," she said. People who bought $400,000 houses they couldn't afford should not have gotten the loans, she said.

"It's a gross generalization to say the credit market will dry up."

Nowicki said she is not opposed to some government help. "But it needs to be help designed to respond to realistic concerns. . . . Acting quickly, in response to panic that is not rooted in true fact, is rarely a good idea."

Richard Coughlan, senior associate dean at the University of Richmond Robins School of Business, is generally in favor of letting the natural markets work. However, "some level of government intervention appears to be necessary."

He said he is disheartened by knee-jerk reactions. Nor is he in favor of some people benefiting from their poor decisions.

"But steps are needed to get the financial markets unstuck from where they are," Coughlan said. Contact Carol Hazard at (804) 775-8023 or chazard@timesdispatch.com.