The federal government's $700 billion rescue plan bailing out Wall Street banks and investment houses on the brink of failure was necessary to stabilize financial markets and free up the stalled credit system, say economic experts at local Catholic colleges.

"The economy was close to free fall without some sort of massive effort," said Katherine Whitman, associate professor of business administration at Mount St. Mary's College. The bailout, she says, "may not be perfect, but it had to happen fast."

"I do think the bailout was the right thing to do," agrees David Offenberg, finance professor at Loyola Marymount University. He emphasized the government is not "spending" $700 billion dollars but "investing" the money to purchase troubled mortgage backed securities which could turn a profit for taxpayers later if the assets have appreciated in value by the time the government sells them.

The rescue plan, he says, will lesson the negative impact of mortgage backed assets and will slow down growth in unemployment. However, he adds, some inflation will occur, so costs for goods and services "will probably get a little more expensive."

And, he notes, the country has still to reach its foreclosure peak. While there have been more than 900,000 foreclosures since 2007, according to an Oct. 6 Los Angeles Times article, nearly 2 million mortgages are delinquent by 60 days or more putting homeowners at risk of foreclosure.

The U.S. economic downturn, Offenberg points out, started about one and a half years ago followed by downturns in overseas markets late last year. There will eventually be an economic recovery, he says, but in the short term, many in the stock market who invested in risky assets are "taking a beating." A rule of thumb in any economy for people nearing retirement, says Offenberg, is to slowly transition from stock funds into safer investments, such as bond funds.

"People retiring right now are certainly in difficult situations" and some may want to consider postponing retirement, says Whitman. Generally, workers' pension funds are not in jeopardy, she points out, but people with individual retirement accounts seeking to cash out, for example, may lose money in the present economy.

Noting that there have been 10 recessions since World War II, Whitman believes if the current economy slips into a recession "we'll come out of it." The most important thing people should know, she says, is that the country is not going to have another Great Depression like it experienced in the 1930s when bank accounts were not federally insured and there were other contributing factors such as the Dust Bowl agricultural disaster.

The congressional bailout plan signed into law by President Bush Oct. 3 gives unprecedented new powers to the Treasury Department to spend up to $700 billion to buy troubled loans from financial institutions in efforts to stave off more bankruptcies and free up credit. As part of the measure, Congress added an oversight board and increased the cap on federal insurance for bank accounts from $100,000 to $250,000.