Oct. 8--Sen. Byron Dorgan said in Jamestown Tuesday he believes the economy will recover, but it won't be painless.

Area residents filled the City Council chambers and asked questions mostly centered on the economy, the bailout of financial institutions and the tumbling stock market. Dorgan said the present economic situation should have been expected.

"You can't create a huge bubble of speculation without expecting it to burst," he said.

These were the biggest financial institutions in the country, he said, who were engaging in wild speculation. Dorgan related the story of one person involved in hedge funds who personally made $3.7 billion. He believes "there's so much greed run amok."

"Our economy is in great peril," he said. "We need to restore the protections and regulate the trillions of dollars of dark money. All of it has built into huge bubble."

The "dark money" is in derivatives and hedge funds, Dorgan said. The wild speculation came about when the regulations on large investment banks separating them from riskier ventures were eliminated in 1999. Congress had the opportunity to reinstate those regulations when it put together the bailout.

"I believe moving $700 billion without putting regulations in place is a very big mistake," he said.

The effect of the present economic situation on North Dakotans is being felt primarily through the stock market. Jeff Fuchs asked about 401Ks and IRAs saying those retirement funds have plummeted in the last 12 months. Dorgan said for those who are looking at long-term investment, it's a paper loss.

"But if you cash in now you're down 30 percent," he said.

Still, Dorgan is optimistic the economy will recover. It won't be easy, however, to rebuild consumer confidence, he said. He said 2 million Americans will lose their homes this year. The credit market is locked up and that will affect business and jobs. The global market is also being affected by what happens in this country. Plus, the country is about $10 trillion in debt.

"We have to do a lot of everything' even if it's painful' to provide for economic recovery," he said.

At this time the U.S. is spending $12 billion a month in Iraq, which is not included in any budget. Another $20 billion has gone into training 425,000 Iraqis as soldiers and policemen.

"We decided to fight a war without paying for it," Dorgan said.

North Dakota is bucking the national economic trend with $1.2 billion surplus, jobs and stability. Dorgan said 85 drilling rigs are out in the Bakken oil patch now. Along with oil and natural gas development, the state is also working on renewable energy sources such as wind energy and biomass. Added to that, agricultural commodity prices are strong right now.

After the meeting, Dorgan said he believes North Dakota's energy development will continue to be a strong positive in the state's economy. Although he expects agriculture prices to soften, he said, the energy sector and its diversity should help keep the state sound economically.

"A $1.2 billion surplus -- what a problem to have," he said.

Sun reporter Toni Pirkl can be reached at (701) 952-8453 or by e-mail at tonip@jamestownsun.com

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