CEOs cheer bailouts but want more clarity

By Karey Wutkowski

WASHINGTON (Reuters) - A panel of top chief executives said on Wednesday the U.S. Federal Reserve and Treasury Department have taken appropriate action to rescue major financial institutions in recent weeks, calling the moves necessary to restore confidence in capital markets.

"The most important thing we need to be doing right now is removing some of this uncertainty and some of this fear... and that's exactly what is taking place," said Harold McGraw, chairman and CEO of publisher McGraw-Hill Cos Inc (MHP.N).

McGraw, speaking at a Business Roundtable event on competitiveness, said the question going forward will be how far the government goes with its bailouts.

"The question is ... where to stop, it isn't how far can you go," said McGraw, who also serves as chairman of the Roundtable. "This is not an endless game."

Anne Mulcahy, chairman and CEO of Xerox Corp (XRX.N), said market players are already correcting themselves, with financial firms reducing exposure to risky products, raising capital and strengthening their risk management structures.

"Some of the actions taken to date are going to play out and are going to bring health and reinvention to our financial system," she said.

The CEOs spoke amid an unprecedented period of market turmoil that has included the Fed's backing for the takeover of investment bank Bear Stearns Cos by JPMorgan Chase (JPM.N) in March, the rescue of mortgage giants Fannie Mae (FNM.N) and Freddie Mac (FRE.N) earlier this month, the bankruptcy filing of investment bank Lehman Brothers Holdings LEH.N on Monday, and the government bailout of insurer American International Group Inc (AIG.N) on Tuesday.

Mulcahy said recent events have changed her views on when an economic recovery will come; she said minimal economic growth will continue for the foreseeable future.

"I think it's going to last a bit longer than I think we had anticipated," she said. "I think there's a resiliency about going along at the current rate, but the bump up might be a little further out."

The CEOs said their own businesses had not been hard hit by the financial turmoil.

Ivan Seidenberg, chairman and CEO of Verizon Communications (VZ.N), the No. 2 U.S. phone service provider, said his business is 70 percent consumer-based and 30 percent business-based. He said the financial crisis hasn't translated yet into significant layoffs or a drop in business creation that would affect Verizon.

Mulcahy said Xerox has benefited from more than half of its revenue coming from overseas, helping the company maintain a strong balance sheet and plenty of liquidity.

"When you have weakness in an economy or industry, a diversified structure becomes a great hedge against local softness," she said.

Consulting firm Accenture Ltd (ACN.N) CEO Bill Green said that despite the uncertainty in the markets, business customers are still taking a longer view about their needs.

The CEOs said lawmakers should not overreact to the market turmoil by passing legislation riddled with short-term solutions. Rather, the U.S. financial system should be reinvented in a way that rewards both risk management and innovation, they said.