CAPITAL REGION — In late September, Paul Ruud, an economist at Vassar College, signed a letter opposing the bailout bill proposed by U.S. Treasury Secretary Henry Paulson. The letter, signed by approximately 200 economists, urged Congress not to rush, to hold hearings and “to carefully consider the right course of action.”

But now, a little over a week later, Ruud said Congress should pass the revised bailout plan that the House of Representatives is expected to vote on today. “The broad consensus is that it’s time to move forward,” he said.

At this point, Ruud and other area economists agree that the risks of inaction outweigh the risks of passing a flawed, expensive bill. Credit markets have frozen as panicked lenders have tightened lending standards, making it increasingly difficult for businesses and individuals to obtain loans, even when they have good credit. The idea is that injecting liquidity into the system will make lenders more inclined to lend money and possibly stave off a severe recession. Right now, confidence in the system is so shaken that people are reluctant to make loans they are not sure will be repaid.

“We need something that will move the credit markets,” said Hany Shawky, a professor in the Department of Finance at the University at Albany. “This thing is painful, but it’s got to be done. Whether it’s the right fix or not, I don’t know. But it’s got to be done.

“People cannot buy cars,” Shawky continued. “People cannot buy houses. All of this needs credit.” He said passing the bill would also help prevent more banks from failing; the collapse last month of Washington Mutual was the largest bank failure in history.

On Monday, the Dow Jones industrials plunged 777 points after the House of Representatives, in a move that stunned investors, failed to approve the $700 billion financial industry bailout bill. Following the Senate’s passage on Wednesday, the House is expected to vote today on a new version of the bill, which would let the government buy bad mortgage-related securities and other devalued assets from troubled financial institutions.

“We have a sick patient, and something needed to be done,” said Kajal Lahiri, a professor of economics at the University at Albany. “Some fixing is necessary. People ask whether we can have come out of this without intervention. We could, but the pain would continue for two or three years. … It’s kind of scary, this whole thing, but we have no choice. We have to get it done.”

Lahiri said the bill provides necessary oversight of the financial system — he echoed Sen. John McCain’s call for the ouster of Securities and Exchange Commission chief Christopher Cox — but that it unnecessarily makes the government the backer of private investment banks. “Sometimes people overreact,” he said. “You have to let the markets operate freely. … We still have to be competitive. We cannot lose that edge. We cannot be overly regulated. But some regulation or oversight is absolutely essential.”

Frank Mauro, executive director of the Fiscal Policy Institute in Latham, agreed that a bailout bill is necessary but said it’s unclear whether this particular plan is a good one and “there might have been better ways.” One of those ways might have involved having the government buy up the bad mortgages and stabilizing the housing market. Still, “there isn’t enough time to figure out the best approach,” Mauro said. “This is a plausible approach.”

Robert Manning, the head of the Center for Consumer Financial Services at the Rochester Institute of Technology, said he supports paying off delinquent mortgages, rather than the financial institutions that caused this crisis. He said that an infusion of cash is necessary to get the credit market moving again but that the bill doesn’t do enough for the average person. “We need to figure out more ways to keep people in their homes,” he said.

Vassar’s Ruud said he still has concerns about the bailout bill, but he wouldn’t want those concerns to stop it from passing. He said he doesn’t think the country is in a recession but suggested that failing to act would likely cause a recession. “This is a singular event in history,” he said. Although Ruud opposed Paulson’s original proposal, he says the subsequent bills have addressed some of his concerns about oversight and the long-term effects of the intervention.

The average person may not be feeling the effects of the financial meltdown, but they will, Ruud said. Already, businesses are struggling to obtain the short-term loans they need. In the past, a business that pays workers on Friday but doesn’t receive payment for goods and services until a week later might have been able to get a one-week loan to cover the cost of paychecks, he said. Now that one-week loan may be hard to come by, and the business may decide to lay off employees because it can’t come up with the cash to pay them.

The economists acknowledged that nobody can predict what the bill’s impact will be and said there are still a lot of “what ifs.”

“We don’t know [what the impact will be],” Ruud said. “A lot of these things depend on the degree of confidence people have or what their expectations are. Paulson is trying to create confidence. That is an intangible thing that rests on how humans behave.”

UAlbany’s Shawky said the hope is that the market will recover and that the bad loans acquired by the government will eventually be worth something again. Still, there are many questions. “What if the [$700 billion] is not enough to unclog the credit markets? Who is going to get bailed out first?” He rejected the idea that the government should pay off the bad mortgages. “That’s too costly, and it’s not going to get to the core of the market,” he said.

Paul Calhoun, the F. William Harder professor in the department of management and business at Skidmore College, said the bailout bill will help loosen the credit markets and restore the confidence of investors but won’t be enough to turn the economy around.

“The economy is going to suffer from tightened lending standards,” he said. “A lot of people don’t want to borrow. It’s not just that people can’t get loans. It’s that they don’t want to borrow anymore. The bill will help, but it’s not going to eliminate the risk of recession. We’re probably in a recession now.”

The modified bailout bill includes tax breaks for businesses and middle-class Americans, provides aid for rural schools and raises the limit on federal deposit insurance from $100,000 to $250,000.

Shawky said the second bill is more costly than the bill that failed earlier this week because it provides tax breaks and other items, but he said those tax breaks will help stimulate the economy. Still, he said, it is impossible to feel happy about the bailout bill. “I’m not happy,” he said. “I’m very unhappy that it’s gotten to this point.”

Mauro said the bailout bill addresses problems in the market, but that an economic stimulus bill voted down last week by the Senate would have done more to help average Americans. That bill would have extended unemployment benefits, increased food aid and funded new construction projects.

Lahiri said the new bill includes elements that aren’t necessary. “People are tacking on useless things,” he said.