SALEM, Ore. (AP) - Oregon Gov. Ted Kulongoski is hailing the passage of the $700 billion rescue of the nation's financial industry, calling it a "lifeline for businesses and communities of all sizes."

"It is what our country needs and what Oregon needs during this uncertain time," the Democratic governor said Friday.

The bailout plan "will put us on a path" to improve the state's economy and eventually emerge from the recession that's gripping Oregon, Kulongoski said.

The governor's comments echoed those of a group of Oregon business leaders who gathered in Portland earlier Friday to urge a "yes" vote on the rescue package and talk about how the nation's financial crisis is affecting companies at the local level.

With credit markets frozen, a number of small- and medium-sized businesses are struggling to make due, said Sandra McDonough, president and CEO of the Portland Business Alliance. In Portland alone, she said, there are about 50,000 small businesses.

"We are a small business state," she said. "They're having real issues getting to capital."

Michael Powell, owner of Powell's Books said September, traditionally a slow business month, has been exceptionally difficult.

"Here we are heading into the best retail season of the year with a lot of depression," Powell said. Depressed customers, he said, "make very poor customers. They make very few customers. When it slows down, jobs are lost."

That's what happened with Bill Thorndike's company, Medford Fabrication. Through the summer months, he said, demand was strong for his metals fabrication company; employees were earning overtime. "At the end of August it was as though the spigot was turned off," he said by speaker phone. Overtime turned into layoffs.

The bailout plan, which passed while the business leaders spoke, was a strong first step toward thawing the credit markets and reversing that trend, said Peggy Fowler, CEO and president of Portland General Electric.

"I think the markets will respond," she said. Though, she cautioned, the economy wouldn't change overnight. "It took us a long time to get here, and I think it will take us a while to get back."

Kulongoski also said that doing nothing would be a poor option, because continuing turmoil and uncertainty had been drying up lines of credit and leaving Oregon businesses unable to meet cash flow needs.

"If they can't get access to those lines of credit, they will go out of business," he said. "This was the only option on the table. With it, you're infusing $700 billion into the financial system."

Even with the bailout package now signed into law, Kulongoski said, Oregon lawmakers must prepare to deal with the state's continuing recession by passing an austere state budget for the next two years.

"I'll be the first to admit that preparing a budget when revenues are trending down is not easy," he said. "So in recessionary times like this, we have no choice except to tighten our belts, set priorities and make tough decisions."

Kulongoski again turned aside Senate Republicans' call for across-the-board spending cuts. Instead, he said, the Legislature's budget-writers will need to "distinguish between services that are important and services that are absolutely critical for the long-term economic health of the state."

Kulongoski is scheduled to issue his budget proposal to the Legislature on Dec. 1.  
     
(Copyright 2008 by The Associated Press.  All Rights Reserved.)