The nation’s financial system has its bailout legislation.

Now, will it work?

Nobody knows for sure.

“It’s not a sure thing, but I think the odds are a little better than 50-50,” said Lloyd Thomas, professor of economics and department head at Kansas State University.

But passing the bailout bill was the right thing to do, said Thomas and Bob DeYoung, Capital Federal professor in financial markets and institutions at Kansas University. DeYoung said it would have been “shortsighted” for the bill not to be passed.

“Unfortunately it’s a necessary thing. I wish it wasn’t,” DeYoung said.

On Friday, President Bush signed into law the bill passed by Congress, which allows the U.S. Treasury secretary to buy as much as $700 billion in bad mortgage-related securities. The so-called “toxic securities” were slowing the flow of credit in the U.S. economy and threatening to dry it up, bill supporters said.

The Treasury is investing in the assets and will sell them in the future, DeYoung noted. Generally, when the Treasury borrows money and increases the debt, there are no assets to be sold or gained back, he said.

“Whether that $700 billion will be able to pay off, nobody knows the answer,” DeYoung said. “The final bill to the taxpayers will be far less than the $700 billion, and there’s a small chance they will profit from it.”

Any payback will take years, DeYoung said.

If there were no bailout and the federal government did nothing, it would have been only a few weeks before the average American would start noticing problems on Main Street, DeYoung and Thomas said. Banks wouldn’t be lending among themselves and businesses would have trouble getting credit and finding the money to meet payroll and do regular business.

“It’s too bad you have to reward the people who caused the problem, but I think the problem would be five to 10 times worse if you didn’t,” Thomas said. “This is the most dangerous thing in economics I’ve seen in my life, and I’m 66 years old.”

To prevent similar crises, there should be more federal supervision of mortgage brokers and other mortgage lenders, which were behind many of the bad loans, DeYoung and Thomas said. Those financial institutions are not monitored and regulated the way banks and thrifts are, they said.

“You should have some regulation to make sure that the lending is done responsibly and that loans are not made to people who can’t pay them off,” DeYoung said.

“The great economist John Maynard Keynes used to argue that capitalism is the best system in the world by far, but occasionally it needs some government guidance,” Thomas said.