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USC, Columbia react to economic woes
Professors, bankers give local perspective, advice on national financial turmoil, its consequences
Joshua Rabon
Issue date: 10/8/08 Section: News
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364 days, two collapsed investment banks and one bailout later, the Dow is trading under 10,000 - in four figures for the first time since 2004. Despite the headlines, students aren't feeling the heat from lenders and employers - yet.
Steve Culloo, a fourth-year finance and economics student, said he hasn't felt the impact of the economic turmoil, but is preparing for what could be a more difficult job search.
"I anticipate that it will affect me, and it's already impacted my family," Culloo said. "My dad works in food wholesale and people aren't going to eat out as much. It's just a sign the economy is slowing down."
Culloo's beliefs are supported by the Department of Labor's most recent jobs report, which showed a loss of 159,000 jobs in September, marking the ninth straight month the economy has seen a decrease in jobs. For the year, 760,000 jobs have been lost, with the unemployment rate remaining at 6.1 percent.
Steven Mann, professor of finance at USC, points out that students will feel the crunch outside of the job market.
"Students are going to have trouble getting access to credit. All of this boils down to a credit crisis or credit crunch. The ability to borrow at favorable terms is going to be much more limited," Mann said. "Borrowing for cars, student loans, credit cards - you name it. This matters because it will hit your average student right in the wallet."
Congress has responded to the credit freeze with a $700 billion bailout bill that was signed into law Oct. 3. The bill will provide up to $700 billion for the purchase of troubled assets, primarily mortgage related, from financial institutions. Of the government loan, $250 billion is expected to be available almost immediately, with the rest released in installments.
The bill was originally defeated in the House on Sept. 29 by a vote of 228-205. The revised edition, some 100 plus pages longer, includes an increase in the federal deposit insurance limit from $100,000 to $250,000. Other provisions include tax breaks, changes to U.S. Security and Exchange Commision (SEC) oversight of accounting methods and the creation of two oversight committees.
The bailout has met mixed reactions - both nationally and on campus. A CNN/Opinion Research Corp. poll released Tuesday indicated only 40 percent of Americans think the bailout was designed to rescue the economy to help ordinary taxpayers.
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