News Magazine of the UW Department of Communication
Katie Stapleton-Paff
Com 361
Economic uncertainty and what lies ahead dominated the discussion Tuesday night at the UW hosted forum entitled "Economic Crisis: What does it mean and what could happen next?"
Sponsored by the UW Alumni Association, the lecture was held in Kane Hall 130 - the building's largest lecture room - because of the event's anticipated high turnout. Sure enough, the room was filled to capacity.
The panel was comprised of four distinguished economic scholars: Kermit O. Hanson visiting professor of finance Lew Mandell, Daniel J. Evans Distinguished Professor of Public Affairs and adjunct professor of law as well as former consultant to the Federal Trade Commission Dick Zerbe, Gary Waterman Professor of Economics Eric Zivot and UW Foster School of Business Professor of Finance Alan Hess.
The speech began with each panelist giving a personal synopsis of the current economic crisis, his take on its causes as well as speculation about who is to blame. Regarding the latter, all three panelists reached a consensus that the federal government was the main culprit, because of its readiness to take on debt.
“Debt and greed had reached phenomenal proportions,” Zerbe said. “Most of the blame doesn’t rest with the market per se, but with the Bush administration and the Federal government.”
Mandell also placed a large portion of the blame on former Fed chairman Alan Greenspan and his actions following 9/11.
“Greenspan flooded the economy with liquidity in an effort to stimulate economic recovery,” Mandell said. “I’m sure his intentions were fine, but I believe this was reckless and ultimately led us toward the downward spiral of lax standards for credit which created the mess we’re in today.”
One central theme of the evening’s discussion was the lowered standards for underwriting subprime mortgages that occurred in the late 1990s and early 2000s, which has been widely speculated as the reason the “bubble” burst.
“Congress and the Federal government played a significant role in settling this in motion,” Zivot said. “Ultimately it led to a ‘dumbing down’ of underwriting standards for mortgages – people with limited or no documentation of income or credit were getting these tremendous mortgages they could never afford to repay. This was all very well and fine while the music lasted, but when it stopped, it was disastrous.The day of reckoning came.”
However, there is light at the end of the tunnel, the panel concluded.
“While it’s easy to point the finger, blaming doesn’t get us too far,” Hess said. “Ultimately, I have faith we’ll get through this. I think it is good in that it is teaching us to live within our means, and I also believe that the economic stimulus package that is being discussed in Congress right now could help bring us back to financial safety.”
Many audience members said they came to the speech to gain a better understanding of the situation and to allay their fears and uncertainties.
Retired doctor Dick Wesley said he decided to attend out of a combination of fear and interest in the subject matter.
“My retirement savings have taken a definite hit with the stocks tumbling and I’m beginning to think about going back to work,” he said. “I’m afraid and I think the best antidote to fear is knowledge – and these guys know what they’re talking about. Plus, I am genuinely fascinated with economics.”
Wesley said he is taking a course in economics through the UW’s Access program, which allows senior citizens to take courses not for credit for a very small fee.
“I thought this evening would enhance my classroom learning,” Wesley said.
Jan Hogan, a retiree who came with her husband said she felt reassured by the discussion and was ultimately glad that she attended.
“I too was afraid and ignorance always breeds fear,” Hogan said. “While I still am nervous about the future, I feel like I understand the situation more now, and [the panelists] have reassured me that in the end we’ll be OK.”
