In a move of desperation, President George W. Bush applied a $700 billion Band-Aid on the malignant tumor of greed and corruption growing on Wall Street Friday.
With a vote of 263-171, the bill passed from the House of Representatives and was subsequently signed by Bush. The major premise of this economic legislation includes the government purchasing financial institutions’ defaulted home mortgages.
Edwin Duett, college of business and industry finance professor, said he is not in favor of the bailout.
“We have to keep this economy afloat, but maybe there were better steps than the bailout,” he said. “I think we reached this point because parts of Congress pushed for everyone to get a home and there were too many loans to unqualified borrowers.”
Many people think the bailout is a way to save certain banking investment institutions on Wall Street, Duett said.
“In my opinion, the same people who helped cause the market failure will be overseeing the bailout,” he said. “Some of the same people who are proud of the bill that they helped create for the bailout are the same ones who pushed us into this crisis.”
COBI economics professor Charles Campbell said some of the problems that led up to this crisis were profiteering.
“There was an incentive to sell houses to people that could not afford them because the people who were selling them were operating on a commission,” he said. “Financial institutions could then repossess those homes and sell them for a higher price, but as long as the housing prices were rising, it was not a concern.”
This will affect students as well, Campbell said.
“If everyone universally is having difficulty getting credit, then students will be too,” he said. “This definitely concerns me because I have three students in my family with student loans.”
This whole controversy has made strange bedfellows, he said.
“I have never seen Newt Gingrich and Dennis Kucinich agree on anything,” he said. “They were both opposed to the bailout,”
Campbell said he thinks the Federal Reserve Bank will be key to solving this problem.
“The Federal Reserve will make sure the firms will be able to obtain credit, which will prevent job loss,” he said.
People want deregulation but are not willing to suffer the consequences of a downturn, Duett said.
“I don’t think we could leave it alone now – the carnage would be way too much,” he said. “We have to find some way to keep the home values from continuing to decline and put a stop to the mortgage defaults.”
Edward Jones financial advisor Benjamin Howell said with the financial world in turmoil, people might be tempted to make hasty, short-term decisions.
“These aren’t the easiest times for investors, but by showing patience and discipline, and keeping your eyes open for opportunities, you can get through these days with your investment goals intact – and still attainable,” he said.
There’s no denying that the markets are extremely volatile, but the U.S. still has an enormously powerful and resilient economy, Howell said.
“The biggest gains often occur in the early stages of a market turnaround, so you could miss out on the possibility for considerable growth if you’re sitting on the investment sidelines,” he said. “The market decline actually gives you a chance to buy quality stocks at lower prices.”
Senior accounting major Drew Crawley said Congress helped encourage what happened on Wall Street.
“Congress should be just as accountable as Wall Street and take responsibility in causing that mess,” he said. “There should be some oversight over how they distribute the $700 billion so taxpayers do not get hurt.”
There also should oversight over the secretary of treasury, Crawley said.
“Congress needs to oversee what the treasury department is doing with the $700 billion to make sure they are making the best decisions possible,” he said.