By Hannah Gray
Rumors of recession have been circulating through the news as well as classrooms at the University of Portland.
Although unemployment increased from 4.7 percent to 5.7 in the duration of a year, according to Forbes, and inflation is around 5.37 percent, UP students have been insulated from the impact of the crisis thus far.
Even though inflation has increased, student enrollment is about the same. Karen Nelson, Director of Institutional Research, conducts surveys of freshmen. Only 20 percent of freshmen who drop out or transfer, typically the latter, do so because of financial problems. This has stayed about the same for eight years.
As for life on The Bluff, senior Kelly Nemecek believes that UP offers an extended network that allows students to connect with major firms.
"It (the economy) made it a lot easier to choose a job because there are not a lot available," Nemecek said.
It is currently recruiting season, where senior business majors meet and interview with firms to secure a job post-graduation.
Nemecek said that besides the job market, the economy has affected students negatively with many things the world is seeing today: the energy crisis causing high gas prices and the decrease in consumer want-based spending.
In the business world, Lehman Brothers has fully collapsed and other firms are not far behind them.
Due to the uncertainty in the market, investors have been withdrawing their risky investments and transferring them to safe ones, like government bonds. This flight to safety adds more pressure to the weakening economy.
Saturday, the Bush administration proposed a plan for $700 billion to be allocated to purchasing mortgage assets from private firms, in order to save such firms from going under.
Bush said that doing nothing would be the worst plan of action. The proposed national debt will raise the national debt ceiling to $11.3 trillion.
Just last week, the Federal Reserve granted American International Group (AIG) $75 billion in hopes of preventing the chaos across international markets that would most likely happen if the group was to fail.
It is clear that the economy is getting worse, but economics professor James Seal explains how this crisis began - the rapid expansion in the housing market.
"We had a big boom on the housing market which was financed by debt, which is typical," Seal said. This allowed people with weak credit who were typically unable to get mortgages.
Such people were finally able to start borrowing from banks. Then financial institutions like Freddie Mac bought these debts from the bank.
But when default rates on mortgages escalated higher than expected, hysteria and uncertainty brought a lack of confidence to the system.
This anxiety spread through institutions, leading them to collect their money. When banks didn't have the money (because it was lent out to home owners), the economy turned like a domino effect, Seal explained.
Both Seal and economics professor Todd Easton think that the current generation will not be worse off than their parents' generation despite media speculation.
But as to what the future holds, "no one knows," Easton said. He continued to say that the future, "looks like it is going to be bad. The financial markets are hugely disrupted."
"People are working hard to restore confidence," Seal said. "If they do so successfully, we will get out of this without substantial losses. If we don't, losses could be greater."
Before the economy can improve, the underlying issue has to be solved.
"The underlying issue is the financial market which has outgrown the regulatory structure," Seal said.
For example, common banks like US Bank control how much capital and risk they can afford, he said. But the fact remains that investment banks, who can take on much more risk with less capital, are what need to change.
Seal believes that the Federal Reserve system and Treasury are adapting appropriately in the current situation. It can only be hoped that the U.S. gets out of this financial crisis before it worsens.
