Wall Street crisis affects college students too
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If you aren’t scared, you’re not paying attention.
Monday, a $700 billion deal to bail out Wall Street and attempt to solve the United States’ current financial crisis failed in a Congressional vote.
Its failure is widely attributed to widespread unpopularity with the bill, with members of Congress reportedly having received numerous calls from their constituents urging them to vote “No.”
The root cause of the unpopularity is likely the fact that congressional leaders and the president — despite numerous public addresses — did an extremely poor job explaining exactly what is happening to our economy and how this particular bill was supposed to solve the problem.
What people — and especially students — need to understand is this crisis is having a direct effect on their lives. As long as the mess continues, all lines of credit will dry up.
Although few students will have to worry about getting a good mortgage any time soon, many do have to worry about buying a new car, getting a credit card or, more importantly, getting a student loan.
The nature of the crisis is such that financial institutions are increasingly deciding they can’t afford to lend out money, especially to those with poor or nonexistent credit histories — a group which overwhelmingly includes college students. As this calamity continues, many who depend on private student loans to bridge the financial gaps will discover they can no longer afford college.
That’s not to say this particular bill was the solution.
The truth of the matter is it probably would have led to profits for several people who might have had a hand in crafting the whole situation. The vast increase in the deficit would probably cause some pain for the average American.
But the impact of doing nothing will likely lead to greater pain in the long run. When the choice is between two bad options, a person must choose the lesser of two evils.
There are those who may preach we should take our time and try to carefully craft a better solution. However, the longer this situation goes on, the more foreign investors will be reticent to invest in the U.S., the more jobs will be lost as companies find they cannot afford to purchase needed materials and the more banks will hesitate to loan money.
What the president and leaders of congress should do is directly address the average American to carefully and thoroughly explain why they should care about the fate of Wall Street and how the whole situation affects them.
It’s not enough to say we’re in an economic crisis — you need to show people what that means. They could even break out charts and graphs, if that’s what is needed.
MSU students should be hoping a solution is found quickly. It won’t be too long now before people will have to begin applying for loans for the next school year. Anyone depending on a loan will want the banks to have had as much time to recover from these times of trouble as possible to ensure the maximum amount of money is available.
This is definitely one problem that should be keeping you up at night.
Commentary
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Ricky F.
(09/30/08 10:34pm)Report
You are not your credit score
You are not the house you own, the school you attended, the clothes you wear.
You’ll never win the lottery and you’ll never lead the world by climbing the ladder like a good boy scout.
Until you realize that the hex “May you live an interesting life” is not a curse but a fulfilling destiny will you understand your potential.
The ephemeral lives of affluent but empty traders who lost it all betting on greed and subprime morals will never amount to that of the meager man who lived a life in pursuit of the higher ideal of his fellow man.
The Stock market is not America and its fall will not end the ideal. Any man that tells you otherwise had his hand out to the government bail out.
Sometimes you need to put your trust the stranger to know you more than the friend who’s lived with you all your life.
Relax and breathe. Listen to the prophet Lester Burnham when he sings the song of truth.
“it’s hard to stay mad, when there’s so much beauty in the world. Sometimes I feel like I’m seeing it all at once, and it’s too much, my heart fills up like a balloon that’s about to burst. And then I remember to relax, and stop trying to hold on to it, and then it flows through me like rain. And I can’t feel anything but gratitude for every single moment of my stupid little life. You have no idea what I’m talking about, I’m sure. But don’t worry… you will someday.”
Bright Side
(09/30/08 10:36pm)Report
I hope more students have trouble getting loans.
College degrees are a dime a dozen these days and the surplus is lowering the value of a degree. If less people hae degrees in the future those with degrees will be able to expect higher salaries.
I worked through college and was able to keep my total outstanding balance less than 10K throughout my 5 years.
Patriarch
(09/30/08 11:58pm)Report
Here’s the truth that’s come from this most recent “economic crisis”; the “Free market works”, and will always repair itself over time, of its own unique eccenticities, one by one, provided,that is, the Government stays as far away as possible from attempting to either shape it or fix it. When a politician tells you that “he’ll fix it” watch out; he’s either a fool or a demagogue. What caused this latest crisis started in the late 1970’s and peaked in the 1990’s when Congress gratuitously inserted itself into an area they knew nothing about… the housing market; wanting to play God and give everyone, even those with no credit or financial ability to afford a home, that home they could not afford! “EASY MONEY” brought on a wave of greed disguised in all forms of wierd new “financial promotions and packages. The House and Senate’s methodology was to “guarantee” Fannie Mae, and later, Freddie Mac that the Government, (eventually meaning taxpayers John and Mary Q citizen) would stand behind all these packages and loans, good or bad! Whenever the Congress plays this game of creating “Bigger Government” and “Bigger Bureaucracies” to serve the social needs, and wants, of all the people it’s eventually all the people who wind up getting hurt, one way or the other. When housing prices started to fall, it created a ‘house of cards’we just discovered in the last month, even though many individuals in the Congress, including John McCain, warned Americans about this three years ago! “Social engineering” is always an outgrowth of a liberal mentality that says that the Government is better equipped than anyone to take care of individuals and is therefore going to “take care” of its citizens from the cradle to the grave, whether it “a home” or “medical care”. Just know, and always remember, that this false economic and social ideology is the “death knell” your’re hearing, and its sounding as a loud threat against your private enterprise capabilities, your entreprenurial spirit and eventually and inevitably your personal freedoms. This has been proven in every single socialist or communist nation or entity throughout history that’s tried to sell it to its people. Fear not! “College loans” and “Business loans” will always be available for the very simple, and extremely sound economic reason that independent, intelligent, highly productive individuals will always create their own methods for accumulating and successful managing and building financial “wealth”, as well as “knowledge”, and thus the financial segments of society willing to provide credit to those they know will be more than capable of repaying that loan with interest. Because financially stable individual can make their mortgage payments! That’s a whole lot different than what we’ve recently experienced…“giving someone who can’t afford that loan, or doesn’t even now how he or she is going to pay it back, a loan that’s going to hurt them personally and financially. Suddenly, the financial markets got a wake up call. They now have to go back to elementary economics 101. The days of “easy money” are over for now. “Credit Worthiness” will be a term resurrected across the board. We must admit that “There’s no free lunch” after all. And no one ever gets something for nothing. And whenever any politicians begins to start telling you something otherwise..Don’t walk, RUN FAR FROM THEM AS YOU CAN, OR YOU’LL GET HURT!
Uh .. loans have to be repaid?
(10/01/08 6:12am)Report
How much simpler does this have to be?
You cannot lend money to people who cannot afford, in the long-run, to repay it. Your economy collapses.
That is just WELFARE. Like the alleged “grants” that MSU keeps announcing — tax money whose payback is very rarely accounted for.
Well — that dog don’t hunt anymore. It has just blown up in our faces. And look at the got-dang mess.
MSUAlum2001
(10/01/08 7:52am)Report
So it’s all the government’s fault eh? Do you guys not realize that in actual numbers we are talking about less than 1% of the houses that started this mess? Think about that for just one second. Less than 1% of the nation’s houses brought this country’s financial system down! That should tell you that the entire system was way too leveraged and corrupted.
Matthew
(10/01/08 7:58am)Report
Uh . . . private banks loaned the money. That is not welfare, it’s the almighty free market behaving stupidly. A $700B government bailout . . . that’s welfare. And, yes, the market may correct itself, but the great depression was an example of market correction. Would you like another one of those?
What has been proven by this mess is that Wall Street is not to be trusted. We’ve been “trusting” the free market since 1974. What is it going to take to convince you that trickle-down economics do not work? How many businesses have to crumble under their own greed before you consider the possibility that some, reasonable government regulation is needed?
Worried?
(10/01/08 8:16am)Report
I’m celebrating. There’s been way too much credit around for too long.
ACORN + OBAMA = FINANCIAL DISASTER
(10/01/08 8:40am)Report
“ .. That should tell you that the entire system was way too leveraged and corrupted ..”
Uh .. so you’re for people not repaying their loans? You do that in Cuba — Fidel cuts one of your hands off.
“Uh . . . private banks loaned the money. That is not welfare, it’s the almighty free market behaving stupidly.”
WRONG, WRONG, WRONG!!
The got-dang Community Reinvestment Act, idiot Slick Willie, and idiot GWB PRESSURED banks to either lend for “affordable housing” — or get a regulatory boot up their arses.
Try reading and thinking. It hurts, only for a little while.
Ricky F
(10/01/08 10:04am)Report
Why is is that Conservatives, who often deny the science of evolution, the big bang, global warming, and tobacco links to cancer, suddenly believe that economics is this great science? It’s not.
There is no natural law saying that the markets always work and free markets are the ebst solution. Basic observation would say, to any rational observer, no!
Free markets often lead to competition busting monopolies, suppressed new technology and research,and infringement on individual rights.
This doesn’t mean that we should drop the markets. The market idea in general is better than communism or fascism in getting goods out. But to say that a market system based solely on the decisions of flawed (i.e., not completely rational) will always work without some regulation is absurd.
Most of these subprime loans that went under weren’t from government programs, but were from the private laon companies who saw a way to package these to investors and rate them AAA, when theywere closer to junk bond status. This s the free market failing.
ACORN + OBAMA = FINANCIAL DISASTER
(10/01/08 10:18am)Report
MAJOR SCREW-UP
“ .. were from the private laon (sic) companies who saw a way to package these to investors and rate them AAA ..”
Borrowers do not rate themselves AAA. Separate companies — e.g., Moody’s, S&P — issue the ratings.
Why Democrats and Obama should never be allowed near tax money, Chapter 700,000,000,001.
God, how much simpler can it be?
Government orders “more affordable housing” — “affordables” default and economy nearly collapses.
Get a clue. And a dictionary.
MSUAlum2001
(10/01/08 10:28am)Report
ACORN, wow you really don’t get it either do you? You can say, “God how stupid are you?” all day but the fact remains, you really haven’t done much either. First off, the Community Reinvestment Act was passed in 1977! Second, your buddy Greenspan (at Bush’s insistence) kept the Fed. funds rate too low for too long allowing this cheap credit to propagate. Third it WAS the banks that leveraged themselves to the hilt by packaging and selling all of these sub-prime bonds and making them so complex nobody knew what they really contained. Fourth S&P and Moody’s were all too happy to go along with this crap by actually rating these bonds at AAA.
And yes I’m in favor of people repaying their loans….however as I stated earlier, is our economy that fragile that we really couldn’t withstand less than 1% of all these loans going bad? It’s higher now as things keep getting worse but still when this crisis started in 2007 and even through early 2008, we were talking way less than 1%. That should tell you that these PRIVATE firms were just as corrupt as anything.
Why don’t you listen and read a little more than what some stupid college professor who’s never worked a day in the REAL world says?
Tim
(10/01/08 10:44am)Report
ACORN- I did a little research and it says that most subprime mortgages were given out by banks and private lenders that were not under the CRA.
http://www.businessweek.com/investing/insights/blog/archives/2008/09/community_reinv.html
Try reading. It won’t hurt….much.
Pete
(10/01/08 11:26am)Report
Ummmm, the whole thing happening is proof that the free market DOES work. Banks loaned money without having the money to back it, and were giving those loans to recipients with poor odds to repay it. And now that has come back to bite them on the ass. That is the very definition of the free market – you gamble and mess with the rules, you get burned. Minimal regulation is necessary to encourage fair practices in markets where resources can be monopolized. But to say that this financial “crisis” is proof that things are broken is just foolish. The only thing being proven is that greed and poor lending practices aren’t a sustainable business model.
Tom W.
(10/01/08 12:49pm)Report
Pete: What do you mean by “proof that the free market DOES work.”?
If you mean that it will correct itself (eventually) on its own, then yes. But market economic should work to benefit society, and unregulated free markets have proven time and time again to not benefit society.
People are greedy and corrupt, there’s no way around it. now, due to that un-checked greed & corruption, our financial system is on the verge of collapse. How long will it take for the market to correct itself and rebound without intervention?
As for the CRA…boy you conservatives just slurp up everything Hannity/O’Reilly/Limbaugh spew out don’t you? The CRA never “forced banks” to engage in sub-prime lending. It addressed a serious problem called red-lining, where lenders would not give loans to qualified individuals in specified districts because of their race. It just “forced” banks to refrain from racist & segregationist lending practices. If borrowers didn’t have a job or a down payment, they didn’t get a loan (until the 21st century)
Whoever you want to blame for this mess, it is the result of insufficient regulation. You can’t spin it any other way.
Bill Lumberg
(10/01/08 1:03pm)Report
The Clinton administration has turned the Community Reinvestment Act, a once-obscure and lightly enforced banking regulation law, into one of the most powerful mandates shaping American cities
There have been changes since 1977 MSUAlum2001 that have impacted the CRA such that it is the underlying problem. Banks were forced to make loans to people that could not pay them back, including private banks. Just because private lending institutions are private does not mean they were not forced under CRA to make these loans. Of course there are several bad people that took advantage of this, but it was the government that set the stage.
Bottom Line
(10/01/08 1:15pm)Report
We’re all to blame for this mess. The government for setting up the CRA in one administration and then not regulating lending practicing in another. Greenspan for keeping interest rates too low for too long and the current Fed for not acting before a point of crisis. The American people for consuming things we cannot afford. Studies show Americans have been spending $101 for every $100 made for almost a decade. Clearly, the only way people were able to do this is because credit was easily available in housing, automobile, electronic markets, etc.
We don’t need to find blame since we’ve all been complicit. We need to find our way out.
ACORN + OBAMA = FINANCIAL DISASTER
(10/01/08 1:38pm)Report
“ACORN- I did a little research ..”
yeah — on DEMOCRAT KOS.
No sale. Keep trying to grow a brain.
“First off, the Community Reinvestment Act was passed in 1977!”
Yeah — and jacked-up by Slick Willie and that idiot GWB.
“ .. so complex nobody knew what they really contained.”
Then why did Goldman Sachs, Morgan Stanley, and moi avoid them? BECAUSE WE HAVE BRAINS!!
“ .. S&P and Moody’s were all too happy ..”
Duh. You didn’t know AAA. Duh.
“ .. And yes I’m in favor of people repaying their loans ..”
How gracious of you, God.
“… however as I stated earlier, is our economy that fragile that we really couldn’t withstand less than 1% of all these loans going bad?”
OMG! That’s what Michael Savage wrote! You want no bail-out, either? OMG!
“ .. Why don’t you listen and read a little more than what some stupid college professor who’s never worked a day in the REAL world says?”
After all the mistakes you just made — you’ve got some gall, claiming a grip on reality.
You’re just like SLICK BARRY — all talk, nothing hands-on. Keep that going.
MSUAlum2001
(10/01/08 2:08pm)Report
“…Then why did Goldman Sachs, Morgan Stanley, and moi avoid them? BECAUSE WE HAVE BRAINS!!!”
-Are we really to believe that you deal in mortgage backed securities? Additionally, the system got so wrecked that Goldman and Morgan Stanley, while not directly complicit in this mess, damn near fell anyway.
And really, where were my mistakes? Please tell me how the information I presented is incorrect! You take my quotes but completely fail to point out the mistakes.
And Bill you are correct, Clinton changed the scope of the act…BUT in reading it, it didn’t really set the stage. People were going to make a lot of those loans anyway…they just had an extra incentive. The CRA could still be somewhat ignored if banks really didn’t care about their score. And Bottom Line is right, we’re all guilty to some extent for this mess. Our own greed and keeping up with the Joneses is doing us in.
Bill Lumberg
(10/01/08 2:26pm)Report
MSUAlum2001 would you care to show/prove “[p]eople were going to make a lot of those loans anyway…”?
And Bottom Line is completely wrong. I have a mortgage that I continue to make payments on for a house that was not out of my price range. I have no car payment and a moderate amount of credit card debit that will be paid off next March/April. This is not my fault at all, however I am going to suffer more then the people who created this mess; as I will not see any “bailout” money nor will the value of my house be restored.
Bottom Line
(10/01/08 3:03pm)Report
Bill,
I was using the royal “we.” Of course, there are plenty of people out there who have been 100% financially responsible (you and I, both.) There are also those who have been irresponsible in only one of the areas you mention and can still find their own way out. BUT there are those who have completely screwed up by taking too much on too many things they could not afford. In the final group, it could be the case they didn’t understand they could not afford it. They just took it because banks and other lenders were all too happy to give it out.
Even when the market is working properly, banks and lenders try to maximize loan amounts because frankly they do want people to miss or underpay payments so they can charge interest to make more $ on the loan. In this case, the banks were giving out too much to too many. It reached a point where too many people couldn’t repay the banks and lenders and they started going belly up.
I think the “people who created this mess” (both banks/lenders and people who agreed to too much) are going to suffer more than you. I’m sorry you lost some money and your house value is going down with the market. However, to compare that to somebody who’s going to lose their house completely to foreclosure or to somebody who is now severly in debt with no way out, I think it’s a little much. Be thankful for what you have…
Tim
(10/01/08 3:46pm)Report
ACORN- *“ACORN- I did a little research ..”
yeah — on DEMOCRAT KOS.*
Umm..reading not a strong suit? The link was to the Business Weekly.
I’ve honestly never read anything from the Kos and certainly wouldn’t go there for information on economic issues.
obama for president
(10/01/08 4:37pm)Report
some people think that the way thing are are for the better, but think about how many college studients would not be able to even dream about college. Sure the 17 million doller quick fix thing will not salve all the problem put it is something that will help us for the now. It might put a little dent in the lack of studient lone and isn’t that what most important. The studients that need these lones really want to go to college and everybody that really want to go to college should have the means to go
MSUAlum2001
(10/01/08 6:00pm)Report
Ummm..Bill did you even read the article you linked to? I took that directly from that! And I’m glad to see you won’t suffer one iota because of this…but in all honesty I bet there were a lot of those same people in 1929/1930 who thought the same thing. Obviously you don’t really have a clue as to how bad this could get. Do you not realize that as the credit market dries up that businesses who rely on short term credit (which are a majority of them in this country) won’t be able to buy inventory to sell or make something else or even meet payroll sometimes? So what happens? Hmmmm…guess they have to close their doors, which puts more people out of work, which means more mortgages going unpaid, which means more bad debt…repeating the cycle! So while yes, you are good boy and pay your mortgage and credit card debt (I do too), to think that you’re getting screwed over here is just dumb. Yes, you probably won’t see a dime, and yes your neighbor might and yes this fix isn’t perfect, but try and look at the whole picture. Your neighbor defaulting on his house because of a bad mortgage could cause your retirement accounts to become non-existent and could very well lead you to the unemployment line.
ACORN + OBAMA = FINANCIAL DISASTER
(10/01/08 6:48pm)Report
“ .. could very well lead you to the unemployment line.”
No — that’s OBAMA’S job.
“The link was to the Business Weekly (sic).”
Business W-e-e-k. Biased op-ed, written by a DEMOCRAT.
- “Are we really to believe that you deal in mortgage backed securities?”
Hey, Jed Clampett — yeah, brokers used to call about REITs, etc. And I said NO, I’M NOT A STUPID DEMOCRAT.
“ .. the system got so wrecked that Goldman and Morgan Stanley, while not directly complicit in this mess ..”
Translation: they didn’t as St. Obama for permission.
And, of course, former Fannie Mae executives and Clintonistas Franklin Delano Raines ($93,000,000.00 total comp), Jamie Gorelick ($26,000,000.00 — NO BANKING EXPERIENCE), and Jim Johnson ($20,000,000.00, before joining OBAMA VP-selection group) had 100% nothing to do with the crisis.
And pigs fly out of your arse.
ACORN + OBAMA = FINANCIAL DISASTER
Losers for Obama
(10/01/08 6:50pm)Report
I amm for Obama becuz ther be no stannnards when get in. I kin watch ESPN all day.