America’s historic economic crisis has affected financial institutions and our government, so it was only fitting that professors and associate professors of economics, finance, history and government convened recently (Tuesday, Nov. 11) at Leonard Auditorium at Wofford College to discuss the situation before an audience of students, visitors and fellow faculty members.
Dr. Frank Machovec (top left in picture), professor of economics, addressed the banking aspect of the crisis, saying that people in the banking field have warned of this situation for 10 years. He said changes in regulations made in 1992 overturned 50 years of sound loan standards in the industry, and it was only a matter of time before it came back to haunt everyone involved.
Following Machovec, Dr. Philip Swicegood (top right), associate professor of finance, got a laugh when he began by saying “That’s the good news…”
Swicegood likened the financial markets to a heart patient, one that is experiencing chest pains, shortness of breath and a tingling feeling in its arms. He said Wall Street put itself in this position with an unhealthy diet, and the clogged arteries are a result of poor decision making across the board in the finance industry. He provided a glimmer of hope by saying that while we may not know exactly what to do to fix the problem, we DO know what not to do. He pointed out that even if the markets do recover, they need to maintain a healthy diet from here forward.
Dr. Mark Byrnes (bottom right), associate professor of history, said that while everyone is comparing the current situation to the stock market crash of 1929 and the Great Depression of the 1930s, a more applicable comparison might be the crash of 1907. In that situation, financier J.P. Morgan stepped in and was influential in turning things around. Intervention prevented a depression in that case. Byrnes pointed out that in the crash of 1987 stocks lost 33 percent of their value. So far this year they have lost 39 percent. But in 1929, stocks lost a whopping 90 percent of their value.
Finally, Dr. John Farrenkopf (bottom left), associate professor of government, commented on the crisis’ affect on world markets, and vice versa. He made the point that the Euro, the highly successful currency now used by many European countries, has never been put to a test before this crisis. He also pointed out the negative impact of the global crisis on China’s growth and Japan’s recovery from a 10-year tailspin that ended in 2003.
A question-and-answer session followed the presentations.