Marlize van Romburgh

With no definite end in sight for the global economic crisis, concerned community members and students turned away from the political punditry on TV and to a local panel of experts on Friday afternoon to answer their questions about the financial future.

Several hundred people showed up in the Performing Arts Center’s Philips Hall, many with notebooks and pens in hand, ready to take notes and ask questions at the town-hall style forum sponsored by the Orfalea College of Business.

A three-person panel of experts, compiled by Cal Poly economics professor Sanjiv Jaggia, spoke to the eager crowd about the causes of the crisis, the prospects for moving the country forward and the implications for their pocketbooks.

Though the forum was sponsored by the college of business and addressed issues such as the job market and loan prospects for first-time borrowers, less than half of the audience appeared to be students.

Finance professor Satish Thosar opened the discussion by outlining events that lead to the current crisis, including artificially low interest rates, the dot-com crash of 2000, the domino-effect of problems caused by failing investment banks, the consequences of de-privatizing mortgage giants Fannie Mae and Freddie Mac and the failure of the government regulatory system to keep up with the new sub-prime lending “innovation.”

Economics professor Eric Fisher spoke next about the long-term prospects for the American economy and the effects of the $700 billion bailout – a move he says the Federal Reserve mismanaged.

A self-named proponent of free market capitalism, Fisher also stated that increased government regulation of the financial sector is good for the national economy.

“These companies want to be regulated,” he said. “It cuts down on the probability of bank runs.”

And despite references in the media back to the Great Depression, Fisher said that the causes of that recession are very different from the one the United States faces now.

“We’re going into a recession like the one in 1981,” he said, referring to the tight credit market and wave of bank failures of the early ’80s.

Phil Cohl, a senior portfolio manager with more than $200 million under his management at financial services firm UBS, led the panel to talk about where the American economy is headed.

“The Paulson plan will be beneficial,” he said. “With the injection of capital into banks, more oversight and the new level of FDIC insurance, we’re going to see things get better.”

– Originally published in the Mustang Daily on 10/27/08