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Economy impacts students
Omkar Baxi
Issue date: 10/3/08 Section: News
As the country's major financial institutions and businesses report record losses and deep financial trouble, college students and their families are starting to feel the economic crunch, according to Ed Nelling, associate professor of finance at Drexel University.
According to Nelling, recent and upcoming college graduates will be affected by the economic situation in three major areas: jobs, credit and investment.
Vibhas Madan, department head of economics and international business at Drexel, explained how the financial trouble of key firms and businesses on Wall Street has rippled throughout the markets to affect the average person on "Main Street."
"Basically, most of this economic downturn can be traced back to the bad housing market. High-risk, high-reward practices by many banks led to mortgages on an enormous number of houses, which the buyers could not reasonably own. These bad lending practices eventually caused various banks to be in deep financial trouble," Madan said.
However, the real problem rippled out of these bad bank assets when investors began to lose trust in key businesses, according to Madan.
"At this point, banks became more cautious about lending, creating a credit freeze that stopped businesses from working effectively," Madan said.
Madan gave an example of how a bank's unwillingness to lend can affect the average worker down the road: consider a business like a hotel or restaurant that makes most of its profit at the end of the year. They still have to pay their employees throughout the year, so they borrow from a bank and take care of their payroll, repaying the debt at the end. However, when the banks become more cautious, it becomes harder for the business to secure money for payroll and they are forced to layoff some of their employees.
Nelling also cited this behavior as a possible consequence for recent college graduates saying, "One of the major effects the market will have on students is the higher competition for a relatively lower amount of jobs. Now the market may stabilize in a year, or in the next five, but the job issue is likely to affect upperclassmen right now."
According to Nelling, recent and upcoming college graduates will be affected by the economic situation in three major areas: jobs, credit and investment.
Vibhas Madan, department head of economics and international business at Drexel, explained how the financial trouble of key firms and businesses on Wall Street has rippled throughout the markets to affect the average person on "Main Street."
"Basically, most of this economic downturn can be traced back to the bad housing market. High-risk, high-reward practices by many banks led to mortgages on an enormous number of houses, which the buyers could not reasonably own. These bad lending practices eventually caused various banks to be in deep financial trouble," Madan said.
However, the real problem rippled out of these bad bank assets when investors began to lose trust in key businesses, according to Madan.
"At this point, banks became more cautious about lending, creating a credit freeze that stopped businesses from working effectively," Madan said.
Madan gave an example of how a bank's unwillingness to lend can affect the average worker down the road: consider a business like a hotel or restaurant that makes most of its profit at the end of the year. They still have to pay their employees throughout the year, so they borrow from a bank and take care of their payroll, repaying the debt at the end. However, when the banks become more cautious, it becomes harder for the business to secure money for payroll and they are forced to layoff some of their employees.
Nelling also cited this behavior as a possible consequence for recent college graduates saying, "One of the major effects the market will have on students is the higher competition for a relatively lower amount of jobs. Now the market may stabilize in a year, or in the next five, but the job issue is likely to affect upperclassmen right now."
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Payday Loan Advocate
posted 10/24/08 @ 1:05 AM EST
On Wednesday, October 14, 2008, the third and final U.S. Presidential Debate took place in Hempstead, New York. Illinois Senator Barack Obama came into the debate with an eight-point lead, according to an average of national polls as compiled by CNN. (Continued…)
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