“This is NOT a bear market, this is NOT an adjustment – it is a financial crisis which can, but not always will, become a depression.   Right now, we’re in the 1929 phase, after the stock market crash, but we’re not in a Great Depression phase,” said Whitman history professor David Schmitz.  

He was speaking at an impromptu panel this past Wednesday to discuss the economy.   “History can’t tell us what to do now, but it can tell us to do something to avert [a greater] crisis.”

Throngs of Whitman students and community members packed Maxey Auditorium to hear the panel speak, two days after the Dow Jones Industrial Average plummeted 778 points –– the largest one-day point decline in history.   The massive selloff on Monday was attributed to the House’s refusal to pass the Bush administration-backed bailout plan of Wall Street, after it was believed a compromise had been reached over the weekend.

Among the contentious issues was the heavy price tag for taxpayers, seen as an unfair attempt to prop up the Wall Street bureaucracy that initially instigated the crisis, as articulated by Representative Jim McDermott (D-WA).

“The public isn’t getting anything for this, except we’re handing money to the same people who basically brought about the problem,” said Dermott, after voting against the measure this past Friday, when a revised version passed the House, 263-171.   The same bill passed the Senate handily on Thursday, 74-25.

Essentially, Congress and the President hope that by buying bad debt and assets, the credit freeze will subside, allowing loans and mortgages to flow to small businesses, prospective homeowners and the like.   While there has been widespread resentment towards the bill, some going so far as to accuse the Bush administration of socialism, and some accusing the federal government of wasting taxpayers’ already tight funds, still others argue that the action is necessary in order to avoid further crises.

“The important thing to remember is that this is a financial crisis, but it’s starting to ripple out into other sectors of the economy,” said senior politics and economics major Jack Mountjoy.   “This bailout needs to happen –– businesses need new loans.   Even businesses flush with cash still need these loans, and if our credit system is frozen, our economy is toast.”

Senior economics major Alex Henke took a similar tone.

“The problem is, if we don’t intervene, even the [investors] who didn’t screw up are going to suffer,” he said.

While many agree that intervention needs to happen, there is disagreement on what type of action would be best.   Some have expressed support for greater assistance to the average American, as opposed to the current trickle-down action encouraged in the recent bailout plan.

Denise Hazlett, Whitman professor of economics and panelist, expressed her support of the bailout while still advocating help for the common American in the form of mortgage assistance.

“When you look back at [this spring’s tax rebate] stimulus package, it didn’t really have much effect, and it’s very expensive.   The best idea would be to re-write house values in bankruptcy proceedings.   It’d take that person on the verge of foreclosure and keep them in that house.   It’d be good for them, their neighbors, and the economy on the whole.”

As the crisis intensifies, more and more parallels are being drawn from the 1929 market crash, and the global depression that ensued.   Though there are indeed similarities, scholars are keen to note the different reactions from leadership in both circumstances.

“One major difference between now and 1929 is that in ’29, the Federal Reserve tightened up the cash supply, instead of bolstering it.   Also, Congress tightened up, with regard to the fiscal budget.   The measures taken [comparing then and now] are drastically different,” Henke said.

Regarding the potentially tumultuous future, Hazlett advocated healthier, wiser spending habits.  

“Don’t sign for a loan if you don’t understand it –– part of the reason we’re in this crisis is people not understanding the terms of the mortgages being sold to them from brokers who didn’t make the fine print clear. Also, it needs to be made clear to us that we can’t have everything right away. As a whole, we spend too much, and save way too little.”