Professor of finance Omar Benkato answers questions about how the 777.68-point drop in the stock market and failed passing of the financial bailout plan will affect students.
Q: What will happen to my money that is in the bank?A: "Money in the banks are safe because they are FDIC insured up to $100,000 per account. I doubt that anybody has more than that in their account, whether it's students or anybody else, have that much in their checking account."
Q: What will happen to my loans? Will I be able to take out additional loans?A:Unless the bailout is passed quickly, the stock market plunge could have some trickle effects that could affect students in many areas of their lives. "To be honest, [the bailout plan is] going to pass in next two to three days."
Q: What will happen to the job market?A:Those looking for jobs will be most affected because companies won't have the money to hire, grow or expand.
Q: What immediate effects will this have on me?A:Student loans will be damaged regardless of whose name is on them."It will have a negative impact, but hopefully for student loans it won't last too long."
Q: How will this affect the housing market?A:Students would be better off waiting for several years before attempting to buy a house. "Another thing that's important is for people, whether they are students or not, is to fully learn about personal financing and how to handle loans, whether it's the use of credit cards, mortgage, car loans, etc."
Q: How does the government's reaction right now compare with how the Great Depression was handled?A:The government has the opportunity to act more quickly than in 1929, which should give Congress the incentive to act quickly now before the recession grows worse and turns into a depression. "When banks start closing and people start getting money out of banks and when unemployment starts creeping up to 20 to 25 percent, that's when it's depression."
Q: What is the biggest change students should be prepared for?A:Students will see changes if Congress fails to pass some sort of bailout plan soon. "Jobs might not be as readily available, although it depends on finance in the economy with different sectors."
Q: How did we get here? How long have we been on this trajectory?A:Poor policies led us down this track for the last several years. Alan Greenspan was too lax with the banking and credit industries. Even after people began to point out issues, regulators failed to act.
Q: What is the government planning next?A:The bailout will pass, in some form. However, $700 billion might not be enough to fix the failing economy.
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