About 160 students and faculty attended a roundtable discussion in Dane Smith Hall on Friday to discuss the country's financial crisis.
The event began just a few hours after The House of Representatives voted 263 to 171 to pass the $700 billion bailout bill, which was later signed into law by President Bush.
The people crammed into the lecture room far outnumbered the number of chairs available. Students sat on the floor, lined the walls and huddled in the doorway to hear professors Donald Coes, Scott Findley, Matias Fontenla, Allen Parkman and Jason Scott Smith speak about the future of the country and its correlation to the past.
Smith, assistant professor of history, said there is much to learn from comparing the country's current situation to the Great Depression.
"For all the difference between 1930s and today, one thing has remained the same, and that's capitalism - which is a very powerful economic system and a very fragile one," he said.
Smith said stakeholders in capitalism need to have faith in the market in order for it to function properly. Passing a $700 billion bailout was necessary in order to support the concept of capitalism, he said.
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However, the government should revisit the mistakes it has made in the past to avoid repeating them in modern times, he said.
"Today, in contrast, the economy is in a credit crisis - a crisis of confidence that hasn't spread to the broader economy," Smith said. "I would observe that if the Great Depression has the ability to teach us anything about the present, it's that doing nothing is not an option. We tried that between 1929 and 1933, and it didn't work."
Findley, assistant professor of economics, said bad spending habits are to blame for the meltdown of the economy.
"Looking at the macroeconomy, our economy and our nation has become a spendthrift nation," Findley said. "If you look at the ratio of total U.S. household debt to GDP - that's the total income of the U.S. economy - in 1980, it was roughly 50 percent. In 2006, it was 100 percent, meaning that U.S. households now owe what the entire U.S. economy can produce in one year."
Findley forecasted continued economic downfall for the country.
"It's likely that this bailout is not going to avert a recession," he said. "Right now, this bailout is aimed at minimizing the macroeconomic loss from the recession."
Student Jason Hansen said he recognized the future could be grim and that he attended the discussion because he wanted to know how financing the $700 billion bailout now will affect the economy later.
"I'm sort of interested in these externalities that are associated with the short term and the externalities that are associated with the long term," Hansen said. "It seems like the bailout has pushed the long term farther out there."
Matias Fontenla, assistant professor of economics, said delaying the approval of a $700 billion bailout would be worse for the economy than introducing it immediately.
"We hate bailouts, and we hate problems of moral adverse, and we hate just bailing out rich people on Wall Street, but we know the alternative," Fontenla said. "The alternative is the Great Depression . and the alternative is what just happened in Argentina a couple of years ago, where the numbers are very similar to the Great Depression."
Patricia Risso, chair of the history department, said she wanted to hear about the correlations between the Great Depression and the current financial disarray of the economy.
"There's an interesting convergence right now," Risso said. "We have a financial crisis, and our fiscal infrastructure is crumbling, and I was wondering if the experience of the Depression and the New Deal has anything to tell us."
Findley said he was nervous about the consolidated power that will be presented to the Treasury Department with the passage of the bailout.
He said the mismanagement or poor production of the market's mortgage-backed securities could fall on the shoulders of the average taxpayer.
"The idea is that the treasury will buy up these mortgage-backed securities and auction them off at a higher price down the road," Findley said. "If the treasury does succeed at (this), then the U.S. taxpayer benefits. But, if the treasury does not succeed at selling off these mortgage-backed securities down the road at a higher price and it comes in at a lower price, then the taxpayer loses. So, this is going to represent a transfer of wealth one way or another."
