Alan Frishman, professor of economics at HWS, was one of the local financial experts interviewed by the Finger Lakes Times shortly after the initial financial bailout plan fell apart. The article looked to Frishman and others to explain what impact the crisis could have on people in the Finger Lakes. Frishman anticipated it could have a big impact on people in this region, according to the article.
“It can affect everyone. These banks made terrible loans to each other, which includes bad mortgages that had to be written off to cover those losses,” he is quoted as saying. “Now the federal government must decide how to shore up those banks so they can write off those losses and continue.”
He explains in the article, if the government doesn’t shore up the banks, it could result in the bankruptcy of major banks. “Many local banks in this area are connected to those big banks.” Frishman says the “implications are tremendous for all,” and notes people would likely find it harder to get a mortgage and their retirement accounts could be severely impacted.
“We can only hope it will be a mild recession, something we can recover from, which makes the bailout plan very important. Without it, there could be layoffs and job losses in this area,” he concludes.
A member of the HWS faculty since 1976, Frishman earned his B.S. in mathematics from the City College of NY (CUNY) and a Certificate in African Studies, M.A. and Ph.D. from Northwestern University.
His areas of expertise include economic development, urbanization and industrialization of countries in Africa (primarily Nigeria), Asia and Latin America. He spent two years teaching in Nigeria. Frishman is a member of the American Economics Association and the African Studies Association.
The full text of the article in the Finger Lakes Times appears below.
The Finger Lakes Times
Local financial experts weigh in
Craig Fox and David L. Shaw • September 26, 2008
Local financial experts are keeping a close eye on events on Wall Street and in Washington.
Steve Finewood, regional branch manager and a financial advisor with the Geneva Smith Barney office, believes that the financial markets will settle down once Congress comes up with a bailout plan to help Wall Street.
The news that the bailout agreement fell apart following yesterday’s historic meeting between President Bush, both presidential candidates and members of the Congressional banking committees, has already caused more stress on Wall Street and stocks will probably dip further today, Finewood said.
“You can expect it to go down,” he said. “Wall Street is very jittery.”
The failure of Washington Mutual, the Washington State-based bank that was seized by the U.S. government Thursday and acquired by JPMorgan Chase, wasn’t a surprise since its stock had been faltering for some time, Finewood said.
He said about 13 banks have failed this year and about 36 since 2000, compared to 925 from 1990-99 and more than 2,000 during the previous decade, so it’s not quite as bad as it could be.
With all the bad news on the national economy, Finewood joked that no one wants his job these days, but he remains hopeful.
“We’re going to have to work this out, but it’s going to be a long process,” Finewood said.
Nevertheless, the crisis could have a big impact on people in the Finger Lakes, said Alan I. Frishman, a professor of economics at Hobart and William Smith Colleges.
“It can affect everyone. These banks made terrible loans to each other, which includes bad mortgages that had to be written off to cover those losses,” Frishman said. “Now the federal government must decide how to shore up those banks so they can write off those losses and continue.”
“If that doesn’t happen, major banks could go bankrupt. Many local banks in this area are connected to those big banks,” he said, adding people would likely find it harder to get a mortgage and their retirement accounts could be severely impacted.
“The implications are tremendous for all, even at the local level because the financial systems are so inter-connected,” Frishman said.
“We may have been heading toward a recession as the economy slows down, and the crisis will only hasten that recession,” Frishman said. “We can only hope it will be a mild recession, something we can recover from, which makes the bailout plan very important. Without it, there could be layoffs and job losses in this area.”
But Jerry Zehr, senior vice president and chief financial officer for Finger Lakes Credit Union in Geneva, has a different perspective.
“A lot of what’s going on has minimal impact on 90 percent of the financial institutions. For the other 10 percent, they may hold 50 percent of the monetary assets in the country and are impacted modestly to severely,” Zehr said.
Some of them have branches in the Finger Lakes, but many do not, he said.
“I don’t think you’ll see a lot of impact locally on banks and credit unions. We are in very good shape, still lending and are active in the markets,” Zehr said.