 "Photo: Calli Turner")
Texas A&M economics professors Kishore Gawande and Dennis Jansen fielded questions on the economic crisis Wednesday in the Robert H. and Judy Ley Allen Building.
The professors were participants in the A&M Economics Society's Financial Crisis Panel Discussion.
One of the issue that was discussed was the stimulus plan.
"The stimulus, like any fiscal stimulus, is supposed to create jobs. It's not as great a plan as it's supposed to be, it's not as deep as it's supposed to be, it's not as big as it's supposed to be," Gawande said.
He said the economic situation is not like the Great Depression for a couple of reasons. He said during that time, there was a deficiency in demand, but the rest of the economy was OK.
"The problem right now is the consumers are so heavily indebted as a group that they are not willing to spend," he said. "It's a tough time for this economy, there are no very easy answers."
Jansen said some think that an increase in job development indicates an upward turn in the economy.
"I would be a little bit skeptical about how well the proposed package or actual package will work to create new jobs," he said.
"Most economists will say [new jobs] can never be measured actually," Jansen said.
Gawande said the focus needs to be placed on banking systems because many banks may be close to or even at bankruptcy but are still operating.
"You can't let these guys just operate when they're bankrupt, they'll do all kinds of crazy things," he said.
But Gawande said banks that do work are needed.
The Federal Reserve System was noted as one of these banks.
"The Fed has been out there basically discounting all kinds of assets basically trying to conduct an open market of sorts," Gawande said. "It actually has succeeded, but it's not clear how much lending is coming from that."
Gawande said one shortcoming of the stimulus package was the amount of time spent creating it.
"In terms of the fiscal stimulus plan that was packaged and planned, perhaps we were in a rush to do that," he said. "I think it scores a lot of political points, but not so much for economic growth."
Gawande said he had two graduate students who bought houses with zero income, and that this was an example of how the economy ended up in this situation.
He said the lenders are willing to make the loans to potential home buyers with no credit, because they're not buying the risk, they're selling it out.
"They will sell it to Fannie Mae or Freddie Mac," he said. "Junk is being bought on the market by very reputable [companies]."
He said the companies are doing this because Congress has decided everyone should buy a house.
"They were probably happy to do it in the ways that were being described, but they were being instructed by Congress to do this," Gawande said.
Jansen said the auto bailout was not a good idea.
"I do not think the U.S. car companies have been in good shape, maybe Ford being the exception, for a long time," he said. "They do not meet the market test on quality or price."
He said bankruptcy is the best option and that the auto brands, such as General Motors, would continue to exist.
"If you let them go through bankruptcy, then these problems will maybe be taken care of," Jansen said.
Gawande said he agreed with Jansen, but he did like one aspect of the auto bailout: the requirement placed upon automakers to produce an electric car.
"This is a long time coming," he said.
Dylan Kluth, the society president and a senior economics major, said the society will have more panels this semester discussing health care and energy.
Kluth said the society worked with their adviser A&M professor Brit Grosskopf to coordinate the event.
The economics society consists of economics and non-economics majors. Kluth said he hopes the panels will be understood by all in attendance, no matter what major or background.
"Our goals are to advance social and economic thought," he said.
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