The economic bailout aimed to save Wall Street could have a big impact on Binghamton University and the surrounding area.
The rescue package, which passed through the Senate with a vote of 74-25 Wednesday night after revisions by lawmakers, would allow the government to spend billions of dollars to buy bad mortgage-related securities and other devalued assets held by troubled financial institutions. If successful, advocates say, the deal would allow frozen credit to begin flowing again and prevent a serious recession.
The original bill failed to pass through Congress Monday and both versions have received criticism.
“I think bailing out these corporations for risky behavior is going to set a bad precedent — letting them know it’s OK to do this risky behavior,” said Polina Yeliseyev, a junior economics, political science and math major. “There’s definitely an issue, but I don’t think a financial bailout is the solution.”
Binghamton Mayor Matt Ryan and Congressman Maurice Hinchey both spoke against the first draft of the bailout, which failed to pass through Congress Monday because it received an equal number of votes in favor and against.
“This country is in desperate need of an economic shot in the arm,” Hinchey said in a statement released Sept. 30. “But it’s imperative that we grow our economy by investing in the working and middle class.”
“We need to build up our economy, not bail it out,” the release stated.
Ryan also said he was worried that the rescue package might not pay enough attention to individuals, in terms of taking care of “Main Street” versus Wall Street.
The bailout won’t just affect Wall Street.
According to Christopher Hanes, a professor in the economics department, the crisis on Wall Street and the bailout could have an adverse effect on the budgets of State Universities of New York, including Binghamton University.
“BU has already been told they will have a budget cut, not yet allocated,” Hanes said. “Whatever happens, BU will take a budget hit in order to make the state budget balance.”
Hanes said a budget cut for SUNY schools would be bad if the bailout is passed, but worse if it isn’t. According to Hanes, SUNY is starving because of budget cuts already in place.
However, the University won’t be the only institution affected by the plight on Wall Street.
According to Hanes, it will probably become more difficult for graduating students to get jobs.
“My guess is companies will be extremely reluctant to hire this season, all over the country,” Hanes said.
Hanes explained that job difficulties are typical of recessions and that he thought there was a large possibility the country would fall into a wider recession.
“Usually what happens in recessions is, you see more enrollment in graduate schools,” Hanes said. “I think we’ll definitely see that this year.”
According to Ryan, the financial crisis that hit Wall Street a few weeks ago will also have a negative impact on the city of Binghamton.
“I do believe we have to do something,” Ryan said. “It’s clear this whole crisis is affecting credit for small businesses and unless we stabilize these markets, a lot of people are going to be losing their jobs.”
Ryan said that the budget for the city could be dramatically altered because of the climate on Wall Street. According to Ryan, 20 percent of the tax base in New York state is based on Wall Street revenues, and a smaller tax base would lead to depleted funds for the state.
“If we don’t get a fair amount of aid from the state, then we’re going to be in dire circumstances,” Ryan said.
— Information from The Associated Press was used in this report.