This article first appeared in the St. Louis Beacon: October 24, 2008 - Things will get worse before they get better. That was the consensus of experts gathered at a forum on the economic crisis Friday. But, they said, St. Louis and Missouri will likely feel a less severe impact than places like California and Florida.
The experts spoke at "Financing the Future: A Look at How the Credit Crisis Affects Development and Job Creation," a forum sponsored by state Rep. Jamilah Nasheed, D-St. Louis, at Harris-Stowe State University. About 30 people attended.
The five experts represented the government, business and the university. Their goal was to explain the causes of and answer questions about the country's current economic situation.
While the audience applauded at points and nodded at others, not everyone was satisfied by the hour and a half discussion.
Laura Moore, of St. Louis, came to the forum for more insight into the crisis. She said she was impressed by the summaries of the problem, but she would have preferred more discussion of jobs and what can be done to stimulate the economy -- short of more taxpayer dollars pumped into Wall Street.
"I think now the American consumer is being asked to foot the bill on both ends," Moore said. "It should never have happened, and I am very upset with the people in power. It's outrageous now that they expect people to foot the bill and then repay the banks at a higher interest rate. It's like closing the door after the horse is out."
Radha Gopalan, an assistant professor of finance at Washington University, summed up the financial crisis as a combination of low interest rates, mortgage issues and lax regulation, calling it "this current mess."
"This was a house of cards that was built by unscrupulous people and people who simply didn't know," Gopalan said. "And the regulators were all caught napping."
Gopalan predicted that the economy will recover slowly and possibly come to a partial halt because so little credit is available for banks and consumers.
Predictions though, the experts said, are difficult. The situation, said William Ratliff, executive vice president of the Missouri Bankers Association, is simply changing too fast. He pointed to past banking wisdom that said major reform in Washington would take 10 years. Congress passed the bailout bill in 10 days.
One thing St. Louisans and Missouri's residents don't have to worry about is the safety of their deposits, said D. Eric McClure, commissioner of the state's finance division. The division oversees bank regulation throughout the state. Ninety percent of the state's banks are regulated under McClure's office.
Credit unions are also safe, according to Roshara Holub, president and chief executive officer of the Missouri Credit Union Association. Credit unions and their deposits are federally insured and make more conservative investments than banks, making them more robust in a flagging economy.
Mortgage brokers are a bigger concern statewide. According to McClure, only about 25 percent of brokers are subject to state oversight. That means 75 percent are exempt, usually because they are registered with the federal Department of Housing and Urban Development. All the panelists pointed to unscrupulous mortgage brokers as one of the causes of the economic meltdown.
A new law will require state licensing of mortgage brokers shortly and McClure said his department is gearing up for the added oversight.
While the words "another Great Depression" were uttered at Friday's forum, Julie Stackhouse, with the Federal Reserve Bank of St. Louis, said that is unlikely. The conditions in the 1930s that brought about the Depression no longer exist, she said. The recent federal bailout is also an example of lessons learned from the past.
While the experts saw the St. Louis region as in better shape than most of the country, they could not say what the future would hold.
"It's kind of like turning an aircraft carrier," Ratliff said. "It you're going north and you want to go west, it'll take you about 10 months. That's kind of the same thing with the economic situation."
Nasheed, who chairs the state financial institutions committee, said she wanted to host the forum because she has seen the effects of the crisis in her own district.
"Houses where I knocked on the door (campaigning) in 2006 are now vacant and abandoned in 2008," Nasheed said. "Homes are shutting down every day with dead-bolt locks on the doors because of the sub prime mess."
For more information visit the education section of the St. Louis Federal Reserve's website.
Amelia Flood is a freelance writer in St. Louis.