A BRAVE NEW ECONOMY
By Evan Alvarez
For the past three years, Lou Guevara, 27, earned a living as a bank officer for Chase Bank while working toward a degree in business communication at Baruch College.
Mr. Guevara has been taking out loans to finance his tuition, which has gradually inflated over the past year along with its interest rates. Payment options have also become more constricting. If he pays the college with a credit card, they will charge him an additional convenience fee. And it better not be Visa because it’s no longer accepted.
(Photo by Evan Alvarez)
Today, Mr. Guevara struggles with these expenses in addition to rent, transportation, phone and internet bills on a lower salary that is no longer provided by Chase, which let him go this past September. “It definitely threw a wrench in what I was trying to accomplish… You get used to a certain lifestyle, taking care of your bills and doing everything. It was just like a rude awakening…”
Mr. Guevara has been working at the Apple Store since his severance with the bank. He has few complaints with the exception of its modest pay and looks forward to completing his degree this upcoming spring. He understands that Chase’s decision was based less on his work performance and more on forces beyond their control. “I think it was majorly mishandled [but] I don’t think any one person can be held accountable.”
Those most affected by the economic crisis, however, are the individuals barely left standing who have lost their livelihood and fiscal independence. Many New York City residents, including Mr. Guevara, have begun to feel the ripples of this economic shock wave and see their urban landscape as its epicenter.
“There’s a lot that’s unclear about it but I guess ultimately everyone wants to know how it’s going to affect people in New York,” said Nicole Shultz, 32, who is a freelance architect. “One of my contracts ended because of the economy. I [also] just found out that the magazine group I work for just did massive layoffs, too.”
The sub-prime mortgage crisis, which sprouted from poorly leveraged home loans, has culminated into near mortal blows to the U.S. and world economy this year. The unlikely entity has toppled markets across the globe and dissolved once prominent financial institutions into bankruptcy.
According to the U.S. Department of Labor, over 847,000 jobs were lost between December of 2007 and October 2008 nationwide. Although the New York State unemployment rate has changed little, at least 30,000 jobs have been lost, particularly in finance and manufacturing, over the past year. The agency also reported a continuously growing number of layoffs over the past several months in addition to national unemployment climbing to 6.5%.
In addition to those hardest hit with joblessness and dwindling employment opportunities, many have suffered heavy blows to their investments and retirement. “Well, I’ve lost a million dollars”, said Monty, an 89-year-old, retired New York City resident who chose not to give his last name. “That which I put in the stocks has taken a terrible beating.”
Within a weekend, once seemingly perdurable banking institutions like Goldman Sachs, Merrill Lynch, Lehman Brothers, American International Group, Fannie Mae and Freddie Mac collapsed, partially or entirely, dragging with them most of their shareholder’s investments.
Americans, whether affected directly or indirectly, all seem to be asking the same question: Who is responsible for this mess?
Many New Yorkers seem to have some idea as to what factors played a part. More still are asking questions of how and why. “I can’t really make any sense out of it,” said Andrea Cooper, 47, who does research training with the MTA. “I think it’s something more complicated than calling out one person and saying ‘this is their fault’. You can’t blame George Bush for this problem.”
Despite the fact that no finger can be singularly pointed at a particular organization or person, people seem to view the government and heads of now crippled financial institutions as the closest culprits.
For over a decade the government has advocated policies that modestly grazed over regulatory practices of major lending institutions. And for much of that time, primarily between 2000 and 2007, there didn’t seem to be any imminent danger of an economic catastrophe.
It was only in late 2007 that the American market began to dip, ever so slightly, as the property values of homes declined. It didn’t help either that most of the people who had purchased their homes were now forced to give them back to the banks as collateral for their borrowed mortgage.
“Right now we’re seeing big companies that are falling but we’re not seeing the small businesses which are really hurting,” said Jerry Lutchman, 25, who works for American Express. “I definitely believe that it’s a good thing that the government is trying to take this money to open up the credit market.”
Major financial institutions put total faith in their bargain rate lending at low interest, which has ended up emptying companies’ cash reserves and replacing them with millions of properties of staggered value.
This gaping hole of debt worth hundreds of billions of dollars transformed into a burden for the government that forcibly became financed with American tax dollars. “I think that if the government didn’t bail these institutions out then we would see more of a psychological effect on the people of this country because these institutions are closing and have been around for years,” said Ms. Cooper.
Plummeting stock values of the once fiscally commanding firms like AIG, Merrill Lynch, and Lehman Brothers jarred the country’s cash flows as American markets began to crumble.
These effects have gradually trickled down to millions of now unemployed Americans across the country. “The effects of it have been seen to a greater extent in other parts of the country,” said Ms. Shultz. “I think it’s being felt [there] a lot more profoundly.”
People are now searching for new alternatives to cope with economically scarred landscape, whether it be changing professions or waiting vigilantly for what may be to come. “Within my group there were about four if us that got the axe,” said Mr. Guevara. “I think we are going to see more layoffs and losses but I think people should brace themselves. I have.”