Op-Ed
The Economy Is Falling
The Girl With Kaleidoscope Eyes
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The past few weeks of Wall Street meltdown have profoundly reshaped the economy. Let’s start from the top. Last week the Treasury Department bailed out Fannie Mae and Freddie Mac, two of the country’s integral mortgage finance companies that dated back to World War II. Now fast-forward to Sunday night. Lehman Brothers, a prestigious investment bank whose founding predates the Civil War, filed the largest bankruptcy in American history. Wall Street powerhouse Merrill Lynch sold itself to Bank of America. Moving forward, we have A.I.G. and Washington Mutual fighting for their survival. Taken together, the financial services industry has found itself in somewhat of a quagmire.
Now it is pretty clear that over the years Cornell has done a good job linking itself to the world of finance. With roughly a quarter of the classes offered in the Applied Economics and Management major directly related to finance and an official concentration created in the School of Hotel Administration, it appears the Cornell faculty has decisively integrated the interest in markets into our academic curriculum. The strong supply of business classes is met by a robust demand by pre-professional students looking to maximize their utility in financial matters. The Career Services office too adapted to the spike in graduate and undergraduate financial interests. Cornell’s strong relationships with Wall Street have consistently helped to place students at the top investment banks for summer internships and full time employment.
Under normal market circumstances, Cornell’s affinity for finance would be a good thing. But as the Wall Street domino effect continues, it is quite evident that an abundance of students who aspired to careers in finance will be sorely let down. Fewer banks and jobs, more people unemployed - the point is clear. In retrospect one has to wonder, was it wise for Cornell to invest so heavily into the world of finance? Are all of these initiatives now irrelevant? I would respond that perhaps we have placed too many eggs in one basket.
The trickle down effect into Ithaca will have some interesting repercussions that will reverberate beyond post-collegiate employment. Far above Cayuga’s waters you may feel exempt from Wall Street, but our economy is inextricably connected to the revenues and employment these investment banks generate for New York State. According to an article in Tuesday’s New York Sun, in a healthy economy, Wall Street accounts for 20 percent of the state’s revenue. Yet as stated in a press release issued by the New York State Division of the Budget, “state economists are now, for the first time since 2003, forecasting that New York has officially entered a recession.” As Gov. David Paterson and his budget committee sit up in Albany and address the plummet in state revenue we should seriously consider, how will state spending be reduced? One possible route would be that state budget officials will reduce appropriations for Cornell University in the upcoming fiscal quarters, which directly would affect the livelihood of our four state schools.
On top of the questionable money flow from New York State, we should be cognizant of the limited financial capabilities of many of Cornell’s donors. Capital Campaign support from alums on Wall Street and beyond will undoubtedly be affected by the economic downturn of the past few weeks. The Cornell alum and former employee of Lehman Brothers will be more concerned about ensuring his child’s tuition than paying for a new lab facility in Martha Van Rensselaer Hall.
Put simply, the current phase of the financial crisis has created decreased employment and revenue in New York City, which reduced the state budget, which in turn may reduce Cornell funding. So to you Biology and Society or Entomology majors who looked down on Wall Street and thought this crisis wouldn’t affect you, unfortunately it does. This affects everyone.
In the ambiguous state employment/ unemployment it may a good opportunity for students who have devoted countless semesters to bond duration and balance sheets, to take a class on human rights violations or African art. Diversify your academic portfolio. Try something new.
Like the investment banks who had overexposed themselves to sub prime risk, we in the Ivy League have overexposed ourselves to Wall Street. Perhaps we took on too much risk as well.
Laura Temel is a senior in the College of Arts and Sciences. She can be contacted at let9@cornell.edu. The Girl With Kaleidoscope Eyes appears alternate Wednesdays this semester.