Understanding the credit crisis
By ANGELA GREEN
STAFF WRITER
AKGI4S@PSU.EDU
Most of us can't afford to pay for
college, buy a new car, or expand
a business with cash, and that is
why there is credit. With credit
we can increase our buying
power by spreading out
our payments over time .
In the years leading
up to the credit crisis,
interest rates, the costs
of borrowing money,
were at historical lows .
When interest rates
are low, money can be
borrowed easily because there
is more money available in the
economy.
There are three components to the
credit crisis: sub-prime lending,
credit default swaps and money
markets breaking a dollar.
The sub-prime lending crisis
involves lenders allowing
individuals to borrow more money
than they could afford to repay.
This left the lenders with billions
of dollars in worthless assets.
Credit default swaps involve
companies selling insurance on
bonds without having the cash
Building and maintaining
credit 101
By KIRILL SOBIN
STAFF WRITER
KVDIO2@PSU.EDU
A credit score is a number used
largely by financial institutions to
predict a likelihood of a consumer
to default on a loan in the first 90
days. This number is comprised
of accounts on your credit file like
car loan, credit card, mortgage,
utility bills, collection accounts
and other items reported by a
creditor or a service provider.
Most recently financial
institutions are beginning to use a
new credit scoring model, FICO.
FICO is more comprehensive
model in comparison to older
credit scoring models; it takes
into consideration payment
history, amounts owed, length of
credit history, percentage of new
credit, number of credit inquiries
and types of credit used.
In addition credit agencies are
providing banks with a number in
a range from zero to 1,000, which
shows a lender the likelihood that
you will file a bankruptcy. Make
sure you monitor your credit and
know where you stand on the
FICO rating scale; after all you
reserves available to pay the
insured if the bonds defaulted.
Money markets, generally
known as safe investments, were
seeing returns of less than a dollar
because of their exposure to these
worthless assets. This resulted in
them being perceived as unsafe
investments.
II ..... / These three
factors created a
perfect storm and
f e, caused the flow of
hi
Jo, credit to freeze.
4, Lenders were
afraid to make
loans because they
feared they would not
be repaid. Without
the flow of credit, the
economy significantly /
slows because people
must use cash to buy
what they need.
Students should
care about the crisis
because if it continues,
the criteria for obtaining
student loans will become strict
and affect the number of loans
available. Also, if businesses
find it difficult to obtain
the credit they need to buy
inventory and pay employees,
will need to borrow money.
According to Automotive News,
GMAC said people with credit
scores lower than 700 will no
longer be able to borrow money
from them for vehicles.
The announcement shows the
growing importance of credit
score and its implications on our
lives.
Take a look at these statistics from
creditreport.com: An average
credit score in Pennsylvania is
696. What it means to you is
most likely you will not be able
to finance your next GM vehicle
through GMAC.
This is one of many recent steps
taken by financial organizations
to tighten the availability of credit
in order to shield themselves from
less than perfect borrowers.
You may ask, What can I do?
How can I build my credit history
and keep my credit score above
700?
"Start slow with moderate
credit limit on a credit card," said
Vickie Zettlemoyer, loan center
manager at Members Ist FCU.
"If you are shopping for a vehicle
make sure to put down at least 10
percent. Bankers like to see your
r"rl 1757,T1MTM
the number of seasonal jobs
available and permanent job
offers made could shrink. Finally,
the crisis could affect the quality
of life on campus because it could
be too expensive for universities
to build new dormitories or make
capitol improvements.
To address the crisis and
unfreeze the flow of credit, the
government agreed to bailout
these troubled institutions by
buying their worthless assets.
Buying the worthless assets will
allow these lenders to retain
their cash reserves. Guaranteeing
future loans made will encourage
lending. They hope these actions
will jump start the
11 .....i / economy, but the
results won't be
seen for at least six
eei months.
)11111°"°Students who
want to avoid a
personal credit
crisis should
ould
become
financiallyliterate, use
credit judiciously, live within
your means, save for the future
and refrain from buying
N IS.- 4001" ,
commitment. Payoff
your credit card balances in full
every month or at least try not to
use more than 30 percent of its
available credit limit."
The ways to improve your credit
score are the same in any case:
correct errors, pay your bills on
time, pay down your debt and
apply for credit sparingly.
According to Nellie Mae,
undergraduates carry an average
credit card balance of over $2,300,
and 27 percent of students are
burdened by balances in excess
of $3,000.
If you are just starting out
and have no credit experience,
then contact your local bank or
credit union. Your local financial
institution will be able to offer a
student card with low or no fees
and manageable interest rate.
"Make sure your checking
account in a good standing
with your primary institution,"
Zettlemoyer added. "After all,
you goal is to build a strong
relationship with your local
financial institution; you get to
know them and they get to know
POLITICS:
Proving bias in classrooms
as well as media
likely increase but not enough
to make a drastic difference,
Woessner predicted. He doubts
that political discrimination
really affects this decision,
because conservatives' values
remain the same.
"We haven't found clear
evidence of discrimination," said
Woessner
Woessner, who identifies
himself as a conservative
Republican, earned his bachelor's
degree in political science at
the University of California,
Los Angeles only nine years
before Ben Shapiro, columnist
and author of "Brainwashed:
How Universities Indoctrinate
America's Youth", in which
Shapiro described his college
experience as a conservative at
a liberal university to show that
universities are pushing leftist
agendas.
investments
they don't
k understand.
Although Woessner and Shapiro
both graduated summa cum
laude and both call themselves
conservatives, Woessner claimed
his experience at UCLA was
nothing like Shapiro's. Woessner
doesn't doubt the sincerity or
honesty of Shapiro's narration
of his experience, but he
does have a problem with the
generalizations Shapiro makes in
"Brainwashed."
"It is scientifically inappropriate
to take your experience and from
that conclude that this is the
way the rest of the world must
operate," Woessner said. "I could
no more claim that UCLA is not
a liberal institution on the basis
of my experience than he can say
it is a liberal institution because
of what he went through."
Unlike Shapiro, Dr. Harold
B. Shill, professor of Political
Science and Information
Studies, doubts there is an effort
to indoctrinate. There is an
unspoken code of ethics in the
teaching profession regarding
indoctrination, said Shill.
"In this day and age, there is
very little effort to consciously
indoctrinate. We all feel strongly
about certain things, but we also
have to say, 'I have a professional
responsibility to be fair in the
classroom and make sure that
all points of view are really
Oct. 22 2008
Continued from page 4
welcome,'" Shill said.
Shill doesn't discourage
professors from incorporating
their views into their lectures
as long as they identify their
opinions as such and the opinions
they present are relevant to the
subject. He gave the example
that discussing views on global
warming in an environmental
science class would be
appropriate, but discussing
abortion would not.
"I think we would sanitize the
environment too much if we said
professors should not bring their
opinions in at all, but they need
to distinguish between what are
actually their own opinions and
the body of knowledge that the
course offers," Shill said.
Woessner recognizes that
professors can be effective by
expressing their political beliefs
and challenging students, but he
tries to keep his politics out of
his lessons and teaches from a
nonpartisan standpoint.
"I think it's most effective in
getting students interested in the
material," Woessner said.
Opinions can be useful teaching
methods, but indoctrination
causes problems.
"I have no tolerance for
professors who try to expound
their own political beliefs for
the purposes of making students
carbon copies of themselves," he
said.
Woessner can recall an example
of indoctrination from his UCLA
days. A professor who taught
international relations made
the argument that there should
be sympathy for Joseph Stalin
because he was misunderstood.
"I remember as a young
sophomore thinking, 'Oh, isn't
that reasonable,' and years
later going, 'No. Joseph Stalin
was a monster. It wasn't a
misunderstanding. He knew
what he was doing,'" Woessner
said. Because the professor
didn't present this argument as
an opinion, Woessner said he
didn't critically look at it until
years later.
As the Woessners' research on
academia continues and as more
books, articles and columns
are written on the subject of
indoctrination, universities may
join the media as targets in the
war on bias.