Even the most optimistic assessments of recovery from the current economic recession presented during the third economic forum sponsored in early December by the Mason School of Business at the College of William & Mary were sobering.
"Things get curious-er and curious-er as we move forward," said Mason School dean Larry Pulley as he opened the forum. "We have a lot of people in very difficult straits. Over 10 percent unemployment, we have banks, many of them clogged with underperforming mortgages, we have a lot of Congressional activity looking at and criticizing decisions … "
Dick Ash, Clinical Professor of Entrepreneurship and Private Equity Entrepreneurship at the business school, introduced the panelists after noting that the situation is "not as bleak as it once looked." The panelists then gave their best insights concerning the trajectory toward recovery.
John Boschen, the Brinkley-Mason Professor, economics and finance, forecast recovery in terms of historic precedents established by the world's "big five" bank-led post-World War II recessions—the current recession is number six, he said. Commonalities include large run-ups in commercial or real-estate prices prior to a collapse, stock-market declines approaching 50 percent and rises in unemployment typically measuring 7 percentage points.
It takes about three years for real-estate process to work their way out of the decline and to stabilize and it takes about two-to-three years for stock markets to rebound, he said. Concerning unemployment numbers, he predicted they would run above 10 percent for at least the next two years.
John Merrick, the Richard S. Reynolds professor of business, opened his remarks by referencing the well-known quote by democratic strategist James Carville "it's the economy, stupid." Merrick derided Congressional leaders for focusing on health-care and energy policy at the expense of the economy. He then gave an assessment of bond markets, some of which no longer existed, Others, including the corporate bond market, are performing well, he said.
He suggested that the mortgage-backed security markets were running at their old levels, but he said there was a problem in that the Federal Reserve is buying 80 percent of the securities. "They're paying too much," Merrick said. "I don't know if they have anybody whose job it is to lose money."
"Recovery doesn't mean return" was Deborah Hewitt's mantra. Hewitt, the Clinical Associate Professor, economics and finance, cautioned that economic downturns in the United States and selected European countries had little effect on the economies of nations such as China, India and Brazil. She compared the changing relative economic positions to a "tectonic shift," suggesting that "the order of things" had changed. "What we can expect our economic clout to do for us politically is changing" and will not return to levels enjoyed during previous decades, she said.
Eric Kades, vice dean and professor of law at the William & Mary Law School, took issue with the bailout of financial institutions that now are recording record-profits. He suggested one fix would be for the U.S. Congress to impose a significant windfall profits' tax.
Referencing the bankruptcy experience of General Motors, he said a similar procedure should be imposed upon failing financial institutions—i.e. a change of leadership. "The economy does not need certain people to own these firms," he said.