SIUC prof:  Don't panic

By The Southern Illinoisan

The country has an actual financial crisis on its hands, but it's no time to panic, one of SIUC's financial scholars said Tuesday.

Ike Mathur said the troubling times are real, not mere media hype.

"I think this is a real financial crisis in our economy," said Mathur, finance professor and member of Southern Illinois University Carbondale's College of Business faculty since 1977.

Mathur said that, by now, forecasts of recession are beleaguering the obvious.

"A recession is defined as two consecutive quarters of negative economic growth. We are there," he said.

"The stock market has declined more than 20 percent. From October 2007 to now, it's down 21 percent. We're in a bear market. We expect to see another one to two quarters of this not-so-good economic situation."

That doesn't mean we are in for something akin to The Great Depression, Mathur said.

"The Federal Reserve System is much better at smoothing out the fluctuations. I think their actions will preclude going into a 1930's-style depression," Mathur said. "And, there's no need to panic. The housing market will come back."

Many questionable lending practices have adversely affected the housing market, Mathur said in a news release from the university.

On the positive side, Mathur said he's watching for mergers among various homebuilders, a sign the country is heading out of its recession.

Meanwhile, it's a good time for investors to purchase real estate, if they have the capital or are confident that their mortgage is at an affordable fixed rate. Mathur said real estate prices are down as much as 15 to 20 percent or more in many markets.

Although federal banking regulators have already seized control of the California-based IndyMac, Mathur said he believes U.S. Sen. Christopher Dodd, D-Connecticut, will be successful in pushing through a federal bailout of huge lenders Freddie Mac and Fannie Mae.

The professor said he encourages people to think in the long term.

"If stocks are in tax-deferred accounts, it doesn't make sense to switch them around at this time. In the long run, the market will do well," Mathur said.

He said he anticipates the current problems will have the eventual benefit of stronger regulation of financial institution, likely eliminating such things as the loans approved without income verification.

And if you are lucky enough to have $100,000 or more, keep it to no more than that amount per insured account, he advised.

"No one should have more than $100,000 in any one account at a bank," Mathur said.