Connecticut College Digital Commons @ Connecticut College 2008-2009 Student Newspapers 10-8-2008 College Voice Vol. 33 No. 4 Connecticut College Follow this and additional works at: https://digitalcommons.conncoll.edu/ccnews_2008_2009 Recommended Citation Connecticut College, "College Voice Vol. 33 No. 4" (2008). 2008-2009. 17. https://digitalcommons.conncoll.edu/ccnews_2008_2009/17 This Newspaper is brought to you for free and open access by the Student Newspapers at Digital Commons @ Connecticut College. It has been accepted for inclusion in 2008-2009 by an authorized administrator of Digital Commons @ Connecticut College. For more information, please contact [email protected]. The views expressed in this paper are solely those of the author. First Class PUBLISHED WEEKLY BY THE STUDENTS OF CONNECTICUT COLLEGE U.S. Postage PAID THE Permit #35 New London, CT COLLEGE VOICE NEW LONDON, CONNECTICUT VOLUME XXXIII • ISSUE 4 WEDNESDAY, October 8, 2008 "Alcohol, Financial Crisis 101 The H'onor Find out where our national Code, economy went wrong And Self- Governance" MIRIAM WASSER '09 staff writer SARAH KOSOFSKY '12 In early 2000, the Federal Reserve had set very low interest rates because staff writer the economy was doing well and there was no immediate threat of inflation. This past Thursday, Connecticut In addition, the huge trade imbalance College experienced something new in the US (we import more. capital/ on campus: "Alcohol, the Honor goods and services than we export) Code and Self-Governance: A Com- meant that in effect, the rest of the munity Conversation." This was world was giving us goods and ser: an event created to discuss the issue vices in exchange for US dollars, and of alcohol abuse on campus. In the then using those US dollars to buy US using the money homeowners pay for past few weeks, there have been at Treasury bills. This increased the de- gave mortgages (loans) to many peo- least eleven alcohol-related ambu- mand for Treasury bills, which is es- ple who could not afford to pay them their mortgages as proof that they, the middle-man company, have incoming lance transports to the local hospital, sentially an increase in the supply of back, and the banks were forced to revenue and will be able to pay back in addition to multiple cases of dorm willing buyers. The effect of this is foreclose on those mortgages (take the new loan. Investors are willing damage. There have been reports of that interest rates are driven down, be- away mortgages because payments to buy them because they are backed New Londoners. complaining about cause when supply goes up, prices go have not been made) and seize their by mortgages; they feel confident in drunken student drivers. Reportedly, down; the interest rate represents the homes. This happened over and over their purchases because a house is a one man's service in the L&M hospi- price being charged for the Treasury again, resulting in a great number of solid, physical asset. The new loan tal waiting room while experiencing bills. (It is in the US national interest. empty homes. The law of supply and is the new security that is backed by heart problems was slowed due to the to sell our debt at the lowest possible demand kicked in: which meant that mortgages, and those who buy these amount of Connecticut College stu- interest rate, so that when we pay back the excess in the supply of homes securities receive income when the dents being transported at the time. those who loaned us money, we are drove down the price; i.e., houses homeowners make their mortgage From 5:00 PM to 6:45 PM on Oc- paying them less). This was directly were suddenly worth less than the payments. What follows after the buy- tober 2, every student was encour- linked to the highly competitive and mortgage loans homeowners received ing and selling of these securities is a aged to talk with .the rest of their robust housing market; low interest a few years earlier. This meant that complex, and largely non-transparent residential house about alcohol on rates encourage individuals to take out when homeowners with sub-prime process of buying and selling similar campus and the role of the Honor loans, and more people can therefore mortgages defaulted, the banks lost to the stock market. The connection to Code, either in their own common afford tobuy-homes or take out mort- money because they seized property the financial crisis is that when people rooms, dining halls or classrooms. To gages. (Low interest rates also allow that was worth less than the value of stopped paying their mortgages, there motivate students to attend the meet- businesses to borrow money for entre- the loan they had issued. This is one was a severe drop in confidence in ings, the dining halls, the Oasis, the preneurship, financing inventories or aspect of the current financial crisis. mortgage-backed securities, which Athletic Center, and the Library were for investment). So with low interest Another aspect of the mortgage then caused a crash in their value. all closed in the window of time that rates, banks were able to offer a huge problem has to do with mortgage- This is the heart of the current crisis: the meeting took place. The only way' number of mortgages to homeowners backed securities (a security is essen- there has been a drop in the value of that students were able to get din- and buyers. And because many banks tially a contract that can be assigned all types of assets as people have lost ner through the school was from the were trying to sell the same product, a value and traded; in this case, the confidence in the system. food provided at the house meetings. they had to offer special deals to bor- mortgage!house is used as collateral, Greed certainly played a role, as In these meetings, students were rowers in order to remain competitive. a means of securing the transaction). bad mortgages were sold and inves- able to speak with their house fel- . Because the banks wanted to make Banks want to give loans because tors made very risky investments in lows, faculty members, coaches, these loans, they were not as careful as they make a profit on the interest they an effort to get higher yields. What and fellow students about how they they had been in the past, and relaxed charge, so when they give mortgage is of greater concern is the lack of felt about the alcohol situation on traditional borrowing requirements! loans, they often then package a group transparency, oversight, and regula- campus, and how to make things safety requirements. They ended up of mortgages and sell them to another tion in the financial system. One ex- more comfortable in 'the dorms. lending money to people who could institution or investors. The bank then ample concerns derivatives (a way For many, this event felt unneces- not pay it back-banks issued sub- takes the money it received from the of investing in a particular product sary; they felt that a meeting about prime mortgages (mortgage loans that sale of those packaged mortgages or security without owning the assets alcohol on a Thursday evening would carry a higher risk to lenders because and offers more loans or mortgages behind it, such as purchasing mort- prevent drinking later that night. they are given to people with financial to other buyers. When the bank pack- gage-backed securities-remember, Some upperclassmen believed that problems). ages mortgages, they sell them to an- Economists and critics warned other financial institution-a sort of the talk should be aimed at the fresh- SEE FINANCIAL men, as the majority of the ambu- about sub-prime mortgages for years, middle-man company. This middle- lance transports have been freshmen and what we have seen recently is the man company then asks other finan- continued on page four who "don't know their limit." Many materializing of their concerns: banks cial institutions to loan them money, freshmen believed that the talks wouldn't help; thinking that hearing The Results Are In: more about the detriments of alco- hol would not make the abuse stop. Freshmen elected to SGA In these discussions, students were asked what would make the prob- BEN EAGLE '09 lem less of an issue. Some ideas in- cluded having a movie night on the weekends that would feature movies editor-in-chief recently OUt of theaters. Many other The president and vice president colleges already have this activity, -are always expected to work closely so it is a possibility. And although with one another, but never before Coffee Grounds is currently under have they lived so close to one an- SEE ALCOHOL other. Until now. Last week, in the SEE FRESHMAN continued, on page three continued on page four SPORTS OPINION NEWS ENTERTAINMENT Find out how Does Conn On election Was Language = Field Hockey know what true day leave that of Angels An- was able to kick love means? Obama shirt gelic? Find out its losing ways See one writer's at home.' Find onpage 10 on Page 12 perspective on out why on Page 6 page 3. THE COLLEGE VOICE EDITORIALS October 8, 2008 CONTRIBUTE: e-mail [email protected] Letter From The Editor The COLLEGE VOICE How things have deteriorated. The financial system is crumbling before our Box 4970 • Office (860) 439-2813 eyes, our govermnent is showing frightful inefficiency, and suddenly, Connect- Email: [email protected] icut College has a full-fledged drinking problem. But are any of the above a surprise to anyone who has had their ear to the ground? EDITOR-IN-CHIEF The financial system's collapse (as Miriam Wasser outlines in "Financial Cri- Ben Eagle '09 sis 10I") was a long overdue repercussion for the greed and lack of regulations that became the norm on Wall Street.