The Business Administration department at Eastern Connecticut State University hosted a panel on Feb. 5 to discuss the United States economy 10 years after the 2008 recession. The panel featured a range of professionals who raised points about what caused the economic crash, who was impacted and how the economy has changed since then.

Panelists included Jeffrey Fuhrer and Randall Peteros of the Federal Reserve Bank of Boston and Royal Bank of Canada, respectively, along with Eastern professors Brendan Cunningham and Candice Deal. The event was moderated by Chiaku Chukwuogor, chair of the Department of Business Administration.

Fuhrer is the executive vice president and senior policy advisor at the Federal Reserve Bank of Boston. He has been active in economic research for more than 30 years and has published extensively. To begin his presentation, Fuhrer broke the financial recession of 2008 into three parts — the liquidity crisis, the credit crisis and the economic crisis.

“Those were scary times,” he said. “We did not know where the bottom was by a long shot. It was conceivable that what we were looking at was the beginning of an episode that would rival the Great Depression.”

He explained that liquidity deals with short-term borrowing. When the economy struggled, such financing became largely unavailable, in part because of uncertainty surrounding repayments. “People who might otherwise provide money to non-financial firms and to other financial firms were worried about whether those firms would actually be solvent, whether they could actually survive for the next week or even the next few days.” Fuhrer provided an array of diagrams and statistics, like a “reverse EKG” chart that highlighted the unusual borrowing rates.

According to Fuhrer, one solution was that banks were given federal money to allow for short-term funding, awarded in “term auction facilities.” This money was auctioned off rather than handed out, creating an environment of competitive bidding for borrowers. “It wouldn’t be a sign of weakness if you went to this facility to borrow. That was important,” said Fuhrer. Funding granted lending terms that could be extended, in turn offering people newfound stability. The initiative was retired by the beginning of 2010 when short-term markets were mostly restored.

He continued by delving into the credit and economic components of the financial crash, going over the trouble with assets reliant on mortgage payment along with the “duel-trigger” hit of simultaneous disruption in income and home value. The interconnectedness of commercial systems during this time led to a mess that made assets unstable for even those who tried to plan carefully. “This wasn’t just about crazy subprime borrowing and lending. It wasn’t just stupid people doing stupid things,” Fuhrer emphasized. “Twenty-five percent of all mortgages went under water.”

Toward the end of his presentation, Fuhrer noted that the current monetary policy for the U.S. economy is in a “neutral zone,” which “is a good thing.” While he agreed there always need to be some regulations implemented to safeguard against economic risks, he feels that nothing can guarantee protection from financial downfall.

“No matter what we put in place, we’re probably going to get ourselves into trouble, because that’s what we do as humans.” He reiterated that financial crises have happened globally throughout history and should be examined in conversation with one another to better understand how these major upsets can happen.

Following the opening lecture, remaining panelists had their own segments to analyze various aspects of the recession. Cunningham, a professor of economics at Eastern, went first, unpacking the microeconomics of what happened from a longer-term perspective. He has published numerous peer-reviewed papers and book chapters in addition to previously serving as co-editor of the Journal of Media Economics.

He drew on the work of Kenneth Arrow, an economist, mathematician and political theorist who received a Nobel Prize in economics partially due to his fundamental welfare theorems. “Like any proof, his proofs were built upon some assumptions,” said Cunningham. He described the four assumptions, which make statements regarding consumerism, competition and financial availability. One argument, he stated, is that the government should function as closely as possible to Arrow’s pre-conditions. “Maybe we’d be less likely to see such a disruptive and destructive financial crisis as we did in 2008.” Among the topics he considered were accountant responsibility, “imperfect” information and regulations in relation to efficiency.

Accounting Professor Candice Deal serves on several university committees and faculty search committees, and is a member of the American Accounting Association and Beta Gamma Sigma. She once worked as a grant manager for the National Science Foundation, managing a $1 million dollar grant. During the panel discussion, Deal used her home country, the Bahamas, as a reference to address how the 2008 economic crash affected those outside of the United States.

“The financial crisis had a large impact on Caribbean countries, specifically the Bahamas” Deal started. She contended three reasons why this occurred — close proximity, the US being one of their major trading partners and the decline of tourism. While Americans “were feeling the pinch financially,” as Deal put it, they were unable to travel to the Bahamas, thus directly influencing the Bahamian economy.

“We’re not talking about small numbers here and there. The impact was so bad that the hotels in the country had employees working maybe one or two days a week, and they were the lucky ones, because the others were just fired.” She said that about 112,000 people were receiving government unemployment benefits from a population of less than 400,000.

Randall Peteros is the senior vice president of wealth management with the Royal Bank of Canada and an adjunct business administration professor at Eastern. He received a “Best Paper” award at the 25th Annual Association for Global Business Conference in 2009 for his paper “Financial Crisis Investing in Perspective: Probabilities and Human Behavior.” His role in the panel was to talk about financial stocks and bonds, providing modern data points in comparison to past data points. Peteros informed the audience that stocks were down 57 percent from peak-to-trough when the recession finally ended. “To come back to even, you’d have to go up about 132 percent.” Despite the overwhelming negative spike a decade ago, January 2019 marked the best January for stock rates in 30 years, he asserted. “Volatility is back, it seems.”