A group of UF finance and economics faculty pointed to drops in real estate value as the origins of the U.S. economic crisis in a panel on the nationwide financial dilemma Thursday night.
More than 700 people attended to gain a better understanding of the economic crisis, what it entails and what can be done to rectify it.
The main room in Bryan Hall could only hold 200 people - the remaining 500 had to watch the panel on television from seven overflow rooms throughout the campus.
David Denslow, a UF economics professor, said the current financial crisis began with the bursting of the real estate bubble.
This is the first time since the 1930s that there has been a national decline in real estate prices, Denslow said.
He said there have always been drops in real estate, but they have been localized, such as in Southern California or Boston.
"When the housing prices are lowered in one part of the country, it always rises in another, so there has been no worrying," he said.
Mike Ryngaert, a UF finance professor, said people have been receiving loans on lenient terms to buy real estate.
People aren't truthful in their loan applications about how much money they make, Ryngaert said.
Although the person processing the loan might think something is wrong, Ryangaert said he or she will get compensation if the loan goes through and will process it anyway.
People have been taking out multiple loans to pay for one house, he said.
"In the end, what they owe might be more than what the house is actually worth," Ryngaert said.
If this is the case, he said many people have been turning the keys to their houses over to the banks.
"When the banks foreclose a house, the real estate value drops," he said. "And for every $12 of the outstanding loans, the banks only receive $1 in equity."
The $700 billion rescue plan that has been proposed to the government will buy the mortgages from the banks, Ryngaert said.
The plan was voted down by the House of Representatives on Monday but passed in the Senate on Wednesday. A revised plan will be presented to the House today.
Kimberly Schmitt, a UF freshman, said that she is in favor of the current rescue plan.
"It is going to happen, but it is a matter of sooner or later," Schmitt said. "If it happens later, it will only be more money and may end up in the trillions instead of $700 billion."
She said that if the country does not pass the rescue plan, companies that are considered too big to fail would fail.
"They will drag the economy down with them because of the amount of people invested in them," she said.
The government needs to pump the banks with money, Schmitt said.
Not all students are worried about the economy, though. Naimish Patel, president of the UF Investment Club, said the financial crisis is overhyped.
"People need to panic about something, and the media does a good job of hyping it up," Patel said.
