At Westminster, financial expert talks crisis

By Virginia Ross

The Citibank officer said we are all responsible for the economic breakdown.

NEW WILMINGTON, Pa. — The economic crisis that has hit the United States over the past several months is a complicated situation that will take more than a quick-fix effort to turn it around, explained financial expert Alan Smith.

“Who’s the culprit? We all are. We’re all in this together,” he said.

Smith, a 1977 graduate of Westminster College, told about 100 students at the New Wilmington campus Friday that we are all responsible for the economic breakdown that has affected financial institutions, lenders and consumers.

During his 90-minute presentation, “Turmoil in Financial Markets,” Smith set out to present a primer on the investment industry and provide a framework that would allow students to think about the recent turmoil in the financial markets and ways to cope with and possibly rectify it.

He said he believes the federal government needs to be involved in financial matters, but not act as a dictator.

“They need to let us know what they want done, but then leave it up to the [marketing experts] to make it happen,” he said.

Smith, who has been with Citibank for almost 25 years, is the chief operating officer, global business head for Issuer Services (one of three business lines), and head of electronic markets (information products).

He has a master’s in business administration from the University of North Carolina at Chapel Hill and served the U.S. Congress as an analyst for the Senate Budget Committee.

Smith said the economic problem has deep roots, dating back years ago to a movement that allowed consumers who couldn’t afford to buy homes to purchase them anyway.

“There were people who shouldn’t have been buying houses borrowing money from lenders that shouldn’t have been lending it to them, and it started a whole collection of problems,” he said.

He said the goal was to put consumers into homes, thinking that would stimulate the economy because those homeowners would then buy appliances, lawn mowers and other items needed to maintain their residences.

“They didn’t need to have any money for a down payment, and they were approved for their loans even though they couldn’t really afford them,” he said. “Then a few years down the road they could no longer pay their mortgages.”

Essentially, he added, the situation spiraled and brought the economy to where it is now, with the recent government bailout of the U.S. banking sector, including Fannie Mae and other lenders.

Addressing the stock market, Smith said it is like a roller-coaster ride that plunges but ultimately swings back up.

“In my opinion, this won’t last forever and the market will go back up,” he said. “As to when, exactly, it could bottom out completely or swing back up, I can’t say for sure. But I believe it will.”