President Bush warned Wednesday that the country could experience a recession if the federal government does not take action on the proposed $700 billion bailout, and area experts say the financial crisis can come as close as anyone's front door step.
Though recession is often taboo to prevent mass scare, Dr. John Howard Brown, interim director of the economic department at Georgia Southern University, said it is becoming too apparent not to consider.
"If we are not (in one), we are very close to entering a recession," Brown said.
Dana Ingram is the executive director of JCVision & Associates, a local foreclosure prevention agency that’s helping clients resolve mortgage defaults.
Many economists attribute the increasing financial woes to the subprime mortgage crisis that surfaced a couple years ago.
Georgia ranks third in the nation on late mortgage payments.
Aside from curbing consumer worry, Ingram thought recent cautions about a possible recession contrast what most have thought about the economy.
"If somebody were to say ... even a year ago, the economy would be in a situation that it's in right now, people wouldn't believe you," Ingram said. "Because it was so good."
Dr. Richard Cebula, an Armstrong Atlantic State University professor and editor of the Journal of Economics and Finance Education, acknowledged complex supporting data, but he thinks "any honest, competent economist knows we have a recession in practical terms."
He faults the Federal Reserve Bank and FDIC for "failing in oversight responsibilities," for allowing lenders to give out
too much money to poor credit risks.
"The present situation is different from anything in several generations because people are, on a large scale, losing their homes," Cebula said.
Considering the unprecedented economic condition, Congress will soon decided whether to intervene.
"The much ballyhooed bailout probably is necessary, although not necessarily in the form it was originally proposed," Brown said. "A bailout will keep credit flowing and prevent the economy from worsening."
Brown acknowledged many people will cut back on spending and create a cushion to fall back on during periods of hardship, but he said too much saving isn’t good either.
"However, if everyone reduces their spending, the recession will be worse," Brown said. "Economists call this the paradox of thrift."
However, Cebula thinks spending limits should be considered. He traces the root cause of the crisis back to "short-sighted households who spend too much of their income, borrow on lines of credit blindly and ... give in to the temptation to over borrow when buying or owning a home."
Ingram agreed, questioning if government intervention is just going to be a temporary solution.
Her office finds a lot of people were unprepared to meet rising interest rates and unforeseeable market changes.
"Foreclosure doesn't know any income. It doesn't know any race," she said. "It's happening all across the spectrum."
She applauded the government's effort to help through the Federal Housing Administration Secure Mortgage Program, which allows participating lenders to refinance to their borrowers at a fixed rate.
Cebula agreed some intervention is necessary and the program is a better alternative to foreclosure.
"The consumer needs more attention," he said.
Ingram thinks those who have been wise with good credit and a manageable debt-to-income ratio should purchase a home.
"The market, for a buyer, is fabulous," Ingram said. "I think it's a really good time to purchase."
She advocates pre-home ownership and general financial counseling
"We've got to get back to financial basics," Ingram said. "Because the next generation is going to repeat the same mistakes, if not make them greater."
Cebula said recessions are a normal part of any economy.
"It's not a tragedy," he said. "It goes away."