The Barometer Online

Issue date: 10/7/08 Section: News

Media Credit: Cory Reed Oregon State University President Ed Ray discusses the current economic situation and bailout plan. Ray has a doctorate in economics from Stanford University.

With the economy taking a dive and heading into recession, OSU president and published economist, Ed Ray, urges students to hang on and ride out the financial drought.

After the Dow Jones dropped 778 points last Monday, many investors' worst nightmares were confirmed. With this painful drop, more than a trillion dollars in paper wealth vanished.

While this amount of money is unfathomable to most, and while the hit was felt all across the nation, Ray was quick to put it into perspective.

"People's worst expectations were that this is it, melt down - the world is going to end," Ray said. "But you know what, they got up this morning, the sun came up, and today is a new day."

What many students at OSU don't know about their university's leader is that prior to his position as president of OSU, Ray was on the chair of economics for 16 years at Ohio State University. There, Ray conducted research on a variety of economic arenas.

His areas of expertise include international trade, tariff/non-tariff barriers, financial development issues, and American economic history. His background also includes experience in various tax and social security issues.

For those who don't fully understand the economy, this financial calamity can be especially overwhelming.

In an interview discussing the foundation beneath this economic downturn, Ray explained how the Federal Reserve Bank's low interest and easy credit policy led to the present state of the economy.

While credit was easy to come by, people began borrowing and acquiring assets and real-estate, non-bank financial institutions began acquiring mortgages and companies like AIG began selling insurance protecting against the risks associated with these mortgages. This series set the playing field high and did not take into account the correlation between risks in the mortgage market.

"My understanding is that companies like AIG made a critical error," Ray said.

Continued...

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