Watch CBSN Live

Economy, Banks Continue To Fall

This story was written by Chris Allred, Technician

America's financial sector and the stock market took a hit Monday with the announcement that the House of Representatives rejected a proposed $700 billion bailout plan, and prospects for loans and jobs will be lower for students.

Citibank's overtaking of Wachovia, a bank headquartered in Charlotte, may not affect students yet but could give North Carolina long-term financial problems according to Michael Walden, North Carolina State University economist and professor of agricultural and resource economics.

"Charlotte is the second largest financial sector in the country, second only to New York City," he said. "It enhances New York at the cost of Charlotte."

Wachovia's decline will likely result in lost jobs and consolidation of headquarters and employees, Walden said.

Financial services replaced tobacco as the top economic sector in North Carolina, so the changes on Wall Street affect "our most important economic sector," he said.

If students have accounts with Wachovia, Walden said they should not worry.

"If you have a deposit or checking account, all that will transfer," he said.

Those who have money invested in Wachovia's stock are likely to suffer, he said, as its value has decreased by at least 90 percent.

The Dow Jones industrial average dropped an all-time high of 777 points.

"It was not an all-time drop in percentage terms, which is still reserved for 1987," he said. "This represents disappointment on Wall Street with the failure of Congress to pass the bailout plan."

The $700 billion plan did not get the support of House Republicans, though the Democratic party did not vote uniformly either.

"This plan was designed to unfreeze the financial sector by buying up nonperforming loans, particularly mortgage loans," he said.

While the stock market's failure may not impact students who have not made investments yet, Walden said eventually economic problems will catch up to them.

"Eventually they will be workers, eventually students will want to take out home loans..." he said. "Students have already interacted with the financial sector. Students need a financial sector that's functional so that when they want to borrow money they can borrow money, and right now that's in jeopardy."

Other than a rise in food and gas prices, David Granger, a junior in computer science, said he has yet to feel any effects of the economy.

Granger has his money in Bank of America, but he said he can understand Wachovia customers' worries.

"I wouldn't be as worried about money as much as interest rates a couple months from now," he said.

John Wheeler, a freshman in mechanical engineering, said he will likely feel the economy's problems when paying additional out-of-state tuition next school year.

Walden said the market will adjust, but he is unsure how long it will take.

"If we don't have that rescue plan, eventually the market will adjust itself," he said. "It will take longer and the cost will be higher."