In the credit crisis web: unwinding Utah from the nation's sticky financial snare.

AuthorCreager, Janine S.
PositionCaught

Amid national headlines bellowing the losses on Wall Street, panicked pleas on Capitol Hill, and political wrangling over government bailouts, one might almost hear the echo of eighteenth century Scottish novelist Sir Walter Scott's famous quote: "Oh what a tangled web we weave when first we practice to deceive."

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At least that's what some experts in Utah's financial industry say; on the whole, the credit crisis can be summed up in a few words: unrealistic expectations, combined with greed and possible dishonesty.

But do the recent events in the global and national financial markets spell doomsday for Utah? The answer according to many: No. While the state is certainly not immune to the financial infection spreading from coast to coast, the long-term prognosis for Utah is good. However, there is no doubt that segments of our economy are in recession and it will take a while to emerge from it, some experts say.

"We've had shocks to the U.S. and global financial system that were as serious as any since the great depression," says Jeff Thredgold, economist for Zion's Bank. "Utah is obviously affected by what has happened. Utah has been taken down to a no-growth basis at this point. We've lost 15,000 jobs."

According to Thredgold, Utah was running at a 2 percent job growth rate just two months ago, but now it's close to zero, and new home construction is weaker than it has been in 17 years. "If you have weakness in home construction, it affects other sectors," he says.

The Beginning of the End

In Utah, as with the rest of nation, the credit debacle circled back to strike its heaviest blow on the market from which it started: real estate.

"In the broader picture, the main issue that drove this current situation is the real estate market," says Howard Headlee, president of the Utah Bankers Association. While Headlee says there is some dispute as to whether there was blatant dishonesty on the part of those selling the securities or those buying the properties, it is clear that, "underwriting standards were relaxed and mortgages were being funded that shouldn't have been." This is what the term "subprime" refers to: risky loans made to individuals who were not able to meet certain credit standards to qualify for prime rates.

But because of the real estate boom taking place in the nation at the time, and rising confidence that the situation would only improve, many of these mortgages were extended and...

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