Friday, November 14, 2008

Completed Questions for Articles on Economic Turmoil

Please read instructions first:
I wanted to get you started with these first two articles tonight. You will not have to answer all of these questions, just some of them. The red, bold questions are required, and after I'm finished with the last two articles, I'll give you a total # on how many you have to answer.


**Please make sure that you do your own, independent work. I will be providing some vocabulary words and additional explanation for the articles.

“The End of Prosperity?” by Niall Ferguson.
1. What has been happening to the U.S. housing market since 2007?
2. How many homeowners might lose their homes, according to worst case scenarios?
3. Why are banks and other financial institutions in bigger trouble?
4. How does the “drastic reduction of credit” affect smaller companies like the car dealer example?
The Historical Parallels
5. What happened to the stock market in the 3 years after the crash of 1929?
6. How did the stock market react on Sept. 29 (2008) after Congress initially rejected the bailout?
7. What does Milton Friedman and Anna Schwartz’s book say is the cause of the Great Depression?
Why Depression 2.0 Can Still Be Avoided
8. How has current Federal Reserve Chairman Ben Bernanke tried to keep from repeating past mistakes?
9. Give 2 examples of how America’s economic turmoil has gone global.


“11 Questions About the $700 Billion” by Justin Fox and the section at the bottom of the page called “Need a Loan?”
11 Questions
10. Who gets the $700 billion?
11. Why is it a problem if more than one leveraged financial institution (banks, investment banks, etc.) collapses?
12. Will the government get all of its money back? Why or why not?
13. Who does Fox blame for the crisis?
Need a Loan?
14. What is the biggest hurdle in getting a mortgage now?
15. How are credit card companies changing their strategies?
16. How does the credit crunch affect student loans?

“How They Failed Us” by Michael Grunwald.
17. Why do many people not trust both parties in government, according to the author of the article? Provide at least two specific examples.
18. How did both Senator Obama and Senator McCain react/deal with the negotiations over the bailout plan?
The Credibility Gap - required: pick one of the following four questions
19. Why is it surprising to see House Republicans vote against the bailout bill and break with President Bush?
20. Why wasn’t the bailout plan popular with liberals or conservatives?
21. How did the Bush administration fail to “sell” their plan to the American public?
22. Why did the opposition to the bailout change practically overnight?

"Death By Rescue" by Donald Luskin - required: pick one of the following five questions
I'm From the Government, and I'm Here to Help
23. What does the article list as possible causes for the collapse of the financial markets in the past few months?
24. With the Bear Stearns bank bailout in March 2008, the Federal Reserve negotiated its sale to a competitor (JP Morgan bank) on a Sunday night when the stock market wasn’t open for business. Why does this kind of deal only make it attractive for other helpless banks to find a good deal and not have to face the consequences?
Falling One By One
25. What is your reaction to the government allowing competing mega-banks to buy each other out for below-market value that the company is worth while the government uses taxpayers’ money to pay for the sale?

I thought of it this way:

That would be like the government allowing McDonalds to buy Burger King for 1/10
its value as a company and then allowing McDonalds to use tax dollars to pay for
the sale. The rationale is that if Burger King goes out of business, the
jobs lost will damage the economy and all of the shareholders invested in Burger
King will lose money. And what about the companies that sell BK their
hamburger, buns, potatoes and pop? All those companies could be hurt too,
so the best thing to do, of course, is to let McDonalds buy BK. And
McDonalds will pay the U.S. government back if it ever makes a profit on any of
this. What’s that, you ask? What about all of those competing stores
right next to each other? Well, you can leave them up and keep selling the
same product, but if a McDonalds is losing to a BK somewhere, that BK is
probably gonna have to close down and those folks will be thrown out of
work. Wait! Isn’t that what we’re trying to avoid? Yep.
So….


Urgency, Then Inaction
26. Doesn’t it make you wonder what’s really going on when written into the $700 billion bailout law are specific instructions about “provisions related to film and television productions” and an “exemption from excise tax for certain wooden arrows designed for use by children” but little specifics on where the $700 billion should be spent? Why or why not?
27. Why does the author believe that the $250 billion in bailout money used in October 2008 was the best way to use that money?

8 comments:

bobby haag 3rd hour said...

Bobby Haag

1. The drastic reduction of credit affects smaller companies because the banks assets are the company’s loans and the assets have fallen in value.
2. America’s turmoil has gone global because China and us have become really close to merging financially and we also introduce U.S.-style deposit insurance in many countries which means the banks are less vulnerable.
3. Fox blames the lenders, securitizes, regulators, and Congress first, with buyers last.
4. The credit crunch affects the student loans because 137 lenders have stopped funding federal student loans and 33 have dropped private programs.
5. People do not trust either party in the government because Americans, according to the author, are always skeptical of politicians and the financial meltdown has made it clear to no longer believe much of anything.
6. (20) Liberals and conservatives do not like the bailout plan because they know that the plan will help Main Street as well as Wall Street, which did not make the case until it was all nearly lost by the credit crunch which also endangers loans for cars, homes, farms, and businesses. This can cause millions with jobs and pensions in danger.
7. (23) Possible causes for the collapse of the financial markets would be reserve’s keeping interest rates at below-market levels from 2002 to 2005 which contributed to the undue growth of credit, many banks took imprudent positions, recklessly leveraging their balance sheets, and small corrections that would lead to large losses which would ripple right through the markets causing even larger losses.

Matt Trogu said...

The drastic reduction of credit affects the smaller companies in a major way because when the major companies start to fall then the smaller companies begin to lose their business becuase not as many people will want to invest in the car companies by buying their vehicles and products. Americas economic turmoil has gone global because while our economy goes down we dont buy the other countries products which makes theirs go down, also this could be good for some countries because now that the american people dont buy our cars they will buy their cars. the credit crunch affects student loans becuase many lenders have stopped federal student loans, and 33 stopped programs. People dont trust the republicans because while bush was in office he said he would find weapons of mass destruction and he would do other things he didnt but on the other hand the democrats still had to ask for the bailout along with the republicans the bush administration failed becuase while president bush was in office he failed and people dont trust him. This attracts other banks because they now think that they can do what JP Morgan did on a "sunday Night"

yedo lee said...

“The End of Prosperity?” by Niall Ferguson.
How does the “drastic reduction of credit” affect smaller companies like the car dealer example?
They dont get as much money as they want/expect.

Why Depression 2.0 Can Still Be Avoided
. Give 2 examples of how America’s economic turmoil has gone global.

“11 Questions About the $700 Billion” by Justin Fox and the section at the bottom of the page called “Need a Loan?”
Who does Fox blame for the crisis?
Treasury secretary Hank Paulson and Fed chairman Ben Bernanke

Need A Loan
How does the credit crunch affect student loans?
the credit dropped 29%.

“How They Failed Us” by Michael Grunwald.
Why do many people not trust both parties in government, according to the author of the article? Provide at least two specific examples.
Both sides are saying "trust us". The Democrats are saying that we will end the war.

Why is it surprising to see House Republicans vote against the bailout bill and break with President Bush?
They want to unite their caucuses behind a bill

"Death By Rescue" by Donald Luskin
What does the article list as possible causes for the collapse of the financial markets in the past few months?
the price, the feds are setting the precedent on a weekend when the normal markets arent available and hand over a troubled bank to a competitor at a price below its value.

jeff anderson said...

4. How does the drastic reduction of credit affect smaller companies like the car dealer example?
Because the smaller companies “are smaller” so not as important so the government will most likely put them out of business just to save more money, which is the smart thing to do.
9. Give 2 examples of how America’s economic turmoil has gone global?
The Big three will not just affect just the U.S. it will affect the world because they (the big three) have business all over the world. Plus The U.S is a lot of money to the other countries in the world like China and the French, and if have alliance and if they need help in their country and we have trouble in our country and kept our country up to pare how will help another country.
13. Who does Fox blame for the crisis?
Fox blame’s the reporter’s.
16. How does the credit crunch affect student loans?
137 have stopped funding federal student loans and 33 have dropped private programs. Plus the credit history plummeted down 29%.
17. Because they have lie way to many times about how we will help this country and make it better. For example bush said that will find these weapons of mass destruction, we have not found any yet, and the bush administration said Trust us! We’ll end gridlock in Washington.
19. Why is it surprising to see the house Republicans vote bailout bill and break with President Bush?
Because well Bush is a republican and most of the time there own side will not vote against their own party.
23. What does the article list as possible causes for the collapse of the financial markets in the past few months?
The things that they listed are bondholder, commercial creditor, derivatives counterparties, and securities-account holders.

Ryan Lesson said...

Drastic reduction of credit affecct a car company for example because sometimes a cae might be to expensive for some to by straight out of the cash in their wallet. So, they use credit and pay for it at the end of the mounth.

The growth rates of other countrieshas gone down further than the us. The bric economy went down to 40% a year.

He blames the economy and the fed for being so bad.

137 lenders have stop funding fedral student loans and 33 have dropped there private program.

He doesnt trust the two partie because they both in the end just want to be president. Also they say so much about how there gonna change the world around but, they dont do it.

Because people dont follow the bush administration any more because of there follow up on hurricane katrina.

Im pretty mad that the banks use are money to buy other banks and become bigger its basically me paying to help make the bank bigger.

Erik Young said...

4) because if no one has enough money to pay for cars then the car companies are losing buisness and then they go into debt.
9)the chinese govt has been getting more money whikle we are losing money because everyone buys from china. the oil prices everywhere are going sky high.
13) he blames the govt. because they dont do anything to help the buisness's in crisis.
16)people cant get loans from the bank because the bank is low on money and since the credit is bad the people cant get money because the banks are worried they wont get paid back.
17)they think that both parties are going to do the same thing to fix the credit but they dont like the plan the govt has.
24) this shows that the banks can do whate ver they want and go into debt and the govt. will just bail them out so in the meantime big corperate officals are getting money while there buisness's fail and people are losing money and jobs.

martin said...

-End Of Prosperity:
2. In the worst case scenario about 13% of the U.S. homeowners will lose their houses.
4. Small business owners will not be able to get the credit that they need to maintain their inventory of products, this will lead to employment lay offs.
-The Historical Parallels:
6. The Dow fell nearly 7% after the rejection of congress’ bailout plan had been denied, this has been matched 17 times since its birth in 1896
-Why Depression 2.0 can still be avoided:
9. The economic downfall is no longer an America-exclusive problem, in fact European banks are going under as well, Growth rates in the euro zone and Japan have fallen further than the U.S, with the exception of Brazil, all of the BRIC economies are now down about 40% or more on the year. While it is not mentioned in the article, it is well known that most of the big companies in the world have invested in the U.S. market because it is supposed to be extremely stable, and so when the U.S. market falls, it is a chain reaction across the globe.
-11 Questions about $700 Billion/Need a Loan:
13. Well he seems to be quite aggravated with Wall Street, and second towards congress for devising a plan that will take away from tax payer money and give to the people that caused this problem in the first place, and also because it is such a huge amount.
15. An example of how credit card are changing their strategies is when you take a look at American Express, they yp0ically cut the credit limit on its credit cards each year by 4%. That figure now stands at 10%.
16. The student loans were affected because, 137 lenders have stopped funding federal student loans and 33 have dropped private programs all together. Since May the Education Department has spent around $5 Billion buying loans in an effort to reignite private lending.
-How they failed us:
17. People do not trust either party anymore because both parties have made pretty bold promises that they have not followed through with, for example the Bush Administration promised that they will get the country out of the economic crisis that it’s in by saying that they had surpluses as far as the eye can see. While the democrats continue to promise that they will end the war, and get the lobbyists out of the back rooms, and in most cases they have not followed through with their promises.
-The Credibility Gap:
19. The reason that it was surprising to see the Republicans vote against Bush’s bailout plan of $700 Billion because they had supported Bush throughout the last eight years of his presidency, even through the Iraqi war, which by itself has spend billions of dollars.
-Death by Rescue:
23. This article really does not list any reasons for the crisis, but rather blames one of the parties for the economic issues. They also blame bad investments into failing markets, and also the banking system by the Fed, The Treasury, The FDIC, and the SEC which all have backfired.

Anonymous said...

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