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?”
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.
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?