...LEADERSHIP AND ETHICAL DECISIONS PERFORMED BY KENNETH LEWIS AND THE FED DURRING THE FINANCIAL CRISIS OF 2007-2008 November 29, 2010 Introduction The robust leadership decisions of both the Fed and Kenneth Lewis, CEO of Bank of America (B of A), were not only ethical and accurate, but could have simply saved our financial system as we know it. During the weekend of September 13-14, 2008 Kenneth Lewis met with CEO of Merrill Lynch (Merrill), John Thain, in order to try and rescue Merrill from a hasty bankruptcy that lurked around the corner. Lewis was thinking that it was the perfect opportunity to add the only thing that B of A lacked after recent acquisitions, a “Wall Street investment bank that underwrote and sold securities” (Pozen and Beresford, 2010). On December 5, 2008 B of A’s shareholders voted to approve the merger between the two (Pozen and Beresford, 2010). It wasn’t until days later that Lewis became progressively more concerned about the growing fourth quarter losses on Merrill’s books, from $5.38 billion on November 12 to $12 billion on December 14, one month later. By mid December Lewis began looking for a way out of the deal before the scheduled closing date in late January. Both the Fed and the U.S. Treasury Secretary, resisting that Lewis walk away, threatened to fire Lewis and replace the board at B of A if the merger didn’t take place. Lewis, afraid of legalities from not disclosing the losses to their shareholders before the vote, and the drop in...
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...Ms. Silver-Greenberg, in her article entitled “As Foreclosure Problems Persist, Fed Seeks More Fines”, noted three key points, 1) the Federal Reserve is interceding with regards to the foreclosure dilemma, 2) there are flaws in the foreclosure process and 3) consumer’s may quality to request an “Independent Foreclosure Review”. Ms. Silver-Greenberg states the Fed is interceding in the foreclosure dilemma. After an extensive investigation, extending over 2 years according to Silver-Greenberg, by the Federal Reserve resulted in a report entitled “ Interagency Review of Foreclosure Policies and Practices” (2011). The Fed’s have imposed a guideline for the mortgage institutions to follow and if they choose not to, there are talks of imposing stiff fines. The actions of these lenders have affected not only the borrowers, but also the mortgage industry, investors, and the economy itself. I feel that it is a shame lenders were able to get away with their procedural defects as long as they were. This resulted in more consumers being affected and as an end result exacerbated the decline in the economy. According to not only Ms. Silver-Greenberg, but also the report submitted by the Federal Reserve, (2011), there are flaws in the foreclosure process. These flaws are not only inappropriate signatures of bank officials, but also issues with organization of paperwork, customer service, lack of quality control, just to name a few. After reviewing this report, which until now...
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...Summer Assignment: Article Summaries Jose Reyes 9/1/14 AP Macroeconomics Mr. Garyn Summary of Article 1: “Small Business, Joining a Parade of Outsourcing” By Phyllis Korkki Feb. 15, 2014 - For smaller local businesses there is a cheaper alternative to getting one time projects professionally done. You can get someone from a foreign country to complete your one time project at a much lower cost than if you got someone from the United States with the same skill level. ODesk created its online marketplace in 2005 for smaller businesses to be able to see the individual ratings and portfolio of foreign workers willing to do a project for a small amount of money. http://www.nytimes.com/2014/02/16/business/small-business-joining-a-parade-of-outsourcing.html?_r=0 Summary of Article 2: “Food, housing costs rise sharply in March; overall inflation low”April 15, 2014|By Ricardo Lopez - Although during march, food and house costs rise, inflation remains at an average low. The Federal consumers price index rose by 0.2% while the past 12 months, overall inflation rose by 1.7%. Because of extreme weather behavior during march, the price of beef rose to an all time high rising up by 0.4% according to the Federal consumers price index. After the extreme weather behavior the index for meats, eggs, and poultry increased along with the rental index. http://articles.latimes.com/2014/apr/15/business/la-fi-mo-consumer-price-index-20140415 Summary of Article 3: “The New American...
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...with more than $50 billion in assets to undergo to ensure they can endure shocks like those that upended the banking system and led to big government bailouts in the 2008 financial crisis. Lenders announced more than $60 billion of dividends and stock buybacks after the Fed approved capital plans for 25 of the 30 banks in its annual exam. In the extreme scenario, the Fed test assumed a rise in the 6.7% unemployment rate to 11.2%, a 50% drop in stock prices and a decline in home prices to 2001 levels (Citi…). Citigroup shares dropped 5.4% Thursday to close at $47.45 a share after the Federal Reserve rejected the plans of Citigroup and four other banks to raise dividend payments and increase stock buybacks. Twenty-five other banks that took part in the "stress test" received a green light for their planned dividend payouts and share repurchases. Citigroup was the biggest recipient of federal bailout money during the crisis, getting $45 billion in cash infusions and many billions more in guarantees. The Fed said its rejection of Citigroup's plans "reflects significantly heightened supervisory expectations for the largest and most complex" bank holding companies. The results show lenders may still face obstacles to boosting dividends and buybacks even as regulators say the firms have doubled their capital since the first public stress test in 2009 (Citi…Boos). The Fed is increasing scrutiny of the industry’s controls and planning processes as concerns about capital levels wane...
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...influence to help save the nation from disaster during several economic crises. In 1895, Morgan assisted in rescuing America’s gold standard when he headed a banking syndicate that loaned the federal government more than $60 million. In another instance, the financial panic of 1907, Morgan held a meeting of the country’s top financiers at his New York City home and convinced them to bail out various faltering financial institutions in order to stabilize the markets. Morgan initially was widely commended for leading Wall Street out of the 1907 financial crisis; however, in the ensuing years the portly banker with the handlebar mustache and gruff manner faced increasing criticism from muckraking journalists, progressive politicians and others that he had too much power and could manipulate the financial system for his own gain. In 1912, Morgan was called to testify before a congressional committee chaired by U.S. Representative Arsene Pujo (1861-1939) of Louisiana that was investigating the existence of a “money trust,” a small cabal of elite Wall Street financiers, including Morgan, who allegedly colluded to control American banking and industry. The Pujo Committee hearings helped bring about the creation of the Federal Reserve System in December 1913 and spurred passage of the Clayton Antitrust Act of 1914. J.P. MORGAN: ART COLLECTION AND FINAL YEARS The famous financier died at age 75 on March 31, 1913, in Rome, Italy. On April 14, the day of his funeral, the New York Stock Exchange...
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...Americans pulled their money out of France and put it in U.S. stocks. If everyone pulled their investments today, the same thing would happen. Businesses would fail, and the U.S. would go into more debt. The central bank of the United States is the Federal Reserve System controls the financial system, and is the most powerful single actor in the U.S. economy. The head of the central banking system of the U.S. is called the Chairman of the Federal Reserve. The chairman is appointed by the president of the United States and serves a four-year term with confirmation from the Senate, currently serving is Ben Bernanke. The Federal Reserve System has a total of seven board members including the Chairman. With the exception of the Chairman members serve a staggered fourteen-year term. The Federal Reserve Board of Governors is responsible for the monetary policy and serves as a dependent political structure. Although it is a dependent political structure and operates on its own, disagreements between the administration and board are very common. Pressure from Congress and/or the President can and have influenced the decision of the board but its semi-independence prevails, generally. The Federal Reserve Board of Governors “operates through the Federal Open...
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...University of Phoenix Author's Note This paper prepared for ECO/372 facilitated by Introduction The Federal Reserve system is the main banking system within the United States. Established by Congress, its primary objectives are to seek full employment for US citizens, ensure price stability, supervise banks via regulation, provide financial services to banks, the US government, and foreign official institutions, and review and stabilize long-term interest rates. A seven person Board of Governors, also known as a federal agency, administers the Federal Reserve. Currently the Board Chair is Janet Yellen, the first woman to hold the position since the Reserve's creation in 1913. The Federal Reserve balances are affected by not only the Board but by the Federal Open Market Committee, which monitors monetary and credit market conditions within the US as well as foreign exchange markets (Board of Governors of the Federal Reserve System, 2015). The Reserve is an essential component in the current monetary and fiscal policy. The president and Congress are policy makers who seek to influence the economy with this monetary and fiscal policy. They seek legislation that changes taxes and increases or decreases government spending and borrowing. Central banks take cues from this legislation and therefore adjust interest rates, reserve requirements, and the buying and selling of government securities and foreign exchange (Horton & El-Ganainy, 2012). By expanding...
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...Monetary Policy Just what is Monetary Policy? Well, dependant upon to whom the question is being posed, the answer may slightly vary, but all in all the principle itself is still the same. Monetary policies are basically practices set forth to govern and ensure the stability, and growth of our economy. The Federal Reserve Board of Governors, who operates the Federal Reserve System, currently enacts such policies. Obtaining economic stability and growth requires the promotion of a healthy balance between consumer spending and inflation which can be achieved by understanding the history of how and why the Federal Reserve originally came to be, the basic tools used in Monetary Policy, and the administration and regulations set forth of such policies towards banks by the Federal Reserve. Prior to the Federal Reserve System, in the 1700s -1913, a more liberal approach to banking existed in the United States. During this period the banking system had primarily consisted of a large group of unrelated and unregulated banks with unrelated currency and no medium to clear it. However, the major problems imposed upon the economy, as a result of the lack there of such needed relativity, were all relative to the one simple fact: The current banking system was not doing its job and immediate action was needed. The banks playing a major role serving as a conduit for social and economic policy at the time were unreliable, and the economy reflected just that. The bank’s depositors...
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...The Federal Reserve and Money William L. Reed University of Phoenix Economics 212 Watson Ragin April 20, 2010 The Federal Reserve and Money “Money is the set of assets in the economy that people regularly use to buy goods and services from other people” and money serves three functions as a unit of account, a store of value, and as a medium of exchange. (Mankiw, 2006) A unit of account is unstable over time due to inflation and is unpredictable whereas a store of value must be able to be stored and retrieved at a later date similar to gold, silver, or real estate. Today’s money does not have a good store of value because most monies or currency are guaranteed as a medium of exchange by the government’s word which may also be unpredictable. The best description and function of money is that it is a good that acts as a medium of exchange for transactions between a buyer and a seller. There are two basic types of money the first is commodity money that have intrinsic value because the money would value even if it were not used for money such as gold. Gold has intrinsic value because it can be used in other ways than using it for money. The other type of money is called fiat money that does not have any intrinsic value. It cannot be used for any other purpose than as a medium of exchange such as currency. A central bank or reserve bank is an institution given the authority to manage exclusively a government’s spending and monetary system. The Federal Reserve System...
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...fedrThe Federal Reserve Policy from 1999 to the Present: The monetary policy of the United States has two basic goals that are outlined in a 1977 amendment to the Federal Reserve Act. These basic goals are: to promote "maximum" sustainable output and employment while promoting "stable" pricing [1]. It has become the responsibility of the Federal Reserve Board to try in: Maintaining the stability of financial systems and contain risk that may arise in financial markets. Regulating banking to ensure safety and soundness protecting the consumer from harm while using credit and banking services. Overseeing the nation's payment systems providing financial services to financial institutions, the U.S. government, and foreign institutions. Stabilizing world pricing and creation sustainable employment. While the Federal Reserve Board is in a constant challenge to perform these above tasks. The economy goes through business cycles where the output of goods and services and the employment rate of the country are above or below their long running levels. The term "monetary policy" refers to what the nation's central bank or Federal Reserve happens to administer so that they may influence the amount of money and credit in the U.S. economy. What happens to this money or the credit during this time will directly affect the interest rates and the performance of the U.S. economy and its people. Stabilizing the U.S. economy has become paramount for the Federal Open Market...
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...Keynote Address, Conference on Price Stability Federal Reserve Bank of Chicago Thursday, November 3, 2005 From Inflation to Disinflation and Low Inflation By Allan H. Meltzer Volume 2 of A History of the Federal Reserve covers mainly the years of inflation and disinflation, followed by a return to what is now regarded as relatively low inflation. It treats four questions: Why did inflation start? Why did it continue for 15 or more years, from 1965 to about 1982? Why did it end? Why did it not return? In this paper, I give an overview of the material that I consider in much greater detail in my book. As we look back to the 1950s and 1960s from the early 21st century, two of the many changes in the Federal Reserve System affecting inflation deserve comment. First, in the 1950s the goal was price stability, zero reported inflation, not inflation of about two percent. The 1959-60 disinflation brought reported cpi inflation, measured as a 12-month moving average, to less than 1 percent from March through August 1959. This measure again was below 1 percent through most of 1961, and it did not reach 2 percent until early 1966. Properly measured and adjusted for biases in the price index, the true price level probably declined modestly during this period. This period of deflation was also a period of sustained economic growth. It, and several periods of deflation discussed in volume 1 of A History of the Federal Reserve, show no evidence of the liquidity trap that...
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...U.S Federal Reserve Monetary Policy Sherwin Harris ECO/212 May 30, 2011 Frank Vigil Introduction The Monetary Policy relates to the activities that the Federal Reserve take on to effect the sum of money and credit in the U.S. economy. Changes to the amount of money and credit have emotional impacts on the interests rates and the performance of the U.S. economy, if the cost of credit is reduced, more people and business will borrow money and the economy will accelerate. Money The purpose and function of money can be considered a medium of exchange. Is a standard representation of value, and can be used as a payment for products, service of goods or as a measure of wealth. The assessment of money are regulated by government agencies, gold, and most market conditions, The central bank manages the nation's monetary system by increasing or decreasing the monetary supply which in good common spirit can enhance increase or downcast the affect of interest rates, and control the rate in which goods and services increase in appraisal in relation to one another. Money is not just resources of exchange; it is also a store of value for an individual, family or a society. In its modest form, money could be, and was at times, coin or pieces of paper that represented real things. Gold has been used as the backing for many currencies in most countries, the of meaning money that has no commodities or other valuables directly backing it, is often said...
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...certain economic variables such as the market and its prices, individual income, profit, and taxes. Expectations are integral parts of the financial system. Hope of the future of the economy depends on current acts and shapes the economy. Productivity growth remains stable, and inflation is expected to remain restrained. If consumers are positive and confident about the economy and its future, they may reduce their savings rates and start to borrow more than reduce their spending. In 2009, the consumer expectations about the economy were at a record low (United States Department of Labor: Bureau of Labor Statistics, 2014). Many people were negative about the economic expectations. That is why it is crucial to measure the consumer confidence by the consumer confidence index. The index will measure the consumers spending and savings current and in the future. The value can be adjusted and measured monthly through a quick survey of consumers opinions on the U.S. economic conditions. Ideas of customers are imperative and taken into consideration. The more consumers spend, the better the economy, as a whole, will be. Consumer Income According to Federal Reserve Economic Data (FRED), the real median household income in the United States in the year 2013 was $51,939 (Federal Reserve Bank, 2013). 2013 was only slightly higher than the previous year, 2012, which recorded at $51,758. These numbers are the lowest they have been since 1995. When the market crashed, smaller companies let go...
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...words FISCAL, DEBT CEILING, TREASURY, THE FED, CHINA Written by Gong Li 1155019071 Jiang Peng 1155038183 Yang Mengdi 1155020855 Zhang Yiwen 1155010794 Zheng Qianfei 1155038175 Written by Gong Li 1155019071 Jiang Peng 1155038183 Yang Mengdi 1155020855 Zhang Yiwen 1155010794 Zheng Qianfei 1155038175 CONTENT Executive Summary 1 1, The US Fiscal Outlook 3 -Recent and historical fiscal outlook 3 -The US debt ceiling and recent crises 4 -Financial cliff (2013) and its impacts to the US economy 5 -The US fiscal future 6 2, Fiscal Situation and Treasury Market 9 -The role of US department of the treasury 9 -The role of the Federal Reserve 9 -The US treasury market 10 -The Fed, the interest rates, the QE and the taper 12 -The prediction of the future interest rate 13 -Summary 14 3, China’s involvement in the US Treasury market 15 -China’s Ownership of US Treasury Securities 15 -Reasons of China’s preference for the US Treasuries 16 -The Symbiosis between China and the US in Terms of US Public Debt Holdings 18 -Our Suggestion on China’s Future Position in the US Treasury Market 20 References 22 Executive Summary The state and local governments continue to face fiscal challenges in the short- to medium-term term. According to the Government Accountability Office, the fiscal situation in the US has just returned to the level preceding the year of 2007, but however, it is projected that the fiscal situation will deteriorate again over a prolonged...
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...personally see it every day at work, but in the end I decided to research on a second issue at my place of employment and that is “working off the clock”. I began working for my current employer, the federal government, in 2009. Since that time I have noticed the common practice of the expectation of my fellow workers and myself, without specifically being asked, to perform our duties and not report our time that was in excess of eight hours per day. Most recently I was asked by our local Union to become a Union Stewart and since accepting that position I wanted to research as to why this is normal practice and how we can go about correcting this issue. In researching the University’s Electronic Reserve Readings I have decided to use a paper labeled “Working off the Clock and Its Impact.” To begin with I believe it is common knowledge that it is against federal law to allow any employee to work outside of their normal working hours without compensation. According to the Department of Labor’s (DOL) website “the Fair Labor Standards Act (FLSA) prescribes standards for wages and overtime pay, which affect most private and public employment. The act is administered by the Wage and Hour Division. It requires employers to pay covered employees who are not otherwise exempt at least the federal minimum wage and overtime pay of one-and-one-half-times the regular rate of pay” (unknown, n.d.). I am unsure as to which type of research method is being used in my research article, but I feel pretty...
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