...The government has requested and approved taking 700 billion dollars of tax payers money, with what is now being called (EESA) Emergency Economic Stabilization Act of 2008, but it is better known as the “Bailout” (One Hundred and Tenth Congress of the United States of America. Pages 1-169). For an expensive and critical Act, not much is known or published about it. While this Act is the most expensive in US history, did you know that the US has a long history of bailouts? Do you know what this Act is about? Do you know who will be paying for the Act? Who is at fault for this crisis? The Emergency Economic Stabilization Act is not a new concept to the US Government. From the 1970’s to the present date there have been thirteen of them. There have been five of bailouts in 2008 alone, with two of those being mortgage related. One for 200 billion dollars to government sponsored enterprises Fannie Mae and Freddie Mac. (Alford paragraph 1) The second mortgage related bailout is for 30 billion to Bear Stearns. This bailout is the largest proposed and approved bailout in US history. (Nankin, Umansky, Kjellman, Klein). The United States is not the only country feeling the effect of financial fallout. Countries such as France, Germany, Portugal, and Spain face similar bailouts topping out at two trillion dollars. (Chu, Retzlaff P 1) To help market stability and the US economy, the Bush administration proposed the Emergency Economic Stabilization Act in September 2008. The Act...
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...Dixie Coolich AA #2 11/4/14 AIG Ex-CEO Willumstad Testifies Bailout Was Only Deal In 2008 American International Group Inc., like many other financial institutions lost money during the financial crisis due to investments of sub-prime loans. In the interest of saving the company and saving the shareholders even a small portion of their invested money, AIG board of directors took a bailout package offered by the US government. The government bailout required that AIG give them control of 80 percent of their stock in return for a $85 billion loan that carried an interest rate of nearly 14 percent. “The board voted for the loan deal after exhausting private-sector lifeline possibilities.” (Zajac, 2014) At the time of the bailout the only other option for AIG was bankruptcy. “But AIG’s former chief executive officer, Hank Greenburg still owned a lot of AIG stock, and he sued, arguing basically that the government should have given AIG a nicer bailout, the way it did with JPMorgan and Citi. Other bailouts were also conducted during this crisis and with much better interest rates than American International Group Inc., received. To accomplish taking almost 80 percent of the company’s stock the board agreed to a reverse stock split making shareholders stock almost worthless. “Greenburg is suing the federal government for about $40 billion in damages, asserting that it violated the Constitution’s Fifth Amendment by taking control of AIG with “just compensation” for...
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...by the region to date. Today, more than two years later, its devastating effects are still being felt as the government continues to struggle with the bailout to stabilize the financial system, mitigate contagion risk, and resolve the CLICO crisis. Even one year after the bailout, there was still no resolution of the crisis. In view of the intractable nature of the CLICO collapse, the People’s Partnership government that came to power on May 24, 2010 established a commission of enquiry to investigate the causes of CLICO’s collapse, the scope of the MOU, the cost of the bailout, and the failure to provide a bailout to the Hindu Credit Union (HCU) that collapsed in 2008. There are many questions that are still unanswered. What were the root causes of CLICO’s collapse? What corporate governance structures and practices precipitated the collapse? Did the bailout create moral hazard? Who or what was to blame for the collapse? What action has the government taken to date? What lessons have been learnt and, more importantly, how can this situation be prevented from being repeated in the future? This concept paper examines these questions, analyzes the evidence to find answers, and in the conclusion, suggests ways to improve corporate governance and the empowerment of regulators to provide competent regulatory oversight and enforcement. Key words: financial collapse, bailout, corporate governance, moral hazard, political influence, risk management Introduction The devastating effects...
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...by the region to date. Today, more than two years later, its devastating effects are still being felt as the government continues to struggle with the bailout to stabilize the financial system, mitigate contagion risk, and resolve the CLICO crisis. Even one year after the bailout, there was still no resolution of the crisis. In view of the intractable nature of the CLICO collapse, the People’s Partnership government that came to power on May 24, 2010 established a commission of enquiry to investigate the causes of CLICO’s collapse, the scope of the MOU, the cost of the bailout, and the failure to provide a bailout to the Hindu Credit Union (HCU) that collapsed in 2008. There are many questions that are still unanswered. What were the root causes of CLICO’s collapse? What corporate governance structures and practices precipitated the collapse? Did the bailout create moral hazard? Who or what was to blame for the collapse? What action has the government taken to date? What lessons have been learnt and, more importantly, how can this situation be prevented from being repeated in the future? This concept paper examines these questions, analyzes the evidence to find answers, and in the conclusion, suggests ways to improve corporate governance and the empowerment of regulators to provide competent regulatory oversight and enforcement. Key words: financial collapse, bailout, corporate governance, moral hazard, political influence, risk management Introduction The devastating effects...
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...In recent years especially with the financial crisis, a number of countries have found themselves needing a bail out of some sort. From the PIGS of Europe to South Asia and Africa. What all these countries have/had in common was the need for funds to facilitate a bailout of their faltering economies especially the banking sector. Like the countries that need a bail LDC always need money to finance their debt and pay off any interest especially in time of uncertainty. The purpose of this paper is to present a way for such countries to meet their financial needs and to protect their banking sectors. Unlike businesses or corporations, countries have access to natural resources which can be got and sold on the world market for a profit. Some countries even have an immediate market for their minerals like oil and gold. Almost all LDCs and a number of the other countries that needed bail out funds, have these resources that can be sold for profit. However in a situation where quick funds are needed, selling these resources would take a considerably long period of time which is not available at that instance. This can be remedied by the sell of long term covered call options on the resources of the different countries that need the funds. An options strategy is when an investor holds a long position (owns the asset: in our case mineral) in an asset and writes (sells) call options on that same asset in an attempt to generate increased income from the asset. This strategy is often...
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... I personally was constantly questioning “did that really occur or was that Hollywood’s input?”. The start of the movie where a government official – the Treasury Secretary – was asked to call a private investor (Warren Buffet) to assist Lehman Brothers shocked me. Did/Can he really do that? I find that event to be bordering on unethical behavior and wonder what Buffet thought of our government when they asked him that. Later in the movie, Buffet is called again – what power Buffet has!? I also questioned the fact that our Treasury Secretary had former employment ties to Lehman Brothers and could be a bit jaded. His professional experience obviously was something the government wanted to capture. The hasty firing of the higher executives at Lehman Brothers was a bit hasty in my opinion. The movie depicted that their personnel replacements were not well thought out as well (poor handling of the meeting with the Korean representatives). Following that, I found it very odd that our government asked other companies to “help” out Lehman Brothers. I can see that the failure of one bank can trigger other failures, but as a private investor in one firm, I would question if my funds were used to help a competing company. In that scene, the warned phrase by the Treasury Secretary, “we will remember who wasn’t helpful” seemed a bit odd – does our government really threaten private business to that extent? This was...
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...Revolt on Goose Island: The Chicago Factory Takeover, `and What it Says About The Economic Crisis INTRODUCTION Kari Lydersen, a staff writer for the Washington Post, wrote the Revolt on Goose Island: The Chicago Factory Takeover, and What it Says About The Economic Crisis in 2009. This was during a time when the economy was in financial crisis and many lives were being disrupted. It is situated in Chicago, Illinois at the Republic Windows & Doors factory. This story tells how 250 members of the UE, a very progressive union took a stand for what they believed they were owed. The purpose of writing this book was to show that people in the labor force were tired of being taken advantage of and wanted their lives to matter. THE COMPANY The Republic Windows & Doors factory was located on what is known as Goose Island in the Chicago River. This was an area that used to be located in the heart of the industrial and commercial businesses. The area had lost most of its industrial businesses and was in a revitalizing mode to turn it back to the industrial roots that had first started that area. Republic Windows & Doors was a small family owned business that made low-cost storm windows and doors (Lydersen, 22). By moving to Goose Island, the city committed almost $10 million in 1996 to help Republic establish the new building and to grow (Lydersen, 25). The money was funded through TIF (tax increment financing) funds that are used to revitalize areas that have declined...
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...Capitalism: A Love Story, which opened in 962 theaters earlier this month, is Michael Moore’s most ambitious work yet – taking aim at the root cause behind the injustices he’s exposed in his other films over the last 20 years. This time capitalism itself is the culprit to be maligned in Moore’s trademark docu-tragi-comic style. And by using the platform of a major motion picture to make a direct assault at the root of the problem, Moore has created space in the political mainstream for a radical conversation (radical meaning “going to the root”). It’s a conversation that is desperately needed as the economic crisis continues to devastate low- and middle-income Americans in spite of President Obama’s and Congress’ efforts to stop the bleeding by throwing trillions of dollars at the banks. Yesterday, Democracy Now! reported that while the Dow Jones topped 10,000 for the first time in a year, foreclosures have reached a record level of 940,000 in the third quarter. But with this film airing in major chain cinemas across the nation, the normally taboo topics of how wealth is divided, who owns Congress, and how vital economic decisions are made are now open for discussion in a way they haven’t been in the U.S. for decades. In Capitalism, Michael Moore features the reality of the economic crisis for America’s usually-invisible poor and working class. The movie begins with a family filming their eviction from their own home. In a terrifying scene, we watch from inside their living...
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...2008 Bank Bailout Economic crisis that strike a nation don’t happen from night to dawn, several factors attribute for an economic crisis to happen similar to a meltdown. This was the case for the 2008 economic crisis in America since the great depression that collapsed the stock market in 1929. Several are needed for a market to crash and crumble in pieces, risky investments, reckless decision making, and investments taking on a greater risks in hopes of greater returns are believed to be what caused the 2008 economic crisis in America. I believe that the bailout plan helped in the short term but will have its negative effects in the long run. The private sector in America especially the banks have a huge impact on the economy; there’s a lot of competition in that aspect of the economy. I believe that when the government intervenes in a free market economy and in the private sector it has to be with rules, regulations and under certain circumstances. The banks cannot just take risks loan money without checking first if the person can pay. For every act there is a consequence that has to be faced. The banks can’t just expect for the government to save them every time the feel they will go bankrupt. The government has stepped in several times since the beginning of 2008 to assist failing financial institutions. In September 2008, the federal government extended $85 billion to the American International Group, the country’s largest insurer and one of the world’s largest companies...
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...This article was downloaded by: [Loughborough University] On: 26 March 2015, At: 11:27 Publisher: Routledge Informa Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK Public Money & Management Publication details, including instructions for authors and subscription information: http://www.tandfonline.com/loi/rpmm20 How the UK government responded to the fiscal crisis: an outsider's view Walter Kickert Published online: 23 Mar 2012. To cite this article: Walter Kickert (2012) How the UK government responded to the fiscal crisis: an outsider's view, Public Money & Management, 32:3, 169-176, DOI: 10.1080/09540962.2012.676273 To link to this article: http://dx.doi.org/10.1080/09540962.2012.676273 PLEASE SCROLL DOWN FOR ARTICLE Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) contained in the publications on our platform. However, Taylor & Francis, our agents, and our licensors make no representations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of the Content. Any opinions and views expressed in this publication are the opinions and views of the authors, and are not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be relied upon and should be independently verified with primary sources of information. Taylor and Francis shall not be liable...
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...The Fed's decision was part of the annual checkup it requires banks 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...
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...GLOBAL FINANCIAL CRISIS The Global Financial Crisis is considered to be the worst financial crisis to hit the global economy since the Great Depression. Around the world, stock markets fell, financial institutes collapsed or were bought out, banks stopped business with each other and governments had to bail out their banks and financial institutions. This in turn caused lots of unemployment and collapse of the real estate market, contributing to failure of businesses and industries, decline in consumer wealth and a decline in economic activity leading to the Global Recession. The Financial Crisis may have showed some traces in 2007 but it really hit on 15th September 2008 when the United States Government allowed Lehman Brothers to go bankrupt, resulting in all banks deemed to be risky. The immediate cause of the crisis was the bursting of the United States housing bubble which had peaked in 2006.By September 2008, housing prices in the United States began to decline after hitting their peak in 2006.Easy credit and a belief that house prices would continue to appreciate had encouraged many subprime borrowers to obtain adjustable rate mortgages. These mortgages enticed borrowers with a below market interest rate for some time, followed by market interest rates for the remainder of the mortgage’s term. Borrowers who could not make higher payments once the initial grace period ended tried to refinance their mortgages. Refinancing became more difficult, once housing...
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...for Greece started emerging when the newly-elected government realised that the country was heavily in debt. In the meantime, both Greek banks and the government were graded by rating agencies as dramatically low, as the country's debt had peaked (Tseronis 2014). Furthermore, in 2010, reports concerning accounting irregularities for the statistics which the Greek government delivered to Brussels caused the media to put Greece on the spot and raised concerns about the sustainability of the Greek debt and the country's credibility (Tseronis 2014). Thus, Greece became the first EU member to activate a bailout package from the newly set up European Financial Stability Facility (EFSF) and representatives of the European Commission (EC), the European Central Bank (ECB), and the International Monetary Fund (IMF), commonly referred to as the ‘troika’, in May 2010 (Gemenis & Nezi 2015; Tseronis 2014). Afterwards, Greece required a second bailout programme in February 2012 and an agreement that led to a third bailout after marathon negotiations, on 13th July 2015. The aim of this essay is not only to describe and analyse how Greece reached a third bailout but also to investigate if this programme could be the end of the Greek and euro crisis. It is divided into three main sectors: the first one is about the previous bailout programmes as well as the reasons for their failure. The second one analyses the present crisis, the new bailout framework and its current effects in Greece. The last...
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...Will Greece survive the debt crisis once again? Problem Description Greece was on the verge of bankruptcy in 2010 due to the understatement of their deficit figure for years. They managed to survive this financial crisis with international bailout of 240 billion euros. Although bailouts did manage to provide some time to Greece to improve their financial position, but it came at huge expense. In order to improve the economy, it became necessary for Greece to reduce government spending and increase taxes. Consequences The international bailouts managed to delay Greece economic problem for few years but could not get rid of it completely. Moreover, the unemployment rate in Greece rose to above 25 percent during that time period. The bailouts money that supposed to improve Greece financial position was actually used to pay off debt. As a result, Greece economic situation never recovered and government still have to pay huge amount of debt to its creditors. Greece failure to reach an agreement with Europe to arrange money to pay off its debt could result in huge financial crisis and political changes in Greece as they may have to leave Eurozone and seek help from other countries. Some people believe that if Greece go bankrupt it would not have major economic impact on the Europe as it is just a small part of the euro economy and it would be better off to cut it loose. While, other argue that financial problem in Greece would have a major impact on the world and Europe specifically...
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...com/services 12 International Strategy 13 Institutional Strategy 13 Recommendations for Future Growth 14 Delivering Value to Customers 14 Human Resource Capital 15 Research and Development 16 References 17 Bibliography 18 Introduction The ‘Credit Crunch’ emerged in 2007 with the first effects being felt by the U.S. Mortgage industry. The term ‘credit crunch’ came was used to describe the collapse of the subprime mortgage industry that resulted in a freeze in lending by financial institutions. With non-payment of loans, huge debt and no capital gains, financial institutions began to go under. Investment banks, financial services and real estate market felt immediate impacts. Trillions of U.S. dollars were lost, huge government bailouts were necessary and a global slowdown of consumer spending and economic activity. In fact, by early 2008, the effects snowballed to global markets. Prior to 2007 and this global economic crisis, the lending habits of the Mortgage industry had opened the way for this eventual collapse. Mortgages were granted to low income earners at low interest rates. These were called subprime loans...
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