Protect your family from income challenges during the financial crisis

Posted by: Scarlett Lu

How to protect your family from challenges in the Financial Crisis.

To experience a financial crisis is frustrating,during a financial crisis we may lose our job and businesses might close down. Everyone faces a financial crisis of some sort throughout our lifetime. An accident can destroy the financial stability of many families. We should be prepare for tough times. Layoffs can cause families barely make their monthly payments; but if .Big companies can close down causing thousands of people to lose their jobs. I you lose your job, don't panic. Work with what you have and figure out what you have. Cut down on your spending. Work with your creditors and keep a positive attitude.

We should have a financial plan to meeting our life goals through good management of our finances. Good planning can help families save money and prepare for financial emergencies. Plan ahead so you will have savings if you were ever to lose your job. Smart financial planning includes: Protecting your family by getting Health Insurance, Life and disability coverage, estate planning, and have college savings.

http://www.businessdayonline.com/index.php?option=com_content&view=article&id=5315:protect-your-income-from-challenges-of-financial-crisis&catid=55:personal-finance&Itemid=327

http://www.ehow.com/how_4562030_protect-family-financial-crisis.html

http://www.fitpregnancy.com/yournewlife/work_money/smart-financial-planning-for-families-45760492.html

Market Frenzy May Be Over

By: Zachary Pienkowski

Recent studies and trends have shown that the utter chaos that has been the stock market over the last year and a half may be over. On September 29, 2008 the market took its largest point drop in history after the news that congress had rejected the $700 billion stimulus plan for our downward spiraling economy. While some thought the eventual approval of this plan would help calm the storm, the stock market continued to take a large number of plunges throughout 2008. Even when things appeared to be turning around and financial analysts and economists urged people to invest, they were still extremely hesitant because investors were unwilling to lose what they had left. Many people saw their retirement pools that took 30 years to accumulate nearly cut in half in a matter of months. Since late August of 2009, the lack of volatility in the market has been an encouraging sign for investors, as well as small but steady increases in the Dow and S&P 500. Strategists attribute this period of recovery to the lack of volatility in the markets and a return to normalcy in the credit markets as well. A large number of Americans are still concerned though because the national unemployment rate is near 10% and and companies that are showing profits are mostly doing so by significantly cutting costs and laying off workers. This may lead to smaller profits reported and investors having to comes to terms with the idea that we may not see a market like we had before the collapse for a long time. This may not necessarily be a bad thing though because it should result in a more stable economy in the long run.

Sources:

http://money.cnn.com/2009/09/28/markets/thebuzz/index.htm
http://money.cnn.com/2009/09/29/markets/thebuzz/index.htm
http://finance.yahoo.com/news/Drop-in-consumer-confidence-apf-1913425646.html?x=0&sec=topStories&pos=main&asset=&ccode=

Study: Bad economy may be good for your health

By: Theresa Tamkins
Posted By: Lily Mei

Are you finally ready for some good news about the recession? As it turns out, a shaky economy might actually be good for your health.

In a bad economy, therapists often suggest taking control of things patients can, including eating right, exercising.

Although it seems hard to believe, a new analysis of the Great Depression -- the mother of all economic bad times -- suggests that mortality dropped and life expectancy increased during that period.
Researchers estimate that around that time, a year with a 5 percent drop in the gross domestic product was associated with a 1.9-year gain in life expectancy, while a 5 percent rise in the GDP lowered life expectancy by about one to two months.
And it's not just the Great Depression, says José A. Tapia Granados, M.D., of the Institute for Social Research at the University of Michigan, Ann Arbor.
Past research has shown similar results -- at least a drop in mortality -- in periods of U.S. economic recession during the 1980s and 1990s, as well as in recessions in other countries, Tapia says. Health.com: How exercise may boost your mood
"In some sense it is good news," he explains. "The usual view of a period of recession is that everything is bad during these periods."
In a study published this week in Proceedings of the National Academy of Sciences, Tapia and his colleague Ana V. Diez Roux analyzed the economic growth and population health in the United States between 1920 and 1940, including the years of the Great Depression, which lasted from 1929 to 1933.
Life expectancy in general increased 8.8 years between 1920 and 1940, but gains fluctuated with the economy. Health.com: Will your depression diagnosis protect you from employment discrimination?
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In Depth: Money and Main Street
They found that mortality declined and life expectancy increased during the Great Depression, as well as in the recessions of 1921 and 1938, compared with other years during that period. Suicides did increase during the Great Depression, but they made up less than 2 percent of deaths during that time.

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G-20 to supplant G-8 as international economic council

By: Zachary Pienkowski

Leaders of the G-20 economic summit will announce Friday that the group will become the new permanent council for international economic cooperation, senior U.S. officials told CNN Thursday.

The move comes in the wake of a major push by President Obama, the officials said. The G-20 will now essentially eclipse the G-8, which will continue to meet on major security issues but carry much less influence.

"It's a reflection of the world economy today and the players that make it up," said one senior official. Nations like China, Brazil and India -- which were locked out of the more elite G-8 -- will be part of the larger group.

The Group of 20 -- leaders of 20 countries representing 90 percent of the world's economic output -- are meeting in Pittsburgh for a two-day summit, focusing on the financial crisis and how to avoid a future repeat. The gathering is Obama's first time hosting a major international summit.

"We're meeting at a time where, for the first time since London, certainly for the first time in a year, we're seeing the first signs of optimism about prospects for global recovery," U.S. Treasury Secretary Timothy Geithner told reporters Thursday. "I think the broad consensus of private economists and businesses are that we're beginning to see growth in the United States, and around the world we see exports rising and forecasts for growth are being revised upwards."

"This is encouraging," he said, "but we have a ways to go."

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Financial crisis rewriting the rulebook on personal investing

By: Mark Jewell
Posted by: Scarlett Lu


BOSTON — Stocks always rise over the long run. Bonds are for retirees and investors with little taste for risk. Companies rarely cut their dividends.

Those are three of the long-followed rules of investing — and rules that, as investors learned during a year of the stock market's worst turmoil since the Depression, can't always be counted on.
The new rules: Bonds might be the better long-term bet. Diversifying your portfolio means more than just picking different types of stocks. And nothing, including the humdrum money market fund, is risk-free.

Not even blue chips such as Dow Chemical and General Electric, once considered so reliable they were deemed to be good for widows and orphans, were safe when everything seemed to be crashing.
At their lowest points over the past year, a share of GE or Dow could be purchased for less than the price of lunch at McDonald's. And both companies slashed their sacred dividend last year — Dow for the first time in 97 years, GE for the first time in 71.
As the meltdown helped take out half the stock market's value from its peak, investors and advisers began to question the time-honored strategies of the longest investing binge in American history, dating to the start of a bull market in 1982.
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A Timeline of the Financial Crisis

Some say that we are on the way out of this recession and financial crisis. But are we? When and where did it all begin?
It was in February of 2007 that the Federal Home Loan Mortgage Corporation decided they would no longer buy the most risky supreme mortgages and mortgage-related securities. This was the start to what was a downward spiral in the housing market and our economy. People no longer could pay for their homes and real estate was hard to sell. Then in April, the New Century Financial Corporation, a leading subprime mortgage lender, filed for Chapter 11 bankruptcy protection. Chapter 11 was a way for companies to restructure their business model and pay investors over time.
Skipping ahead, more mortgage companies went under and filed for bankruptcy. In 2008, banks were being hit hard and were being taken over by other banks. This included JPMorgan taking over Chase, and Bank of America taking over Countrywide Financial.
The Fed stepped in many times to try to stimulate the economy throughout these last 3 years. They met again a few days ago again to hash out more problems. Are we on an upturn now? That’s for each one of us to decide.

By: Kelsey Hoffman

Sources:
http://timeline.stlouisfed.org/index.cfm?p=timeline
http://en.wikipedia.org/wiki/Subprime_crisis_impact_timeline
http://www.foxbusiness.com/story/markets/economy/timeline-financial-crisis/

Is the Economy Healing Yet?

By, Meredith Anderson

Our government has been trying hard to help our country out of this recession. The auto plan, the Recovery Act, the housing plan, and many other acts have been helping our economy strengthen ever so slightly. However we are not totally out of the hole yet and the climb back to a healthy economy is still quite a while away. Obama lets the country know that although things are looking in a more positive direction we still some hard times to face. “But economic improvements do not mean that hard times are over -- 2009 will continue to be a difficult year for America's economy. ... The severity of this recession will cause more job loss, more foreclosures and more pain before it ends.” To further back up Obama’s statement Federal Reserve Chairmen Ben Bernake says, “"full recovery is likely to take more than two or three years."

For lots of us it is hard to know whether or not we are improving. We rely on the media and our government to tell us where we are headed. The problem with this is that everyone seems to be confused about what’s good and what’s bad. Not only has our economy spiraled our perception of what is a healthy economy is becoming slightly impaired as well.




Sources:

http://edition.cnn.com/2009/POLITICS/04/14/obama.economy/index.html
https://www.eccu.org/resources/thebuzz/2008/october/14
http://www.usatoday.com/money/economy/2009-02-24-bernanke-economy_N.htm

Government & The Financial Crisis

By, Amy Nightingale


While Sarah Palin was at a conference in Hong Kong, she gave a speech where she spoke about her thoughts on the causes behind the current financial crisis to a group of executives and bankers. She said, “ We got into this mess because of government interference in the first place. We’re not interested in government fixes, we’re interested in freedom.”

Palin attacked the Federal Reserve’s low interest rates as the main reason why the U.S. is in its current financial position. She feels that the low rates caused people to buy homes, which they were unable to afford. Sarah Palin was speaking against the Obama administration, and wasn’t taking into account the progresss that they have made.

Obama spoke this week at this year’s Group of 20 Summit. The Pittsburgh Summit is a conference where leaders can meet to discuss the hard work that the government has done in confronting the global economic crisis. At the summit, the leaders will be attempting to create an exit strategy for the programs that were necessary in the financial crisis which have resulted in additional government debt.

References:

http://edition.cnn.com/2009/WORLD/americas/09/23/economic.summit/

http://www.americanbankingnews.com/2009/09/23/sarah-palin-government-cause-of-financial-crisis/

http://topics.nytimes.com/top/reference/timestopics/organizations/g/group_of_20/index.html?scp=1-spot&sq=group%20of%2020&st=cse

Should We Worry About the Shrinking Dollar?

By: Lily Mei

The dollar has been shrinking since March 2008, and at the end of last week the dollar was only 0.65 euro down from 0.80 from last month. The underlining question is should we be worried?
The answer is yes and no. Yes, because the shrinking dollar is a problem for investors especially if all your assets are in dollars and most of your goods and services are priced in other currencies. Luckily, most investors can protect their assets from further erosion of the dollar in three simple ways.
Essentially you would want to diversify your assets in foreign currency, gold, and/or a range of different sustainable commodities. There are risks in reinvesting your assets in any of these three ways. In general, if you are trading in foreign currencies you can faced hefty tax rates.
Gold may be the safest way because in history whenever there was a recession the price of gold usually increase. Furthermore, if the dollar keeps dropping, you may want to think of stocks and bonds in euro, yen, or rubles because they will tend to become more valuable than buying in dollar.
Overall, in time the dollar may strengthen once again, but in a scenario of a long-term decline in dollar it may not be bad to rethink and plan ahead of diversifying your dollar valued assets so you wouldn’t suffer as much of a loss.

Sources:

http://articles.moneycentral.msn.com/Investing/Dispatch/061128.aspx

http://www.bloomberg.com/apps/news?pid=20601100&sid=apvyWkjStAL0

http://online.wsj.com/article/SB125271048869905007.html

http://www.economist.com/opinion/displayStory.cfm?story_id=2404984

Panel Probing Crisis Adds to Role

WASHINGTON -- Members of a bipartisan federal panel investigating the financial crisis made clear at their first meeting Thursday that they plan to work closely with congressional leaders to help shape pending overhauls of financial rules.
View Full ImageBloomberg News
Former Sen. Bob Graham, left, and Phil Angelides leave a meeting of the commission probing the financial crisis in Washington on Thursday.

That could help speed the balky legislative process. But it could also complicate the commission's already tricky task of maintaining internal harmony, given the partisan divides that could emerge over the legislation -- and the number of political figures among the blue-ribbon panel's membership.
The 10-member commission, created by Congress earlier this year, is headed by Phil Angelides, a former California state treasurer and one-time Democratic gubernatorial candidate, and its vice chairman is former House Ways and Means Chairman Bill Thomas, a sometimes-combative conservative Republican. Other members include a Democratic former U.S. senator, Bob Graham of Florida, as well as Keith Hennessey, a top economic adviser to former President George W. Bush, and Doug Holtz-Eakin, a top economic strategist for 2008 Republican presidential candidate John McCain.

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Posted by: Kelsey Hoffman

Transcript of September 'Money Summit: Money & Main St.'

Posted by: Lily Mei

(CNN) -- Anderson Cooper, Ali Velshi and the CNN Money Team hosted a special "CNN Money Summit: Money & Main St." Thursday night, September 17. Here's a transcript of the show:

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Two topics in the hour ahead: the economy and you.

ANDERSON COOPER, CNN HOST: It's been one year since Lehman Brothers declared bankruptcy putting into motion a series of events that plowed the American economy deeper into recession and cost you money.

VELSHI: Everyone felt the effects as the crisis rippled through the job, housing and stock markets.

COOPER: In the hour ahead, we're going to figure out what happened over the past year and point you in the right direction for the year and years ahead. Our panel of experts will give you the tools you need to profit and even prosper.

Tonight on this CNN MONEY SUMMIT: MONEY AND MAIN STREET.

A year after the fall of Lehman Brothers there's good news and bad from the guys who crunch the economic numbers.

First the good, Federal Reserve Chairman Ben Bernanke said earlier this week the recession is very likely over. The bad news, not all economists agree with him nor do most Americans.

New polling we did for this program shows 86 percent of the country still feels we are in a recession. And more than three quarters of all Americans say it's a pretty bad one.

But it's not all doom and gloom. There is good news, things are improving in some areas very quickly.

We're going to be discussing this tonight with our panel: Fortune magazine senior editor Leigh Gallagher; an economist and author, Stephen Leeb; Christine Romans, host of CNN's "Your Money;" also Money magazine senior writers Walter Updegrave and Donna Rosato; and Ryan Mack, president of Optimum Capital -- Ali.

VELSHI: Anderson, thanks.

But first, how did we get here? One year ago this week, America's subprime crisis became a global financial crisis. What had been a downturn fueled by falling home prices and mortgage defaults became in a matter of days something much bigger.

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Facts and the Financial Crisis

Facts and the Financial Crisis
Published: September 19, 2009

By, Amy Nightingale Group 3A

The Financial Crisis Inquiry Commission, created by Congress to examine the causes of the crisis, held its first public meeting last week. In his opening remarks, the chairman, Phil Angelides, a former California state treasurer, likened the group’s potential impact to that of the Pecora hearings in the 1930s, which examined the stock market crash of 1929 and led to transformational changes in banking, investing and financial regulation.

And yet, last week’s meeting was oddly inauspicious, feeding doubts about the commission’s ability to realize that potential.
For starters, the meeting was a long time coming, and thin on substance. It has been four months since Congress passed a law authorizing the commission and two months since lawmakers selected its 10 commissioners — six chosen by the Democratic leadership and four by the Republican leadership.

For starters, the meeting was a long time coming, and thin on substance. It has been four months since Congress passed a law authorizing the commission and two months since lawmakers selected its 10 commissioners — six chosen by the Democratic leadership and four by the Republican leadership.

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Oil Prices Effected by Economy

LONDON (Reuters) -- Oil prices fell 3.2% Monday, to below $70 a barrel, as further signs of weak fuel demand raised expectations that prices may have raced ahead of the nascent economic recovery.

Oil prices have more than doubled since hitting lows near $30 a barrel at the height of the global economic crisis, but the market has come under pressure since touching a one-year high of $75 a barrel almost a month ago.

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Posted by, Meredith Anderson

Detroit’s Taking on the Financial Crisis, With Fashion?

By: Sara Sindelar

Fashion is a major industry and it is feeling the pain of the crisis as well. When you think of Detroit you think auto industry but fashion is taking over in the city. Detroit is trying to change the city instead of losing it to the financial crisis. “As that business [auto industry] fades and its jobs disappear, city planners are hoping to redeploy the city's creative minds and craftsmen toward a new and growing field: fashion.” (CNN Money). Detroit has held their own fashion week since 2005 and they are hoping that they will gain strong enough PR for the local designers to be featured in national stores. One woman who was laid off from the auto industry started a handbag line; a previous finance worker left to start a men’s suit collection; the industry is growing in Detroit. "Creative industries build a vibrant community that young professionals want to live in," Detroit Regional Chamber COO Tammy Carnrike says. This can gain young population which can lead to an increase in the Detroit economy. So watch out New York and Los Angeles, Detroit is ready to be next in fashion.

The fashion industry is and will continue to change as the recession continues. Designers are making more affordable and accessible clothing and people are starting up fashion lines after being laid off. "I want this line to be accessible," says designer Richard Chai. This is the A-word that was not previously used on the runway for high fashion. “But this is the new fashion economy. Less glamorous. More sellable.” (Wall Street Journal).

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Source 3

Crisis panel vows: We will be relevant

Posted By: Sara Sindelar

Congressionally-appointed panel convenes to discover causes of financial crisis. It is determined to be helpful, even as lawmakers move ahead without them.


WASHINGTON (CNNMoney.com) -- Capping a week that highlighted the one-year anniversary of the financial collapse, a panel aimed at getting to the bottom of its cause is just now getting on its feet.
The Financial Crisis Inquiry Commission's members want to "shed light" on why the collapse happened and make recommendations to avoid future crises. Their final report is 15 months away, but congressional leaders are already pushing ahead on bills to revamp financial rules to avoid the next crisis.
The congressionally appointed group, funded with $8 million, met for the first time publicly on Thursday and pledged that its work will serve as more than window dressing for politicians worried about the appearance that they allowed the financial crisis to happen.


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Job Market Hurting Because of Economy

By, Meredith Anderson


Our economy is hurting right now. With people spending way less and companies cutting cost everywhere they can, you can bet the countries employment is feeling the pain as well. Our unemployment is at a record high for young people at 25.5%. Everyone wants to stay in college anyway but now graduation comes with a scarier price tag. The “real world” as mom and dad have been calling it for years, is even more intense and competitive these days.

Right here in Syracuse we are feeling the effects of the economy. Carrier cut 24 people in its engineering department. This means that as of Sept 30, 2009 24 families will lose a great portion of their income. Carrier says that these job cuts were just in response to the weakening economy.

Job cuts have been a huge issue when it comes to the downsizing of our economy not only to college grads but as well as people who have worked for years at companies. In 2008 when the recession really took a turn there were nearly 1,000,000 layoffs! Staying in school doesn’t seem like a bad alternative right now.



Sources:

http://www.powerful-sample-resume-formats.com/could-my-college-education-be-hurting-me-in-a-blue-collar-job-market.html

http://www.gather.com/viewArticle.action?articleId=281474977802219

http://www.syracuse.com/news/index.ssf/2008/08/carrier_to_cut_24_jobs_due_to.html

Saving for Retirement in your 20s

By: Lily Mei

It’s easy to understand why retirement plans don’t loom in mind to most 20-year-olds. Most of them are more concerned about kick-starting their careers, not ending them in the long distant future.

But the fact that if you’re young and start saving it gives you the leverage to be extremely rich in your retirement years. That’s because when you’re in your 20s, you can invest relatively little for a short period and wind up with far more money than someone older who saves much more over a longer period.

Consider this scenario: If you start saving for retirement at the tender age of 26, putting away about $1500 a year for just 45 years, you’ll have around $500,000 at the end with annual earnings of 8%. Now, let’s say you wait until you’re 36 to start saving. You put away the same $1500 a year, but for 30 years and earnings grow at 8% a year. When you’re 66 you only have about $200,000 less than half of what you could have if you started saving earlier.

Sources:

http://www.oprah.com/article/money/personalfinance/20090122_expert_retirement

http://www.money-zine.com/Financial-Planning/Retirement/Retirement-Planning-in-Your-20s/

http://www.usnews.com/usnews/biztech/articles/060428/28tips_retirement.htm

Money flowing from financial system to tax payers, Obama says

Posted by: Lily Mei

NEW YORK (CNN) -- President Obama said Monday that the need for the federal government to help prop up the nation's hard-hit financial system is fading.

President Obama says he wants to end the idea that some firms are "too big to fail."

"While there continues to be a need for government involvement to stabilize the financial system, that necessity is waning," he told an audience of key financial and political leaders at New York's famed Federal Hall on Wall Street.

"After months in which public dollars were flowing into our financial system, we are finally beginning to see money flowing back to taxpayers."

Obama noted that although taxpayers won't necessarily "escape the worst financial crisis in decades entirely unscathed," banks have repaid more than $70 billion in government bailout funds.

He called for the closure of regulatory loopholes that contributed to the current financial crisis.

"We've got to close the loopholes that were at the heart of the crisis. Where there were gaps in the rules, regulators lacked the authority to take action," he said.

This weakness "in oversight engendered systematic, and systemic, abuse."

The president said that, while "holding the Federal Reserve fully accountable for regulation of the largest, most interconnected firms, we'll create an oversight council to bring together regulators from across markets to share information, to identify gaps in regulation, and to tackle issues that don't fit neatly into an organizational chart."

Obama noted that, under his plan, "we'll also require these financial firms to meet stronger capital and liquidity requirements and observe greater constraints on their risky behavior."

The only way to avoid a repeat of the financial crisis, he said, "is to ensure that large firms can't take risks that threaten our entire financial system and to make sure they have the resources to weather even the worst of economic storms."

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How to save money during the financial crisis

By Kelsey Hoffman

There are some key points we need to keep in mind in order to save money during this financial crisis. It all comes down to self-discipline and setting goals. People have to be in control of themselves before they are in control of their money.

The first thing that needs to be done to budget your money is to write out all the necessities for life. These expenses include food, rent/mortgage, utilities, clothing, medical expenses, insurance, etc. Next, you need to write out all the other smaller expenses that you incur on a daily basis. From here there need to be short and long term goals set. These may be goals like “I want to have $100 in my bank account by the end of the month” or longer term goals including “I want to own my own house in 10 years”.

After expenses and goals are laid out, you need to figure out how much needs to be saved per period in order for you to reach those goals. It is also important here to see what small expenses can be eliminated.

After saving for a while it is a good idea to reassess your goals and make sure they are still reasonable. If they are not reasonable, then rewriting your goals and make them more sensible and in accordance with your realistic revenue and expenses.

Sources:

http://www.wikihow.com/Save-Money

http://www.ehow.com/how_4716327_save-money-during-financial-crisis.html

http://www.associatedcontent.com/article/1101686/top_five_ways_to_save_money_during.html

Unemployment and Wages Rise Despite Recession, Similar to Great Depression

By: Nicole Nelson

Surprisingly, wages for workers have actually increased over the past year. It was thought that hourly wages might actually start to fall, but according to government surveys, wage growth has actually increased over the past months. During the past month, average weekly pay rose from $612 to $618. Again, this is surprising because the unemployment rate is higher now than it has been in over twenty six years. Although unemployment is so high, Leondhart states that the recession has been very concentrated and what and who it is effecting. He also states that if you haven’t lost your job by now, you are safer than you were a couple months ago. He figures that the employment rate is so high that its unlikely that it could get any higher. Another interesting fact is that prices have fallen about two percent while average weekly pay has remained constant or risen.

The most interesting fact about the entire raise in weekly pay is that it is very similar to what happened in the Great Depression. Because of deflation during the Great Depression, if you had a job you were actually living pretty comfortably. Similar to now, since prices are falling but if you have a job your pay is not on the same scale, you too are living “comfortably”.

References:
http://www.nytimes.com/2009/09/16/business/economy/16leonhardt.html
http://economix.blogs.nytimes.com/2009/09/16/reader-responses-sticky-wages/

Has Obama Helped Us Move Forward Yet?

WASHINGTON (CNNMoney.com) -- Just a month after taking office, President Obama asked Congress to move fast to reform the "outdated" system of financial oversight and install "tough, new common-sense rules of the road" for Wall Street.
Now, as Obama gave a major address on Monday marking the one-year anniversary of the Lehman Brothers collapse, things haven't advanced very far.

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Posted By,

Meredith Anderson

Lehman and the Financial Crisis

One year ago today Lehman Brothers filed for bankruptcy. The weeks that followed are among the most dramatic in U.S. history. They led to a massive government intervention in the financial system—an intervention that will likely change that system forever.

Many people say that letting Lehman fail was the mistake that caused the financial crisis. To them, the lesson is that the government should never allow any "systemically important" financial institution to fail. If only Lehman had been bailed out, the story goes, we could have avoided much of a 45% drop in the S&P 500, a 4% drop in output, the rise in unemployment to 9.7% from 6.2%, and the $784 billion "stimulus" to top off a $1.59 trillion deficit.

This story is false.

The Lehman failure was not an isolated event. It was a movement in a dramatic crescendo of failures.

to read more click here

Posted by: Nicole Nelson

Obama Urges Wall Street Not to Ignore Lessons of Crisis

WASHINGTON -- President Barack Obama warned Wall Street that it wouldn't be wise to ignore lessons from last year's economic turmoil, pressing the financial sector to join his effort to remake financial regulation by the end of the year.

In a major address in New York, Mr. Obama said the storms of the financial crisis "are beginning to break" with less need for the government to get involved in the financial system. But he pressed Wall Street not to grow complacent as the economy returns to normal, saying banks shouldn't expect taxpayers to come to the rescue again.

"Unfortunately, there are some in the financial industry who are misreading this moment," Mr. Obama said. "Instead of learning the lessons of Lehman and the crisis from which we are still recovering, they are choosing to ignore them. They do so not just at their own peril, but at our nation's."

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Posted by: Kelsey Hoffman

Trials Continue on Merrill Lynch’s Bonuses Paid Out

By: Sara Sindelar

Everyone wants to be rewarded for their hard work but there is a line that does not need to be crossed. It was no surprise that C-suite level executives are treated very well but after the recession started more details were given out. I do not think you can find many people that will agree with the amount in bonuses and the VIP treatment that corporate executives get.

“Regulators have claimed that BofA had said in its proxy statement that it would not pay out bonuses to Merrill employees in fiscal year 2008, when, in fact, the bank authorized bonus payments of as much as $5.8 billion. Of that allowance, $3.6 billion was paid out in 2008 to more than 39,000 Merrill employees.” (CNN Money)”

This week in court discussions on how the banks, Merrill Lynch and Bank of America, should be punished for going against what their proxy statement promised. There are questions being thrown around about who is to blame about the pay out. No matter who signed the checks it is still wrong that so many corporate executives are gaining so much money especially during this recession. Even though the government is making strides to cut down corporate spending it will still happen and more needs to be done in order to control unnecessary spending by corporations. Hopefully there will be consequences for this pay out of bonuses in court.

References:
http://www.boston.com/business/articles/2009/08/25/sec_bank_defend_bonus_settlement/
http://money.cnn.com/2009/09/09/news/companies/bofa_sec/index.htm?postversion=2009091015
http://online.wsj.com/article/SB123750034629289161.html

GM: Satisfaction guaranteed - mostly

Most people would be surprised by how good GM's current crop really is, but there are still some weak spots.

NEW YORK (CNNMoney.com) -- When General Motors announced its new money back guarantee Thursday many people no doubt envisioned the automaker's Detroit headquarters buried under a mountain of returned Chevys and Buicks.

But judging from the latest crop of vehicles, that nightmare probably won't happen.

For the most part, GM has much to be proud of. The company has indeed produced cars that can compete with the rest of the industry, as Bob Lutz said when he unveiled the money-back guarantee.

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Posted by: Sara Sindelar

Triple - A Failure: The Rating Game

Posted by: Lily Mei

Obscure and dry-seeming as it was, this business offered a certain magic. The magic consisted of turning risky mortgages into investments that would be suitable for investors who would know nothing about the underlying loans. To get why this is impressive, you have to think about all that determines whether a mortgage is safe. Who owns the property? What is his or her income? Bundle hundreds of mortgages into a single security and the questions multiply; no investor could begin to answer them. But suppose the security had a rating. If it were rated triple-A by a firm like Moody’s, then the investor could forget about the underlying mortgages. He wouldn’t need to know what properties were in the pool, only that the pool was triple-A — it was just as safe, in theory, as other triple-A securities.
Over the last decade, Moody’s and its two principal competitors, Standard & Poor’s and Fitch, played this game to perfection — putting what amounted to gold seals on mortgage securities that investors swept up with increasing élan. For the rating agencies, this business was extremely lucrative. Their profits surged, Moody’s in particular: it went public, saw its stock increase sixfold and its earnings grow by 900 percent.
By providing the mortgage industry with an entree to Wall Street, the agencies also transformed what had been among the sleepiest corners of finance. No longer did mortgage banks have to wait 10 or 20 or 30 years to get their money back from homeowners. Now they sold their loans into securitized pools and — their capital thus replenished — wrote new loans at a much quicker pace.
Mortgage volume surged; in 2006, it topped $2.5 trillion. Also, many more mortgages were issued to risky subprime borrowers. Almost all of those subprime loans ended up in securitized pools; indeed, the reason banks were willing to issue so many risky loans is that they could fob them off on Wall Street.

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Airlines Increase Prices, Decrease Quality, and Sales Plunge

By, Meredith Anderson

It’s frustrating that because of our current economic conditions that vacations and gateways seem way too expensive to afford. Ticket sales have increased largely in the last two years. Even with special offers sales are still much lower than they were only a short twelve months ago. The truth is that flying isn’t the experience it used to be. The once amenities that once made the flying more comfortable and enjoyable will now cost you quite a bit extra. For a meal and a pillow and blanket might now run you up to $25 additional dollars on top of your pricey ticket. Before you even board the plane you are faced with additional fees. Baggage fees and booking fees have become somewhat of a serious inconvenience for many flyers. It’s not only American airlines as well as European and other major airlines. “Customers are struggling to survive in the current market and the very last thing they need is a cost increase,” said the AEA’s Ulrich Schulte-Strathaus. Not only are individuals themselves cutting travel, businesses have trimmed down there travel budgets relatively a lot. According to a recent survey conducted by Business Travel Coalition one in four companies have called for emergency cuts of travel budget in response to this finical crisis. With the economy the way it is, airlines are just going to have to take a back seat to our current finances.

Sources:
http://blog.taragana.com/n/airlines-say-airport-fee-increases-are-hurting-ability-to-weather-economic-crisis-117129/
http://www.articlesbase.com/finance-articles/why-global-financial-crisis-forces-travel-cuts-822340.html
http://www.moneywise.co.uk/news-views/blogs/nathalie-bonney/2009-07-09/are-low-cost-airlines-really%E2%80%A6-low-cost

What Caused the Financial Crisis?

By: Nicole Nelson

Although there is not one specific cause to the financial crisis that occurred in 2008, there is speculation on root causes of the crisis. Many people are placing the blame solely on the housing market and the fact that mortgages were being given to people that may not have been able to pay for them. Others place the blame on politics and their role in government banks, interest rates, etc. Again, no one is right or wrong in their opinions, but a financial crisis does not occur just because of bad mortgages or bad interest rates. Financial crisis’s happen because bad financial decisions were being made by a lot of people for a significant period of time. Some of the reasons that caused the crisis was “cheap credit” was being given. As mentioned, people were being loaned money to invest in real estate or other areas when they didn’t have the money to. Also, companies were buying out other companies and taking out huge amounts of debt to do so without actually creating any value. Mortgage brokers were also authorizing mortgages and then selling them off without actually taking any responsibility if they could not be paid. Overall, there was not one simple reason that the United States got into the position it is now, various circumstances caused us to be in the financial crisis we are currently in.

References:

2008-2009 Financial Crisis - Cause and Effects

A Year After Financial Crisis, a New World Order Emerges

The Cause of the 2008 Financial Crisis

Airlines Feel Harsh Effects of Econmony

As any frequent flier knows, the airline industry is, to quote Jimi Hendrix, "a frustrating mess." And about the only thing more frustrating than flying is trying to make money by investing in airline stocks.
Most major carriers routinely lose money, despite the fact that they now seem to charge you extra fees for everything but the pleasure of breathing the pressurized air. JetBlue (JBLU) is the only big airline expected to post a profit this year.

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Meredith Anderson

Five Lessons From the Financial Crisis

By David Wessel

With the one-year anniversary of the collapse of Lehman Brothers approaching, economists are listing lessons learned. Among them is Richard Berner of Morgan Stanley.
Here are his five lessons, drawn from a presentation at recent conference sponsored last month by the Central Bank of Argentina and elaborated on in a note to clients last week:

1. “A strong and well-regulated financial system should be the first line of defense against

financial shocks …. [T]he more free-market oriented we want our economies to be, the more we need official supervision and oversight of our financial institutions and markets. That’s because truly free-market economies involve a high risk of business failure, and corresponding high risks to the financial institutions and investors that lend to and invest in those businesses. A key lesson from this crisis is that competition among lenders breeds innovation, but also instability.”

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Posted by Nicole Nelson

Jeopardizing the Education for Our Future

I think a very important aspect of the financial crisis is how it is affecting higher education institutes. Every year people pay thousands of dollars to go to college but in tough economic times it is getting harder and harder for people to get that type of money. In the past few years colleges have seen a decrease in their endowments as well as a slight decrease in their enrollment. Roger Goodman, vice president at Moody’s Investors Service, which assigns credit ratings to 500 schools, is quoted in a Reuters article in saying “What we may see is a shifting (of applicants) from the higher-priced, small, private colleges, to a lower-priced four-year university, and from the four-year universities to community colleges for a couple of years.” I think this is a very reasonable statement and I’ve definitely witnessed it firsthand with friends dropping out of their more expensive school and moving home to go to the local community college. It’s a shame really that the future leaders of America have to jeopardize their education because of the failing economy of today. Even with their decreased funds, schools are still helping students pay their way through school. The Department of Education has been allocating their $116 billion even more wisely now to help students and families pay for postsecondary education during this financial crisis.

References:
http://www.ed.gov/finaid/landing.jhtml
http://www.reuters.com/article/domesticNews/idUSTRE49T02E20081030
http://www.alternet.org/workplace/114996/financial_crisis_sends_tuition_costs_sky-high_as_colleges_face_crunch/

By Kelsey Hoffman