US families lost $11 trillion in 2008

Posted by Lauren Cappelli

By The Wall Street Journal

Americans' net worth fell in 2008, erasing four years of gains, as the value of their houses and stock portfolios declined, according to new data from the Federal Reserve (.pdf file).

Household assets as a whole fell 15% to $65.7 trillion, unadjusted for inflation, compared with a decline of less than a percentage point to $14.2 trillion in total household liabilities.

The net worth of American households -- the difference between assets and liabilities -- was $51.5 trillion, down $11.2 trillion, or nearly 18%, from 2007. That sets Americans' total wealth back to levels lower than in 2004. It was the first decline in American household net worth since 2002.

The Fed data signal the end of an era where Americans spent with an eye on their growing assets -- their homes, retirement funds and stock investments.

An increase in spending that accompanies such a perceived increase in wealth is known as the "wealth effect," and economists calculate that it led Americans to spend about $1.05 for every dollar gained. Now, as Americans' assets shrink, they are spending less.

"The hit to the American family is so broad and so deep," said Jane D'Arista, a research associate at the Political Economy Research Institute at the University of Massachusetts-Amherst.

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Bracing for a Backlash Over Wall Street Bailouts

Copied and Posted by Yi-Xin Jin (Lily)

WASHINGTON — The Obama administration is increasingly concerned about a populist backlash against banks and Wall Street, worried that anger at financial institutions could also end up being directed at Congress and the White House and could complicate President Obama’s agenda.

The administration’s sharp rebuke of the American International Group on Sunday for handing out $165 million in executive bonuses — Lawrence H. Summers, director of the president’s National Economic Council, described it as “outrageous” on “This Week” on ABC — marks the latest effort by the White House to distance itself from abuses that could feed potentially disruptive public anger.

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Could Wall Street be Improving?

Posted by: Allison Franklin

Wall Street cautiously optimistic this week
By IEVA M. AUGSTUMS – 17 hours ago
CHARLOTTE, N.C. (AP) — Wall Street knows it shouldn't get ahead of itself.
So traders and investors are likely to go into the new week cautiously as they wait to see if last week's rally was a sign of a turnaround or just a blip.
The market has gotten used to false starts since stocks began their collapse last September. And as Wall Street ran up its biggest weekly gain since November, many analysts warned that this rally would soon fizzle, with stocks pulling back again rather than staging a lasting recovery. Rallies before it have evaporated — most notably the big comeback in late 2008.
Last week's surprising rally came on what looked like the start of something positive. Better-than-expected retail sales figures helped stocks, as did upbeat corporate news. First, there was word that Citigroup Inc. had operated at a profit the first two months of the year. There was also improving news from four other Dow Jones industrials: Bank of America Corp., General Electric Co., General Motors Corp. and Pfizer Inc.
"We have seen a positive change here," said Michael Sheldon, chief market strategist at RDM Financial Group, of the market's sentiment. "It seems like the mentality has changed a little bit."
The coming week has a series of economic reports that aren't expected to show significant improvement. But the market may get another lift if there are more signs that the economy is at least not getting any worse.
Perhaps the greatest possible influence this week will be the Federal Reserve's assessment of the economy that will accompany its decision on interest rates after a two-day meeting that ends Wednesday. The Fed is widely expected to hold interest rates steady. Its federal funds rates is already almost as low as it can go, set at a range of zero to 0.25 percent.
"All the Fed can do at this point is be clear about the role they are playing and say that they are going to do anything it takes to prop up this system," said Tommy Williams, president of Williams Financial Advisors in Shreveport, La.
Last week, the Dow gained 9 percent, rising 597.04 points to 7,223.98. The Standard & Poor's 500 ended up 10.7 percent, rising 73.17 points to 756.55.

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A.I.G. Lists Firms It Paid With Taxpayer Money

- By Kevin Yu

Amid rising pressure from Congress and taxpayers, the American International Group on Sunday released the names of dozens of financial institutions that benefited from the Federal Reserve’s decision last fall to save the giant insurer from collapse with a huge rescue loan.

Financial companies that received multibillion-dollar payments owed by A.I.G. include Goldman Sachs ($12.9 billion), Merrill Lynch ($6.8 billion), Bank of America ($5.2 billion), Citigroup ($2.3 billion) and Wachovia ($1.5 billion).

Big foreign banks also received large sums from the rescue, including Société Générale of France and Deutsche Bank of Germany, which each received nearly $12 billion; Barclays of Britain ($8.5 billion); and UBS of Switzerland ($5 billion).

A.I.G. also named the 20 largest states, starting with California, that stood to lose billions last fall because A.I.G. was holding money they had raised with bond sales.
In total, A.I.G. named nearly 80 companies and municipalities that benefited most from the Fed rescue, though many more that received smaller payments were left out.

The list, long sought by lawmakers, was released a day after the disclosure that A.I.G. was paying out hundreds of millions of dollars in bonuses to executives at the A.I.G. division where the company’s crisis originated. That drew anger from Democratic and Republican lawmakers alike on Sunday and left the Obama administration scrambling to distance itself from A.I.G.

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The Impact of the Financial Crisis on Jobs


Written by: Liwin Troy Lee

The credit crisis has had a huge impact on the financial firms. It has caused many workers on Wall Street to be out of jobs and for others, the uncertainty of whether they would lose their jobs in the coming months. In 2008, 600,000 people lost their jobs from the crisis and 9.4 million people were looking for jobs in the United States.

The blame for the crisis is on banks who have stopped making loans because they do not believe the loans they lend out will be repaid. The cause of the crisis is subprime mortgage borrower's inability to pay back their home loans. The explanation for this is the drop in housing prices in recent months. Prior to this, if a mortgage borrower could not pay their loans back, they could always sell their home. However, with the decline in housing prices, the borrowers could not sell their homes. The effect of this is that it makes it tougher for businesses to finance their operations, which hinders their growth and cause layoffs.

The rising food and gas prices has been affecting the markets for months. So the credit crisis only adds more stress to a market that is already facing difficulties. Since May 2008, General Motors has laid off 19,000 workers, Starbucks has cut 12,000 jobs and American Airlines recently cut 7,000 jobs. Some of the other companies have put on hiring freezes. The employers who are hiring are hiring very slowly and being more selective.

Sources
Sharp rise in unemployment as financial crisis hits jobs market

What about my job?

Credit Crisis in Hand, Economy Faces Rolling Lay-Offs Which could hit millions

How would you spend $787 billion?

Posted by Stephen Mills; Group1A

In February the government passed a $787 Billion dollar stimulus package designed to help bring our country back afloat from this recession we are sinking into. The large amount of money being spent has been criticized by many and questioned by all as to where the money is being allocated. If you recall towards the end of the Bush saga, he too released a stimulus package which was suppose to help “wall street as well as main street” and this package gave the media a new catch phrase of which was beaten like a dead horse, it was still unclear to many where all the money went. Of course almost all the banks on Wall Street received funds but the money was clearly not managed properly or allocated appropriately as we are still in a mess of trouble.

Well with this new stimulus package it seemed like déjà vu. Talk of hundreds of billions of dollars to be spent in an attempt to jumpstart our way out of recession. Fortunately this time under the Obama administration, they have clearly outlined how all the money will be allocated throughout the country. Some of the biggest spending will be given to agencies such as the Department of Agriculture, which is receiving $28 billion dollars in government funds expected to aid rural development programs and to give assistance to farmers. Another agency receiving large sums of aid is the Department of Transportation who is receiving $27 billion in an effort for states to make critical repairs to damaged roads and bridges. There are several agencies, which are receiving large amounts of aid such as the Department of Education’s $141 billion dollar piece of the pie as well as the Department of Health and Human Services whom will be receiving $59 billion.

Overall this new stimulus package seems to be much more transparent and its allocation of money is clearer than that of the Bush administration’s. Hopefully this is what our country will need to get us on the path to recovery.

Sources:
Source One
Source Two
Source Three

Surviving the Crisis

Posted By: Allison Franklin

With the financial crisis showing no signs of disappearing it is important for people to understand how to survive these tough economic times. When people are in a financial crisis they believe their only way to survive to get in debt and keep increasing this amount until there is no way out. However, if people educate themselves on the basics of finance and debt management then they will see that there are other ways to survive tough times. The first step that needs to be taken is to set up a budget, people need to see what exactly they have available to spend. Most people do not do this, which is a reason why we are in a financial crisis. People have been living beyond their means and eventually the amount of debt could not be sustained. Once the budget is set up, people need to look at where their money is going. If things are not absolutely necessary then they should be temporarily cut until their financial situation turns around. I know this step is easier said than done, but it is very important. Once the budget is setup, people need to figure out how to manage the debt they already have. The easiest way to do this is try to get on a regular payment plan. If you are unable to do this the best place to go is a consumer credit counseling agency. They will help you manage your debt and get out from under it. With these few steps, people will be able to make it through these tough times and once the financial crisis is over people should continue to follow these so there is not another crisis to follow.

Sources:

1) http://financialplan.about.com/cs/budgeting/a/Budgeting.htm

2)http://money.cnn.com/magazines/moneymag/money101/lesson2/

3)http://en.wikipedia.org/wiki/Personal_finance

College Grads Facing Worst Hiring Climate Since 2002

"Undergraduate hiring is expected to plummet this spring according to the results from a recent survey, dashing some analysts’ hopes that a degree would help graduates weather the economic storm. The study, conducted by the National Association of Colleges and Employers (NACE), estimates that employers will hire 22% fewer new graduates from this year’s class than they did from last year’s class. The projection, if true, would represent the biggest downturn since 2002, when the 9/11 terrorist attacks and the dot-com bust sent hiring down 36%."

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By Anne VanderMey

Posted By Jemar

Layoffs Are Cooling Down, At Least For Now

"Last week, the Forbes.com Layoff Tracker counted a mere 6,000 layoffs announced at the 500 largest U.S.-based public companies, a far cry from the 20,000 to 90,000 in previous weeks. Maybe it's time for some cautious optimism."
Via: Klaus Kneale

Read more

Posted By Jemar

the Making Home Affordable Initiative Program

- By Kevin Yu

The Obama administration provided the details on Wednesday for its program to help homeowners. They said that the program, which is called the Making Home Affordable initiative, will be available soon and will help home owners to get reductions in their mortgage payments.

So how does the problem help the home owners?

First, a mortgage lender or mortgage-servicing company would first receive cash incentives to modify a borrowers’ loan so that the monthly housing payment declines to no more than 38 percent of the family’s gross monthly income.

The reduced payments could come in the form of a lower interest rate, longer mortgage term or a reduction in the principal outstanding loan amount.

If the lender decided not to offer the modification, such as in the case of a borrower who had become unemployed and whose income had largely disappeared, it would be required to examine alternatives to foreclosure before seizing the house.

Among the alternatives mentioned are “short sales,” in which the house is sold for less than the outstanding mortgage amount but the borrower is not held accountable for the balance; and a “deed in lieu of foreclosure,” which allows homeowners to avoid foreclosure by voluntarily surrendering their property.

Sources:

1. http://www.nytimes.com/2009/03/04/us/politics/04prexy.html?scp=3&sq=financial%20crisis&st=cse

2. http://www.nytimes.com/2009/03/05/business/economy/05econ.html?ref=business

3. http://www.nytimes.com/2009/03/05/business/economy/05loan.html?_r=1&ref=business

Financial Crisis: "Silver Bullets" for Toxic Mortgages

The Obama Administration is floating a proposal that would allow the government to directly buy more loans from servicers of mortgage-backed securities.

Written by: David Bogoslaw
Posted by: Liwin Troy Lee

With the financial crisis quickly becoming President Obama's primary burden, his Administration has intensified its efforts to stem the rising tide of foreclosures in order to solve the root cause of the difficulties. On Feb. 11, Treasury Secretary Timothy Geithner and Shaun Donovan, Secretary of the Housing & Urban Development Dept., met with community groups and key stakeholders in the banking industry to gauge support for a potential program that would allow the government to directly buy whole loans from servicers of mortgage-backed securities (MBS) in order to modify them—and keep more borrowers in their homes.

This is just one of several proposals the Obama Administration is considering as it comes to terms with the dire need to prevent further waves of foreclosures amid a deepening recession. There were foreclosure filings on 274,399 U.S. properties in January, down 10% from December but 18% higher than a year ago, according to RealtyTrac, a foreclosure research firm. In December, the Mortgage Bankers Assn. said that a record 1 in 10 U.S. families with a mortgage are either in arrears or having their house repossessed.

Banks and other mortgage servicers have being doing loan modifications under an Federal Deposit Insurance Corp. program since the first quarter of 2008, but many have failed to benefit from a cookie-cutter approach that's paid insufficient attention to the financial condition of individual homeowners. And these "mods" haven't addressed the need for a wholesale cleaning out of some of the most toxic loans, those collected in securitized pools and sold piecemeal to vast numbers of investors. The problem is that there is no flexibility to modify the terms of individual mortgages in most of the Pooling and Servicing Agreements, or PSAs, that govern these mortgage pools.

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Financial crisis: MBA Outlook

By Xavier Guerrero

Dow Jones hits new low

Copied and Pasted By Xavier Guerrero

Investor worries about the economy in general, and financial companies in particular, continued to erode the markets on Monday as the Dow Jones industrial average fell below 7,000 for first time since October 1997.

Investors expressed concern about the ability of banks to raise more capital, after the British bank, HSBC Holdings, offered new shares at a substantial discount. HSBC Holdings, the global British bank, fell 18.7 percent after the bank said it would seek to raise nearly $18 billion in capital from shareholders and shut down its American consumer lending business.

Washington also agreed on Monday to provide another $30 billion to the insurance giant, American International Group, which also reported a $61.7 billion loss. On Friday, Washington took a larger stake in Citigroup, reducing the value of shareholders’ stock.

“Another day, another 200 points,” David Dietze, chief investment strategist at Point View Financial Services, said, comparing the daily markets to water torture.

The decision by many companies to trim dividends — one of the remaining incentives for owning stocks — was contributing to the sell-off, Mr. Dietze said. Earlier Monday, the large regional bank PNC Financial Services Group cut its dividend 85 percent and the International Paper Company cut its by 90 percent. Last week, the General Electric cut its dividend 68 percent, and JPMorgan Chase reduced its dividend 87 percent.

Click here for more
Sources:

http://www.nytimes.com/2009/03/03/business/worldbusiness/03markets.html?_r=1&hp
Times.com

U.S. Response to Financial Crisis

Posted By: Allison Franklin

Is US response to financial crisis strong enough?
Government action to save major financial firms has yet to show clear, positive results.
Reporter Mark Trumbull discusses some of the options available to the Obama administration when dealing with underperforming banks.
Reporter Mark Trumbull
In the history of financial crises, one lesson stands out: It’s important to match the scale of the remedy to the scale of the problem – and to do so quickly.
That doesn’t mean every corporate bailout is a good idea. But what’s needed is a forceful approach, whether the costs fall on investors or taxpayers. Governments that try to cut corners or take a wait-and-see approach often end up making recessions deeper and taxpayer costs higher, say financial historians.
The Obama administration is well aware of that trap, yet many economists see a high risk that the United States will go down that path in 2009.
Some signs that efforts to date haven’t been adequate to the task:
• Insurance giant AIG, now largely government-owned and supported, is expected to report the largest quarterly loss in corporate history Monday – plus a newly restructured bailout that will amount to the third rescue of a company that has already tapped $150 in federal funding.
• The Treasury on Friday announced its third rescue in six months of the bank Citigroup, which has received $45 billion in capital infusions plus billions more to insure against losses.
• The overall economy has declined more sharply than economists expected, with gross domestic product shrinking at a 6.2 percent annual pace in the final quarter of 2008.
“As long as they don’t fix the banking system, the economy is going to get worse,” says Pete Kyle, a professor of finance at the University of Maryland. “Death by a thousand cuts is not going to work.”

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Gordon Brown insists the European Union is united in response to global economic crisis

Copied and Posted by: Yi-Xin Jin (Lily)

Gordon Brown has insisted the European Union is united in its response to the global economic crisis after joining fellow leaders for an emergency summit in Brussels.

Amid reports of a split between the major economies and members states from central and Eastern Europe, the Prime Minister said: "People neither want protectionism nor do they want to be in a situation where we don't take the interest rate and the fiscal action that is necessary.

"I found complete support for the measures that I am talking about that are central to the success of the G20 [summit in London next month]."

Speaking after the talks, Mr Brown said: "Today was the start of a European consensus on all these major issues that are facing the world community: yes to better regulation; yes to action on the shadow banking system and hedge funds; no to protectionism; yes to fiscal and monetary stimulus; no to maintaining the old status quo on the role of our financial institutions."

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Capitalism and the Financial Crisis

Posted By: Yi-Xin Jin (Lily)

After witnessing a string of unprecedented turmoil, concerned market participants are encouraging policy makers to take action in improving the transparency and supervision of the financial system. In response to the crisis of confidence among investors, central banks around the world has announced a series of actions that will provide more liquidity and effective set of instruments to stabilize conditions in both strained markets and troubled institutions. Most economically developed countries haven’t seen a crisis like this since the great depression. However, today’s crisis is nothing new but a inherent result of the captialist system. Josh Lees, a writer for Socialist Magazine writes in his article “Understanding Marxism: why capitalism is a system of crisis” that “Economic crisis is a recurring feature of capitalism. Every economic boom ends in a slump, every "golden age" crumbles into recession.” Even though, capitalism has brought wealth and opportunities for many but in the past the system has also created periods of crisis. Many economists believe that there’s no long term detriment from our current crisis; instead there can be an opportunity for change in our financial markets.

Capitalism has become a popular subject in the news media since the start of financial crisis. Many people “blame the excesses of capitalism for the current financial crisis.” There are also articles that is pro-capitalism, like the article posted by TimesOnline, which states that “the financial crisis has exposed capitalism's darkest imperfections. But it is still the best hope we have of creating wealth and opportunity for the many”. There has been a continuous debate regarding whether economic liberty is beneficial or harmful to our economy. In the past two centuries, capitalism has proved itself to be an incredibly resilient and adaptable system. “From the evolution of the stock market and the corporation to nationalisation and the welfare state, to more recent deregulation, capitalism has seemed to evolve remarkably successfully over time.” Histroically, it was with the help of political intervention that allowed capitalism to adapt efficiently to the changing circumstances and crisis which implies that capitalism is not capable of turning our economy around all by itself. The calamity in our current banking system has brought more government intervention into our financial system since the Great Depression. Even though, this is moving our economy another step away from ecnomic liberty but this is the only way to save our unstable financial markets and help the general public in the long run.

Sources:

1. http://www.sa.org.au/index.php?option=com_content&task=view&id=1629&Itemid=106

2. http://community.travelchinaguide.com/forum2.asp?i=49673

3. http://www.forceforgood.com/Blogs/Taking-Responsibility-Beyond-Philanthropy-205/1.aspx

4. http://www.battleofideas.org.uk/index.php/site/battles/2219/

Economy moving in reverse faster than predicted

Posted by Lauren Cappelli

WASHINGTON (AP) - The economy is moving in reverse faster than the government can measure.The contraction for the fourth quarter of 2008 had been estimated at 3.8 percent just a month ago. Then the Commerce Department raised it to an astonishing 6.2 percent Friday — the largest revision since the government started keeping records in 1976.

That was the economy's worst showing in a quarter-century and raised the prospect that the nation could suffer its worst year since 1946.

"Consumers are just hunkering down and saying 'game over,' and businesses in response are cutting back on investment and employment," said Brian Bethune, economist at IHS Global Insight. "It's a negative feedback loop."

Now in its second year, the recession is expected to stretch at least through the first six months of 2009, as shoppers slash spending in the shadow of hard times at home and aboard.
Companies, in turn, are being forced to cut jobs and production while resorting to other cost-saving measures to survive.

The Commerce Department's new report was also weaker than the 5.4 percent drop economists had expected.

The biggest culprit behind the record-breaking revision: Businesses actually cut inventories instead of building them as the government originally thought. That reduced — rather than added to — economic activity.

In addition, consumers pulled back even more on their spending — which accounts for about 70 percent of national economic activity. U.S. exports suffered a bigger drop and businesses retrenched further.

Many economists lowered their forecast for this year's gross domestic product to show a deeper contraction of at least 2 percent. GDP, the value of all goods and services produced in the United States, is the best barometer of the country's economic health.

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U.S. Is Said Set to Provide A.I.G. Another $30 Billion

- By Kevin Yu

The federal government is preparing to loosen the terms of its huge loan to the American International Group and provide another $30 billion to the insurer as it prepares to report the biggest quarterly loss in history on Monday, $62 billion, people involved in the discussions said Sunday night.

The intervention marks the third time that A.I.G., the giant insurer, has had to seek assistance from the federal government. The government already owns nearly 80 percent of the insurer’s holding company as a result of the earlier interventions, which included a $60 billion loan, a $40 billion purchase of preferred shares and $50 billion to soak up the company’s toxic assets.

The deal would have the government commit another $30 billion in cash to A.I.G. from the Troubled Assets Relief Fund, should the company need it, according to the people involved in the talks.

A.I.G. is not expected to draw down the money immediately. Instead, the money is intended to assure credit-rating agencies that A.I.G. can make good on its debts to the government and to private lenders.

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Using the Movies as a Distraction from Tough Times

Posted By Stephen Mills; Group1a

LOS ANGELES — Hollywood could get used to this recession thing.

While much of the economy is teetering between bust and bailout, the movie industry has been startled by a box-office surge that has little precedent in the modern era.

Suddenly it seems as if everyone is going to the movies, with ticket sales this year up 17.5 percent, to $1.7 billion, according to Media by Numbers, a box-office tracking company. And it is not just because ticket prices are higher. Attendance has also jumped, by nearly 16 percent. If that pace continues through the year, it would amount to the biggest box-office surge in at least two decades.

Americans, for the moment, just want to hide in a very dark place, said Martin Kaplan, the director of the Norman Lear Center for the study of entertainment and society at the University of Southern California.

“It’s not rocket science,” he said. “People want to forget their troubles, and they want to be with other people.”

Helping feed the surge is the mix of movies, which have been more audience-friendly in recent months as the studios have tried to adjust after the lackluster sales of more somber and serious films.

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Volcker: Tightly regulate banks

Posted by Pin-Yu Liao

Banks that are big enough to destabilize markets should be subjected to tighter regulatory oversight, and some rules ought to be internationally agreed, White House economic adviser Paul Volcker said Thursday.
In remarks prepared for delivery to the congressional Joint Economic Committee, Volcker said "substantial changes" were needed in oversight of financial firms.

Click to read more.

Home-income Taxpayers Undergo Decrease of Mortgage Interest Deductions

By Pin-Yu Liao

President Barack Obama is proposing a plan that will decrease mortgage interest deductions for high-income tax payers. There will be a drop to 28% tax break for itemized deductions for the aim of generating $ 318 billion over the 10 years. The high-income people with 33% tax bracket will have only 28% tax savings when they claim their deductions on mortgage interest, state and local taxes starting in 2009. They get 28 cents instead of 35 cents for every dollar they spend on the mortgage interests. In other words, tax payments on the families earning more than $250,000 will be raised.
The middle class and the low-income people pay claim standardized deductions, but they receive no benefit from the mortgage interest deductions. In effect, the value of the home will go down as a result of increasing ownership costs. The tax policy has always been setting a limit for high-income taxpayers to claim their itemized deductions, since they are more able to afford more tax pay.
Mortgage interests of $48,000 dollars per year will result in a tax break of $16,800 at 35%, but with the new policy it would be $13,440 dollars tax savings. The high-income people have to contribute $3,360 more to IRS.

Sources:

http://www.usnews.com/blogs/the-home-front/2009/02/26/mortgage-interest-deduction-on-the-chopping-block.html
http://money.cnn.com/2009/02/27/real_estate/mortgage_interest_deduction_slashed/index.htm?postversion=2009022718
http://voices.washingtonpost.com/local-address/2009/02/is_uncle_sam_aiming_at_your_mo.html

$50 Billion Heist

Posted by Yulun Hung

The picture above shows Madoff's $20million jet

CNBC investigates the public unraveling of investment manager Bernard Madoff's alleged multi-billion dollar 'ponzi scheme.' Click here to watch.

Financial Mess: Greed and Stupidity

By Yulun Hung

Recently I have watched a great documentary relating the the financial crisis. It is called the House of Cards: a CNBC report about the origins of today's credit and economic crisis.
What I learned from the documentary is just how greedy people are. There were so many people borrowing money to buy unnecessary luxeries when they clearly couldn't afford to do so. People with bad credits and low incomes were somehow able to take out huge amount of loans to buy newly build, mansion like houses. It doesn't stop there, some of these people even decide to refinance and cash out more money to pay for a new swimming pool, a new car, etc.

What is even more outrageous are the lenders of subprime mortages. Places such as Quick Loan Funding should have never existed. Basically this company's motto is "You can't wait? We won't let you!" One of the employees working for Quick Loan said it takes only minutes to have a loan approved, and pretty much anyone (low income to no income) can borrow money. He goes on saying that some of Quick Loan's lenders were former pizza deliverers with no degree in finance!

The bankers who bought up subprime mortage loans probably weren't as clueless as some of the borrowers, but nevertheless, the high returns were too good to pass up so they played the game. They knew many of the loans were bad investments, so they packaged them into highly complicated CDOs (Collateralized Debt Obligation) so investors had no idea what they just invested in. Many of the investors, even the government, were tricked by the AAA rating and the potential high returns.

When the reporter of House of Cards asked the question of who is to blame? No one stepped up to the plate, from Alan Greenspan all the way down to the borrowers.

If you are interested in House of Cards, you can watch the full documentary at hulu.com

Sources:
http://www.hulu.com/videos/search?query=CNBC+Originals
http://www.cnbc.com/id/28892719
http://en.wikipedia.org/wiki/Collateralized_debt_obligation

What caused the financial Crisis?

Written by: Liwin Troy Lee

The current financial crisis started in September 2008 with the failure of some financial institutions like the Lehman Brothers. The cause was from people who brought homes and could no longer make payments on their subprime mortgage loans. The word "subprime" means loans that start out with low interest rates but after a few years, the interest rate goes up. Subprime loans do not require a lot of verification. For example, the lender does not check if the borrower has a job.

When the home prices were rising and the borrowers had difficulty paying back their loan, they could always sell their home for profit and pay the money back. However, when the home prices were falling, the homeowners would lose their homes to foreclosure. That is the lender takes back the home. As a result, the bank institution who lends the money loses revenue.

Investment firms who created mortgages for lenders bought mortgage-back securities. Mortgage-back securities are bundling of between 1000 to 1500 individual mortgages into one entity. Investment firms also borrowed money to buy bad debts. The use of the borrowed money is called leverage. As a result, when the mortgages went bad, some of these financial institutions went bankrupt. The collapses of companies like the Lehman Brothers caused investors to go into a panic. The impact of this is it caused the stock price to decline.

Many bank and lenders stopped offering loans because they feared that they would no be repaid. Without credit, businesses slowed down and companies laid off workers. Those workers reduce their spending and it hurts other businesses. These workers go to restaurants less and buy less clothes. As a result, those stores lose businesses and they have to lay off workers. This spread throughout the whole economy. Thus, the cause of the financial crisis.

Sources:

Global Financial Crisis 2008 to 2009

US financial crisis began with Subprime mortgages

What Caused the Economic Crisis of 2008?

What happens to Tourist Attractions when there are no Tourists left?

By Stephen Mills; Group1A

Financial crisis, economic slow down, recession, despite how you want to refer to what is happening to the economy in the US everyone is being affected. Among those affected are many tourist towns. Businesses located in tourist areas throughout the United States are facing huge losses in sales and customers for that matter. "We could be handing out $20 bills and we couldn't get people in.” (msnbc.com p6)

Even the United States' largest tourist attractor is experiencing major losses in income and are facing mass layoffs. Walt Disney World has released a statement explaining large income losses and they will begin layoffs as soon as this week. Large businesses such as Disney are not the only ones to be affected; many small businesses located on the outskirts of these larger tourist attractions are being affected on an even larger scale. One small restaurant located in downtown Orlando gets all their business from tourists coming to visit the amusement parks at Disney. With the slowdown of customers due to the recession the owner of the store has had to drop all their employees hours to part time shifts and pick up the remaining hours herself. "It's killing me, but it's working." (Pom, p10. Cnn.com)

On the upside not everyone is under water from this economic slowdown. For instance small towns located on the outskirts of large cities are experiencing higher incomes than ever before. Many small towns near Philadelphia are gaining double digit increases in the percent of customers they are gaining this year due to many families new plan to conserve money by going on weekend trips to local destinations.

Overall the tourist industry in the United States is in dire need to be restructured and consolidated if it wants to survive in this new economy.

Sources:
Source 1
Source 2
Source 3

The Domino Effect of Financial Crisis

Posted by Yi-Xin Jin (Lily)



The factor that is most concerned by the central banks is the provision of short-term liquidity. Short-term liquidity reduces interest rates but encourages more risky-behavior and investments. When interest rates are low because investors’ perception of risk is ‘underpriced’ then that would just lead to another financial crisis in which people have invested too much money. When investors overlook the cost of the risks, the banks are automatically affected by the credit crunch. As one bank defaults, the ‘contagion’ spreads to other banks, which calls for the central banks to lend money to lift them out the predicament. Central banks take on the “lender of last resort” role because this information is publicly known by the customers of those borrowing banks, causing customer to lose confidence in their own banks. Customers start to lose confidence in their own banks when central banks start intervening. However, central banks guarantee to lend “against good collateral at a penalty rate (Bank of England, p.9)” so that banks could recover themselves from liquidity problems, but the penalty rate is higher than the market’s interest rate.


The other major “safety net” besides “lender of last resort” is the Federal Deposit Insurance Company (FDIC). The FDIC’s role is to “provide ‘insurance’ coverage for consumer bank deposits in case of a bank failure (The Augusta Chronicle).” It offers depositor insurance that is over the normal amount, so that depositors will not be afraid of losing all their money. The FDIC can also “make loans and nationalize banks (Professor Wilkinson).” Their responsibilities include insuring savings, checking, and money market accounts, as well as certificates of deposit (CDs) (The Augusta Chronicle). “For single accounts, a depositor's money is insured for up to $100,000… joint account at the bank, that account is insured for up to $200,000 (The Augusta Chronicle).” This safety net is evidence that regulation can provide consumer confidence which may lead to more deposits in banks and a lesser chance of banks defaulting and another financial crisis.



Sources:

1.http://www.bankofengland.co.uk/publications/other/treasurycommittee/other/paper070912.pdf
2. http://chronicle.augusta.com/stories/081108/yrb_469038.shtml

3. http://bankdeals.blogspot.com/2009_01_01_archive.html

Repeating History?

By Lauren Cappelli

In today’s society there are many fears that we are headed towards another Great Depression. However, when you look deep into how bad the Great Depression really was, and compare it to today, you will be able to find comfort in the fact that it will not be nearly as bad.

Unemployment is a big cause of concern for many people. Economists believe that unemployment will peak between 8 and 9% during this crisis. This percentage may seem really high but it is nowhere near the 25% that was reached during the Great Depression.

Bank failures have also been a problem in today’s crisis. A handful of banks, such as Wachovia and Merrill Lynch, have gone under but compared to the amount of bank closings during the depression it doesn’t compare. Over 1,000 banks during the Great Depression closed for good. This was nearly 40% of all banks. Today there have been 19 bank failures. The FDIC has been able to find buyers for these distressed banks which cushions the fall.

Another striking statistic that depicts the difference between the Great Depression and today is the Gross National Product. During the Depression, the GNP dropped by 31% as opposed to the close of the 3rd quarter in 2008 where it only fell by .03%

Although economic times are tough in today’s society we can find a little comfort in the fact that America has seen worse. The Great Depression was a very dark period for the United States, but hopefully it can teach us how to not make the same mistakes today.

Sources:

1. http://www.consumerwarningnetwork.com/2008/10/31/todays-economy-the-depression-is-it-panic-time/

2. http://www.rightpundits.com/?p=2499

3. http://www.dailymarkets.com/economy/2009/01/02/now-and-the-great-depression-similarities-and-differences/

4. http://money.cnn.com/2009/02/07/news/economy/fed_yellen.reut/

Ten Steps To Recovery

- By Kevin Yu

Here is the possible proposal for resolving the most severe financial crisis:

First: As with the Treasury TARP plan, you need to buy illiquid/toxic assets and take them off the balance sheet of banks and financial institutions to re-liquefy them and allow new credit creation.

Second: In exchange for the purchase of illiquid assets, the government gets preferred shares in the financial institutions that allow it to participate in any future upside.

Third: Even the government injected capitals into banks, banks still need capitals to recover from losses. So we will need to inject further actual public capital in the form of preferred shares in the financial institutions.
Fourth: The existing shareholders of the banks need to take a first-tier loss to minimize the risks for the government share. Start by suspending dividend payments on common shares and possibly even existing preferred shares.

Fifth: Public and private recapitalization of financial institutions unfairly benefits unsecured creditors--all creditors except insured depositors--of such institutions. So, you also need to convert some of this unsecured debt into equity.
Sixth: After this crisis is resolved, the banking and financial system may need lower capital than before so as to avoid new asset and credit bubbles.

Seventh: As with the Resolution Trust Corporation, the assets of bankrupt banks that are allowed to fail go to the HOME for a workout (debt restructuring/reduction).

Eighth: You need a program like the Home Owners' Loan Corporation (HOLC) for debt reduction of the household sector. Households in the U.S. have too much debt than asset.

Ninth: government to avoid a situation where the recapitalization of banks and the resolution of this financial crisis lead to another credit and asset bubble.
Tenth: Start implementing a reform of the regulation and supervision of financial institutions in a world of financial globalization

Sources:

1. http://www.nytimes.com/2009/02/25/business/economy/25econ.html?_r=1&ref=business

2. http://www.forbes.com/2008/09/25/mortgage-debt-relief-oped-cx_nr_0925roubini.html

3. http://en.wikipedia.org/wiki/Financial_crisis

What is a financial crisis?

By: Allison Franklin

Any time you turn on the television all you hear is talk of a “financial crisis” or “financial meltdown,” but no one ever really takes the time to explain what this really means. The term financial crisis simply means that financial institutions, such as banks lose a large amount of their assets in a short period of time. With this definition, it is evident that this is what is happening in the U.S. economy today. The problem that arises when the banks lose their assets, is that the stock market goes down, which has an adverse impact on investors. Once this happens other business are affected, which in turn affects everyone else as people end up losing their jobs and their assets in the stock market. It is easy to see the spiral effect that develops and why this situation is referred to as a financial crisis. The big question to ask is what caused the banks to lose their assets to begin with? In the current financial crisis, this is due to the fact that banks were lending out too many mortgages to people who could not afford them. This action caused the housing market to grow to quickly and the prices rose dramatically. This market has also been hard hit during this time as people are now not able to get mortgages and foreclosures are on the rise because people are not able to pay for their mortgages. It is quite simple to see how every market is connected and how a change in one has an effect in all other markets. There are many other financial crisis that can be examined as well. The largest and most historic being the Great Depression in 1929.

Sources:

http://en.wikipedia.org/wiki/Financial_crisis

http://news.bbc.co.uk/2/hi/business/6958091.stm

http://topics.nytimes.com/topics/reference/timestopics/subjects/c/credit_crisis/index.html

Economic crisis 'is as bad as they come'

By Carolyn Lochhead
Copy and posted by Yulun Hung

If 30 years of financial crises teach anything - in Scandinavia, Japan, other parts of Asia and Latin America - the worst is not over for the U.S. economy. But that may be the good news.

This time, a tightly interdependent world has entered a synchronized contraction. Pretty much everyone is in trouble, leaving the world without an engine.
"We are in economic terra incognita," said Joseph Grundfest, a finance professor at Stanford University and co-director of the Rock Center on Corporate Governance.
If the averages of previous crises hold, Americans can expect unemployment to reach 11 or 12 percent, housing prices nationally to drop 36 percent, stocks to lose more than half their value, and real output per capita to plunge 9.3 percent, according to economists Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard University, who have tracked financial crises back to 14th century England.

"Certainly the averages themselves are pretty discouraging," said Reinhart. "Because this crisis is as bad as they come."

Pessimists observe that Japan's Nikkei stock index peaked around 39,000 in 1989 and two decades later is languishing around 7,500. Japan's real estate market still has not recovered after 17 years. The Dow Jones index did not rebound from the 1929 U.S. stock market crash until 1954.

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Pay on Wall Street plummets to levels akin to Main Street - Federal cap, bonus cuts shrink checks

Posted by Yi-Xin Jin (Lily)

NEW YORK -- With the economy in a meltdown, financial workers everywhere fear layoffs. But even those who keep their jobs might face a far different future than they imagined -- one without the big payouts that have long made Wall Street a beacon for the ambitious and the acquisitive.

Those financial-industry workers still standing after the brutal banking collapses of the past year had to contend with a major slash in bonus pay -- with many losing as much as one-third of their total compensation. Then the Obama administration imposed a pay cap of $500,000 on certain senior executives whose companies receive substantial bailout money.

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Are Business Journalists To Blame For The Financial Crisis?

Written by: Philip Delves Broughton
Posted by: Liwin Troy Lee

Parliament's spotlight on the responsibility of business journalists.

If blame were a currency, a lot of people would be rich right now: Wall Street for creating this massive financial hairball, which will take years to unpick; Washington for its failure to act as even a faintly competent guardian of the public interest; mortgage brokers, credit card companies, on and on it goes. But how about we add one more group of people to the list: journalists. Yes, the ink-stained wretches, who are so enjoying the comeuppance of the bankers and yet similarly failed to call out the problems as they mounted. Who doesn't enjoy kicking hacks, after all?

On Tuesday, a parliamentary panel in Britain questioned five of the country's leading business journalists, including the editor of The Financial Times and the BBC's business editor, about their role in the financial crisis. Did they do enough to warn about the crisis before it happened? Why did their reporting not uncover the excesses of the banking industry before 2008? When the crisis eventually broke, did they exaggerate fears, notably during the run on Northern Rock (other-otc: NHRKF.PK - news - people ), which the British government ended up having to nationalize?


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How bad is the economic crisis?

Posted by: Allison Franklin

Economic crisis 'is as bad as they come'
Carolyn Lochhead, Chronicle Washington Bureau
Sunday, February 22, 2009

If 30 years of financial crises teach anything - in Scandinavia, Japan, other parts of Asia and Latin America - the worst is not over for the U.S. economy. But that may be the good news.
This time, a tightly interdependent world has entered a synchronized contraction. Pretty much everyone is in trouble, leaving the world without an engine.
"We are in economic terra incognita," said Joseph Grundfest, a finance professor at Stanford University and co-director of the Rock Center on Corporate Governance.
If the averages of previous crises hold, Americans can expect unemployment to reach 11 or 12 percent, housing prices nationally to drop 36 percent, stocks to lose more than half their value, and real output per capita to plunge 9.3 percent, according to economists Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard University, who have tracked financial crises back to 14th century England.
"Certainly the averages themselves are pretty discouraging," said Reinhart. "Because this crisis is as bad as they come."
Pessimists observe that Japan's Nikkei stock index peaked around 39,000 in 1989 and two decades later is languishing around 7,500. Japan's real estate market still has not recovered after 17 years. The Dow Jones index did not rebound from the 1929 U.S. stock market crash until 1954.

To read the full story click here

Philadelphia Newspapers Seeking Bankruptcy

- By Kevin Yu

The owners of The Philadelphia Inquirer and The Philadelphia Daily News filed for bankruptcy late Sunday night after talks aimed at restructuring their heavy debt load broke down, executives said.

The papers will continue to operate and will remain under local control, said Brian Tierney, publisher of The Inquirer and the leader of a group of local investors who bought the papers in 2006, one of several newspaper deals from that era that have gone bad as the industry’s revenues have plunged.

Philadelphia Newspapers, a subsidiary of Philadelphia Media Holdings, is the entity filed for bankruptcy protection. In a brief interview late on Sunday night, Mr. Tierney said the company would negotiate with its creditors to rework its debt burden.

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Gloom persists despite audacious Obama plans

Posted by Lauren Cappelli

WASHINGTON - In sheer size, the economic measures announced by President Barack Obama to address “a crisis unlike we’ve ever known” are remarkable, rivaling and in many cases dwarfing the New Deal programs that Franklin D. Roosevelt famously created to battle the Great Depression.

Winning approval was a political tour-de-force for the new administration.
Yet gloom and uncertainty persist about the plan’s ability to deliver a cure for the economy’s severe ailments.

Stocks plunged to six-year lows this week after the burst of bill signings, bailout announcements and presidential pledges.

And polls show Americans are increasingly worried about losing jobs and not having enough money to pay their bills.

Why the skepticism? Maybe there’s just been too long a run of bad news.

Arthur Hogan, chief market analyst at Wachovia Securities, blames much of the negativity on “the fact that people are so down. They have no confidence in the future.” Republicans complain about wasted money. Some Democratic supporters say the plan won’t help very much very quickly.

Former President Bill Clinton, who gives Obama high marks for straight talk in telling the nation the bad economic news, says his successor might try a more upbeat approach now. “I just want the American people to know that he’s confident that we are going to get out of this and he feels good about the long run,” Clinton said Friday on ABC News’ “Good Morning America.”

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Wall Street: All eyes on the banks

Posted by Pin-Yu Liao

All eyes will be on Washington and the banking system this week, right where they've been for months.
The market is likely to take its cue this week from the government and the direction of financial stocks. Reports -- expected to be bearish -- on housing, manufacturing, employment and GDP growth will also be of interest.
Bank stocks and the broader market have been tumbling for the last two weeks, since the U.S. Treasury unveiled a bank bailout plan that was short on specifics. Questions about the ability of the banks to stay afloat amid the 14-month-old and counting recession are what is "overhanging the markets right now, more than anything else," said Timothy Ghriskey, chief investment strategist at Solaris Asset Management.

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President Obama's plan on Tax Reductions

By Pin-Yu Liao

President Obama announced that the Treasury will implement tax reductions for employees from their paychecks; 95% of Americans will benefit from this tax cut. Generally the increase for take-home pay will be at least 65 dollars a month.

This tax reduction as part of a $787 economic recovery plan was passed by the Congress in hopes to stimulate consumer spending. Furthermore, $120 billions will be spent on rail and highway projects. President promised that he will come up with strategies to cut the trillion-dollar deficit to rescue the economy. He said, “It will require doing all we can to get exploding deficits under control as our economy begins to recover,” promising to submit a budget that was “sober in its assessments, honest in its accounting” and that “lays out in detail my strategy for investing in what we need, cutting what we don’t and restoring fiscal discipline.”

President Obama will attend the summit on Monday to identify and discuss what his policies are. He will also on Tuesday have a join session with the Congress to release his 2010 budget and talk about his strategies for the financial crisis. Lawmakers, academics and business leaders will join to partake in this discussion and try to solve for this huge amount of deficit.

Sources:

http://www.google.com/hostednews/afp/article/ALeqM5gP2ERpOu3fU1YiYhBanIo6Yusfsw
http://www.nytimes.com/2009/02/22/us/politics/22address.html?_r=1
http://money.cnn.com/2009/02/21/news/economy/taxes.reut/index.htm?postversion=2009022110

Economic Artistry

Posted By Stephen Mills; Group1A

Sun., Feb. 22, 2009

WASHINGTON - President Barack Obama moves into a week that will test his political and economic artistry as he pushes forward with plans to spend unprecedented hundreds of billions to rescue the collapsing economy while also promising to cut America's record budget deficit.

The new administration will outline spending cuts to halve the federal budget deficit in four years by cutting Iraq war spending, raising taxes on wealthy Americans and turning efficiency experts loose on government outlays, an administration official said on Saturday.

The economic pincers gripping Obama's presidency will only be compounded by political dislocation. Republicans, especially the most conservative lawmakers and state governors, already are loudly attacking administration spending plans designed to put a floor under the failing economy.

But cutting the budget — a move Obama telegraphed in his weekly message to Americans on Saturday — is sure to stir anger among liberal Democrats who are determined to restore robust government spending on social programs.

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The consequences of chasing big profits through reckless investments

Posted by Yi-Xin Jin (Lily)

The current crisis is evidence of the reckless investments in highly leverage mortgage-backed securities and derivatives. Niall Ferguson wrote in his article “The Death of Planet Finance”, “The total annual issuance of mortgage-backed securities, including fancy new ‘collateralized debt obligations’ (C.D.O.’s), rose to more than $1 trillion. The volume of ‘derivatives’—contracts such as options and swaps—grew even faster, so that by the end of 2006 their notional value was just over $400 trillion. Before the 1980s, such things were virtually unknown” (Ferguson). Asset backed securities and derivatives have both grown at high rates in the recent years indicating that a lot of mortgages have been lent out, making it more risky for the credit crunch to happen. Despite the risk, investors and highly leverage investment banks still seek highly leveraged projects because of high yields from low interest rates. Various problems have also been occurring in the process of securitization of subprime loans but the real source of the problems lies in the mis-pricing of risk in the financial system.

Banks thought that the house market would keep rising, bringing in more profits without realizing how quickly the mortgages matured. This mis-pricing of risk created a maturity mismatch between the purchased assets and the liabilities that funded these assets in the banking sector. Since most investors preferred assets with short maturities, banks tried to increase profitability by creating off-balance sheet vehicles that would allow them to borrow short and lend long. The process of converting short-term liabilities into long-term assets made banks vulnerable because of the uncertainties in customer demand for repayment and the difficulty in raising new liquid assets.

Sources:

1. http://paul.kedrosky.com/archives/2008/11/06/niall_ferguson_1.html

2. http://www.nytimes.com/2008/03/24/opinion/24krugman.html

3. http://www.sebi.gov.in/commreport/rep40.pdf

In Asia, Clinton to Seek Alliance on Financial Crisis

By Jay Solomon

Copy and posted by Yulun Hung

ELMENDORF AIR FORCE BASE, Alaska -- Secretary of State Hillary Clinton, en route to Japan, said she will seek to develop a strong coordinated response to the global financial crisis between the U.S. and Asia's economic powers during her four-nation regional tour.

Mrs. Clinton cited, in particular, China's "robust stimulus plan" as the type of action the Obama administration is hoping to see from Asian nations in an effort to reenergize the global financial system.
"I will be discussing with [Asian countries] the approaches that they'll be taking" to stimulate their economies "and seeking greater cooperation," Mrs. Clinton told reporters aboard en route to Alaska from Washington. "The Chinese have a very robust stimulus plan…They are taking internal steps."

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Taming the Beast

Copy and Posted by Yi Xin Jin (Lily)

We’re now in the midst of an epic financial crisis, which ought to be at the center of the election debate. But it isn’t.

Now, I don’t expect presidential campaigns to have all the answers to our current crisis — even financial experts are scrambling to keep up with events. But I do think we’re entitled to more answers, and in particular a clearer commitment to financial reform, than we’re getting so far.

In truth, I don’t expect much from John McCain, who has both admitted not knowing much about economics and denied having ever said that. Anyway, lately he’s been busy demonstrating that he doesn’t know much about the Middle East, either.

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How big is the financial crisis?

Posted by: Allison Franklin

Financial crisis bigger threat than Al Qaeda, says US intelligence czar
Aziz Haniffa in Washington, DC

February 15, 2009 23:07 IST
The plunging global economy is an even bigger threat to the United States' national security than the al Qaeda terrorist network or proliferation of weapons of mass destruction, according to America's new intelligence czar.
Retired Admiral Dennis Blair, the Obama administration's Director of National Intelligence, in his first appearance before the US Congress, stated, "The primary near-term security concern of the United States is the global economic crisis and its geopolitical implications."
Traditionally, US intelligence chiefs always preface their opening remarks with either terrorist or nuclear proliferation threats, but Blair's first sentences in his testimony before the US Senate Select Committee on Intelligence was about the economy.
Blair said, "The crisis has been going on for over a year, and economists are divided over whether and when we could hit bottom. Some even fear that the recession could further deepen and reach the level of the Great Depression."
"Of course, all of us recall the dramatic political consequences wrought by the economic turmoil of the 1920s and 1930s in Europe, the instability, and high levels of violent extremism," he said.
"Though we don't know its eventual scale, it already looms as the most serious global and economic and financial crisis in decades," he added.
Blair pointed out, "Industrialised countries are already in recession and growth in emerging market countries, previously thought to be immune from industrialised countries' crises, has also faltered, and many are in recession as well."

To read the full story click here

Japan economy shrinks at fastest rate in 35 years

Posted by Lauren Cappelli

TOKYO (AP) - Strangled by the collapse in global export demand, Japan's economy shrank at its fastest rate in 35 years in the fourth quarter and shows no signs of reversing course anytime soon.

Japan's gross domestic product contracted 3.3 percent from the previous quarter, or an annual pace of 12.7 percent, in the October-December period, the government said Monday.
That was worse than expected and the steepest slide for Japan since the oil shock in 1974. It is more than triple the 3.8 percent annualized contraction in the U.S. in the same quarter.

"There is no question that this is the worst economic crisis since the end of World War II," said Economy Minister Kaoru Yosano. "The outcome clearly shows that Japan's export-dependent economy has been severely hit."

Chief Cabinet Secretary Takeo Kawamura went further, calling the economic downturn a once-in-a-century calamity.

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Toyota trims production further

The automaker says it may reduce hours at North American plants to cope with 'the worst automotive slump in decades.'

By Ben Rooney, CNNMoney.com staff writer
Posted by: Liwin Troy Lee

NEW YORK (CNNMoney.com) -- Toyota Motor Corp. is taking additional steps to scale back production at its North American plants, the automaker said Thursday, in anticipation of worsening auto sales.

Toyota said it will schedule additional "non-production days" in April at certain plants. The company has production facilities in Kentucky, California, Indiana and Texas.

Additionally, there is a "strong possibility" that Toyota will shorten work weeks at certain plants to 72 hours from 80 hours, a program the company calls "work sharing."

"This philosophy of shared sacrifice is the best approach for us, and hopefully will make us a stronger company in the long term," said Jim Wiseman, a Toyota spokesman, in a statement.

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Job Losses Pose a Threat to Stability Worldwide

- By Kevin Yu

From lawyers in Paris to factory workers in China and bodyguards in Colombia, the ranks of the jobless are swelling rapidly across the globe.

Worldwide job losses from the recession that started in the United States in December 2007 could hit a staggering 50 million by the end of 2009, according to the International Labor Organization, a United Nations agency. The slowdown has already claimed 3.6 million American jobs.

High unemployment rates, especially among young workers, have led to protests in countries as varied as Latvia, Chile, Greece, Bulgaria and Iceland and contributed to strikes in Britain and France.

Last month, the government of Iceland, whose economy is expected to contract 10 percent this year, collapsed and the prime minister moved up national elections after weeks of protests by Icelanders angered by soaring unemployment and rising prices.

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Economic Crisis going Global

Posted By Stephen Mills; Group1A

By Tomoko A. Hosaka, Associated Press Writer

TOKYO — Japan's economy contracted in the fourth quarter at the fastest pace in 35 years as a collapse in global demand battered the world's second-largest economy.

Japan's gross domestic product, or the total value of the nation's goods and services, dropped at an annual pace of 12.7% in the October-December period, the government said Monday.

The result represents the steepest drop for Japan since the oil shock of 1974 and far outpaces declines of 3.8% in the U.S. and 1.2% in the euro zone. A survey of economists by Kyodo news agency had projected an 11.6% contraction.

It also marks the third straight quarter of decline after the GDP fell 1.8% in the July-September period.

Fourth-quarter GDP fell 3.3% from the previous three-month period, and for 2008, it contracted 0.7% — the first decline in nine years, according to the Cabinet Office.

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Obama Pieces Together Economic Plan

By Xavier Guerrero

President-elect Barack Obama says his proposed stimulus package could create enough jobs to swallow up last year's 2.6 million job losses. In his weekly address, Obama says his administration will create jobs and help those who've lost theirs

Stimulus package passes, what now?

By Xavier Guerrero

The stimulus package was finally passed after much debate and delegation in the Senate. Obama's original budget, which at one point got up to $890 billion dollars for the package, ended up at $787 billion dollars. Although Obama's options have now been limited because of the reduction on the expected budget, he now takes the offensive on making the stimulus package work.

Since Obama inherited the financial crisis, he now has to keep working on some of the previous plans that were put into play in the Bush administration, for example, the financial bailout of $700 billion dollars that occured in 2008. Obama is now going to take up on step 2 of that financial bailout; he plans on leveraging the second portion of the bailout money into a program that could result in $2 trillion in government and private sector cash infusions to help banks and investment houses clear away some of their so-called "toxic" holdings and thereby spur lending. The part of his plan to help homeowners facing foreclosure is designed not only as succor to the public but to boost confidence in the financial community.

Obama is currently focused on taking the money out of Washington and into the economy.
For more information, click here.

Sources-
USAtoday.com
Newyorktimes.com