tag:blogger.com,1999:blog-84568515490704370542024-02-07T11:15:41.898-08:00RUNIN EconomistUnknownnoreply@blogger.comBlogger12125tag:blogger.com,1999:blog-8456851549070437054.post-76079303860854397012011-02-27T20:36:00.000-08:002011-04-21T11:35:10.015-07:00After the Wars, TARP stood as Bush's Last Stand<div dir="ltr" style="text-align: left;" trbidi="on"><br />
<div style="margin-bottom: 0.1pt; margin-left: 0in; margin-right: 0in; margin-top: 0.1pt;"><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-bottom: 0.5em; margin-left: 1em; padding-bottom: 6px; padding-left: 6px; padding-right: 6px; padding-top: 6px; text-align: right;"><tbody>
<tr><td style="text-align: center;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><a href="http://upload.wikimedia.org/wikipedia/commons/thumb/5/54/Lange-MigrantMother02.jpg/461px-Lange-MigrantMother02.jpg" imageanchor="1" style="clear: right; color: blue; margin-bottom: 1em; margin-left: auto; margin-right: auto; text-decoration: underline;"><img border="0" height="320" src="http://upload.wikimedia.org/wikipedia/commons/thumb/5/54/Lange-MigrantMother02.jpg/461px-Lange-MigrantMother02.jpg" style="cursor: move;" width="246" /></a></div></td></tr>
<tr><td class="tr-caption" style="font-size: 13px; padding-top: 4px; text-align: center;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;">Migrant Mother during the Great Depression</div></td></tr>
</tbody></table><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: x-large;">A</span></span><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;">s President Bush stated during a 2008 </span><a href="http://thinkprogress.org/2008/02/18/bush-iraq-economy/" style="color: blue; text-decoration: underline;"><span class="Apple-style-span" style="font-size: small;">Ann Curry NBC Today Show</span></a><span class="Apple-style-span" style="font-size: small;"> interview, “The Iraq and Afghanistan wars caused a boost to the economy.” Well initially it did -- this was the case in Washington, DC with rising expenditures in the Pentagon and defense contractors. But today, with the Obama Administration sharply cutting back on federal spending, that economic boost spurred by the government is finally tapering off. </span></span></div></div><div style="margin-bottom: 0.1pt; margin-left: 0in; margin-right: 0in; margin-top: 0.1pt;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="Apple-style-span" style="font-size: small;"><br />
</span></div></div><div style="margin-bottom: 0.1pt; margin-left: 0in; margin-right: 0in; margin-top: 0.1pt;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><b><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;">How Much Did the Wars Cost?</span></span></b></div></div><div style="margin-bottom: 0.1pt; margin-left: 0in; margin-right: 0in; margin-top: 0.1pt;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;">During a double-digit recession, the wars, which is now the <a href="http://joshingpolitics.blogspot.com/2008/03/did-iraq-war-cause-our-recession.html" style="color: blue; text-decoration: underline;">second-most expensive </a>in US history after WW II, have become a huge drain for an economy that is hurting for dollars. The fiscal burden of war is not just to execute to win but also to sustain the fight during the occupation stage. Additionally, American taxpayers will have to pay for the cost of the war throughout their life times, since there are many injured troops who have sustained lifelong disabilities and mental trauma. Furthermore, the huge cost of military spending has worsened the deficit ($1.5 trillion) requiring the government to make immediate and steep budget cuts, which the GOP-led House is now championing. Ironically, the GOP is fairly reticent in reminding Americans that it was President Bush's wars and tax cuts that led to this deficit (<a href="http://newsjunkiepost.com/2010/08/08/americans-forgetting-the-recession-began-under-bush-not-obama/" style="color: blue; text-decoration: underline;">Brookings Institute)</a></span></span></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="Apple-style-span" style="font-size: small;"><b><br />
</b></span></div><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="Apple-style-span" style="font-size: small;"><b>Housing Crisis was the Trigger</b></span></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;">But did the War lead us into a double-digit recession? Despite the $2 trillion plus spent so far, it is merely just <a href="http://www.cepr.net/index.php/economics-and-the-elections-the-war-and-the-recession/" style="color: blue; text-decoration: underline;">1% of our GDP</a>. It was instead the housing crisis that caused the US and other parts of the world to slip into a recession. Any good economist as early as 2005, could tell that the steep rise in the price of housing followed by the stock market bubble in the 90s was leading to a bubble that would eventually lead to severe consequences for our economy.</span></span></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="Apple-style-span" style="font-size: small;"><b><br />
</b></span></div><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="Apple-style-span" style="font-size: small;"><b>Was Bush to Blame?</b></span></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;">So was the Bush administration to blame? In my research on my previous paper on Frank Dodds, I was surprised to learn that it was the Bush administration (known for its support of <a href="http://en.wikipedia.org/wiki/Deregulation" style="color: blue; text-decoration: underline;">deregulation)</a> who wanted to keep tabs on both Freddie and Fannie.</span></span></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="Apple-style-span" style="font-size: small;"><b><br />
</b></span></div><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="Apple-style-span" style="font-size: small;"><b>Bush Wanted Oversight of Fannie/Freddie</b></span></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;">In 2005, President </span><span class="apple-style-span"><span class="Apple-style-span" style="font-size: small;">Bush (and also Sen McCain) wanted to </span><a href="http://bellalu0.wordpress.com/2008/09/17/bush-and-mccain-proposed-oversight-of-fannie-mae-and-freddie-mac/" style="color: blue; text-decoration: underline;"><span class="Apple-style-span" style="font-size: small;">transfer oversight of Fannie and Freddie to the HUD</span></a><span class="Apple-style-span" style="font-size: small;">. After the accounting scandals that hit Enron, </span><a href="http://www.scu.edu/ethics/dialogue/candc/cases/worldcom-update.html" style="color: blue; text-decoration: underline;"><span class="Apple-style-span" style="font-size: small;">WorldCom</span></a><span class="Apple-style-span" style="font-size: small;"> and others, this seemed like a good idea. President Bush did not feel that Congress could do its job in overseeing Fannie and Freddie, who had issued over $1.5 trillion in outstanding debt. </span></span></span></div><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"><span class="apple-style-span"><span class="Apple-style-span" style="font-size: small;"><b><br />
</b></span></span></span></div><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="Apple-style-span" style="font-size: small;"><b>Democrats Oppose Transfer</b></span></div><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"><span class="apple-style-span"><span class="Apple-style-span" style="font-size: small;">But Rep Barney Franks, the ranking Democrat in the Financial Services Committee, strongly opposed this bill. This clear act of partisanship turned out to be a huge mistake, because reining in Fannie and Freddie and preventing them from investing in risky securities could have significantly alleviated the housing crisis.</span></span></span></div><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"></span></div><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"></span></div><span style="font-family: 'Times New Roman';"></span><br />
<span style="font-family: 'Times New Roman';"><blockquote><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><i>"These two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis," said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." Rep Frank</i></div></blockquote><br />
<span class="Apple-style-span" style="font-size: small;"><b>The Fiascos of Fannie and Freddie</b></span></span></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;"> Financial giants such as </span><a href="http://en.wikipedia.org/wiki/Freddie_Mac" style="color: blue; text-decoration: underline;"><span class="Apple-style-span" style="font-size: small;">Freddie Mac </span></a><span class="Apple-style-span" style="font-size: small;">and </span><a href="http://online.wsj.com/article/SB10001424052748704657104576141891006477826.html" style="color: blue; text-decoration: underline;"><span class="Apple-style-span" style="font-size: small;">Fannie Mae</span></a><span class="Apple-style-span" style="font-size: small;"> with the government asleep at the switch, played in intricate role in the leveraging of the sub-prime market. The Bush administration felt that Fannie and Freddie were cooking their books so Treasury Secretary John Snow proposed placing the companies under the Treasury oversight with strict controls over risk and capital.</span></span><br />
<div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="apple-style-span"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;">Even if the Bush administration was successful in transferring oversight of Freddie and Fannie to the HUD, the housing crisis would likely not have been completely averted. However, it is possible that the HUD would have found the subprime market problematic and sounded alarm bells sooner which could have possibly significantly lessened the impact.</span></span></span></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="Apple-style-span" style="font-size: small;"><br />
</span></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="apple-style-span"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;">Nevertheless, the Bush administration with the backing of the Federal Reserve, failed to convince Congress to transfer oversight until it was way too late. During this time, interest rates stayed abnormally low, making it cheaper for consumers to buy houses. After origination, mortgages were then repackaged and sold as securities such as <a href="http://www.bloggingstocks.com/2008/01/18/why-the-bush-debt-recession-will-topple-clintons-equity-recessi/" style="color: blue; text-decoration: underline;">Collateralized Debt Obligations (CDO). </a> And when they ran out of borrowers, they mortgage industry found a way to make sub-prime loans to people who couldn't afford them.</span></span></span></div><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="apple-style-span"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;"><b><br />
</b></span></span></span></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="Apple-style-span" style="font-size: small;"><b>Were Americans at Fault?</b></span></div></div><div style="margin-bottom: 0.1pt; margin-left: 0in; margin-right: 0in; margin-top: 0.1pt;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;">The </span></span><span style="font-family: 'Times New Roman';"><a href="http://en.wikipedia.org/wiki/Subprime_mortgage_crisis" style="color: blue; text-decoration: underline;"><span class="Apple-style-span" style="font-size: small;">mortgage crisis</span></a></span><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;"> began in 2007 after a sharp rise in mortgage delinquencies and foreclosures.</span></span><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;"> </span></span><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;">About 80% of the mortgages issued from around 2005--2007 were adjustable-rate mortgages (</span></span><span style="font-family: 'Times New Roman';"><a href="http://runinfixer.blogspot.com/search/label/Atlantic%20Streetb" style="color: blue; text-decoration: underline;"><span class="Apple-style-span" style="font-size: small;">I know, I was issued a couple of them from refinances</span></a></span><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;"> on a few of my rental properties in SE DC which I used mainly for repairs and renovation. In many ways, I and my borrowing habits contributed to the Housing crisis.</span></span></div></div><div style="margin-bottom: 0.1pt; margin-left: 0in; margin-right: 0in; margin-top: 0.1pt;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="Apple-style-span" style="font-size: small;"><br />
</span></div></div><div style="margin-bottom: 0.1pt; margin-left: 0in; margin-right: 0in; margin-top: 0.1pt;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;">Some may argue that the American public should have stayed on its toes and applied some pressure on these companies to stop such risky investment. But lets face it, middle class America was able to purchase homes that they would have never dreamed of buying in the past, and the average person would assume that these large banking and investment firms would have been reasonable and not have invested more money than they could risk in investments that were very risky. The books should have all balanced out. Liabilities should never have been greater than assets but greed and mismanagement got the best of them.</span></span><span class="Apple-style-span" style="font-size: small;"><span style="font-family: 'Times New Roman';"></span></span></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="Apple-style-span" style="font-size: small;"><b><br />
</b></span></div><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="Apple-style-span" style="font-size: small;"><b>Money Could Have Have Stamped out World Hunger</b></span></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;">But despite the fact, that the wars did not cause the recession, with the myriad of problems we are facing today, it was not a prudent way to spend money. That $2 to $3 trillion dollars could have been better spent providing healthcare to the uninsured, feeding the poor, stamping out illiteracy around the world, etc. In addition there were second-tiered effects since our indebtedness from the wars contributed to disastrous <a href="http://money.cnn.com/news/storysupplement/economy/bailouttracker/" style="color: blue; text-decoration: underline;">monetary policy and regulations</a> which favored low interest rates spurring the real estate bubble. Because of the burgeoning costs of both wars (which far superseded earlier projections of only <a href="http://newsjunkiepost.com/2010/08/08/americans-forgetting-the-recession-began-under-bush-not-obama/" style="color: blue; text-decoration: underline;">$100 to 200 billion</a>), the Federal Reserve flooded the American economy with <a href="http://joshingpolitics.blogspot.com/2008/03/did-iraq-war-cause-our-recession.html" style="color: blue; text-decoration: underline;">cheap credit </a>to help pay for it. Quite frankly, without the burden of managing two wars, our government could have focused on our economy and reacted sooner and more comprehensively.</span></span></div><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;"><span class="Apple-style-span" style="color: #29303b; font-family: Georgia, 'Times New Roman', sans-serif; font-size: 13px; font-style: italic; line-height: 20px;"></span></span></span></div><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;"></span></span></div><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;"></span></span><br />
<span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;"><blockquote><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;">"The regulators were looking the other way and money was being lent to anybody this side of a life-support system." </div></blockquote><blockquote><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><a href="http://joshingpolitics.blogspot.com/2008/03/did-iraq-war-cause-our-recession.html" style="color: blue; text-decoration: underline;">Professor Joseph Stiglitz</a>, a Nobel prize winning economist at the Columbia Business School and a former economic adviser to President Clinton.</div></blockquote></span></span><br />
<div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="Apple-style-span" style="font-size: small;"><br />
</span></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><div class="separator" style="clear: both; font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhv7PzEYX1wFqw4O40h1HwiQk_ezsTharO4YowHxcg5KP_UYxFx1t9C8zP01qK7bZFiHWqXiIUmH8uUKh6u0734nJV6NroAWr0uAexIL9PQebZuk4yqsC7rYb_YcrXxpB825v8RLxoExr1j/s1600/Screen+shot+2011-02-27+at+10.56.14+PM.png" imageanchor="1" style="color: blue; margin-left: 1em; margin-right: 1em; text-decoration: underline;"><img border="0" height="226" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhv7PzEYX1wFqw4O40h1HwiQk_ezsTharO4YowHxcg5KP_UYxFx1t9C8zP01qK7bZFiHWqXiIUmH8uUKh6u0734nJV6NroAWr0uAexIL9PQebZuk4yqsC7rYb_YcrXxpB825v8RLxoExr1j/s320/Screen+shot+2011-02-27+at+10.56.14+PM.png" style="cursor: move;" width="320" /></a></div><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;">By, 2008, with our economy on the <a href="http://www.denverpost.com/financialcrisis/ci_15645520" style="color: blue; text-decoration: underline;">brink of collapse</a>, President Bush had one last chance to keep our country from slipping into a depression. From 9/11 to Katrina, Bush’s eight-years in office was full of turmoil and catastrophe – would there be one more that would eclipse the Great Depression of the 1930’s? Amazingly, President Bush <a href="http://keithhennessey.com/2010/02/23/bipartisan-successes/" style="color: blue; text-decoration: underline;">rose to the challenge</a>, quickly gaining </span><a href="http://www.theatlantic.com/politics/archive/2010/09/tarp-the-forbidden-bipartisan-success/63803/" style="color: blue; text-decoration: underline;"><span class="Apple-style-span" style="font-size: small;">bipartisan</span></a><span class="Apple-style-span" style="font-size: small;"> support and decisively <a href="http://en.wikipedia.org/wiki/Emergency_Economic_Stabilization_Act_of_2008" style="color: blue; text-decoration: underline;">bailing out the Automotive Industry, the Banking Industry, the Housing Industry</a> and many others.</span></span></div><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;"><br />
</span></span></div><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;">Congress authorized <a href="http://www.denverpost.com/financialcrisis/ci_15645520" style="color: blue; text-decoration: underline;">$700 billion</a> for the <a href="http://money.cnn.com/news/storysupplement/economy/bailouttracker/" style="color: blue; text-decoration: underline;">Troubled Asset Relief Program </a>(TARP) which by itself added 3.4 percent to the GDP and added almost 2.7 million jobs. With this money, Congress purchased distressed assets, especially mortgage-backed securities, and made capital injections to banks.</span></span></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="Apple-style-span" style="font-size: small;"><br />
</span></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;">Chairman Ben Bernake warned Bush sternly that if he didn’t act fast, our country would slip into another <a href="http://en.wikipedia.org/wiki/Great_Depression" style="color: blue; text-decoration: underline;">Great Depression</a>. Secretary Paulson said that “We may not have an economy on Monday.” Despite all the past missteps, the government’s action during this very critical and dire time in history was far reaching and just the right intervention that rescued our economy from falling off a cliff.</span></span></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span class="Apple-style-span" style="font-size: small;"><br />
</span></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><div style="font-family: 'Times New Roman'; font-size: 10pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;">Today, not only have the majority of the loans been paid off, the government is actually <a href="http://www.bnet.com/blog/business-decision/tarp-8217s-success-proves-washington-8217s-talent/328" style="color: blue; text-decoration: underline;">starting to make money</a>. The government proved its mettle during the most difficult time in Bush’s administration. It proved that government intervention (as opposed to Laissez Faire) does work. Ironically, the government performed well as a bank and got paid back a lot sooner and more completely than expected with more government money.</span></span><br />
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<span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;"> <!--StartFragment--> </span></span><br />
<span style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-size: small;"><div class="MsoNormal" style="margin-bottom: .1pt; margin-left: 0in; margin-right: 0in; margin-top: .1pt; mso-para-margin-bottom: .01gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .01gd;"><span style="font-family: "Times New Roman";">With the world financial crisis (US, Greece, Dubai, Ireland, etc.), these scenarios prove that John Maynard Keynes may have been right all along – that government intervention during times of economic turmoil” is exactly what’s needed.<span style="mso-spacerun: yes;"> </span>Keynes also argued that the private sector can be inefficient and that the public sector needs to be more responsive.<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: .1pt; margin-left: 0in; margin-right: 0in; margin-top: .1pt; mso-para-margin-bottom: .01gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .01gd;"><span style="font-family: "Times New Roman";">Thus a key public policy recommendation is more government regulation (However, with the budget deficit, this would have to be conducted with less government).<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: .1pt; margin-left: 0in; margin-right: 0in; margin-top: .1pt; mso-para-margin-bottom: .01gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .01gd;"><br />
</div><div class="MsoNormal" style="margin-bottom: .1pt; margin-left: 0in; margin-right: 0in; margin-top: .1pt; mso-para-margin-bottom: .01gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .01gd;"><span style="font-family: "Times New Roman";">It was faulty public policy of deregulation and home ownership that led to the financial crisis.<span style="mso-spacerun: yes;"> </span>Thus the public policy should have been given greater oversight of Fannie and Freddie and the Housing Market.<span style="mso-spacerun: yes;"> </span>Ironically, in 2005, President Bush wanted to transfer oversight of Fannie and Freddie to the HUD, after accounting scandals had hit Enron, Worldcom and many others. Sadly, Rep Barney Franks and the Financial Services Committee stuck with party lines and opposed this proposal.<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: .1pt; margin-left: 0in; margin-right: 0in; margin-top: .1pt; mso-para-margin-bottom: .01gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .01gd;"><br />
</div><div class="MsoNormal" style="margin-bottom: .1pt; margin-left: 0in; margin-right: 0in; margin-top: .1pt; mso-para-margin-bottom: .01gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .01gd;"><span style="font-family: "Times New Roman";">It was also the federal government’s public policy (both Republicans and Democrats) that promoted home ownership through FHA and allowing buyers to purchase homes with the smallest down payment possible.<span style="mso-spacerun: yes;"> </span>Sadly, Fannie and Freddie had enormous lobbying powers and were able to influence Congress who didn’t want to vote against Congress.<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: .1pt; margin-left: 0in; margin-right: 0in; margin-top: .1pt; mso-para-margin-bottom: .01gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .01gd;"><br />
</div><div class="MsoNormal" style="margin-bottom: .1pt; margin-left: 0in; margin-right: 0in; margin-top: .1pt; mso-para-margin-bottom: .01gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .01gd;"><span style="font-family: "Times New Roman";">This policy for increased home ownership was devastating to our economy and was a huge factor that led to the financial crisis.<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: .1pt; margin-left: 0in; margin-right: 0in; margin-top: .1pt; mso-para-margin-bottom: .01gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .01gd;"><br />
</div><div class="MsoNormal" style="margin-bottom: .1pt; margin-left: 0in; margin-right: 0in; margin-top: .1pt; mso-para-margin-bottom: .01gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .01gd;"><span style="font-family: "Times New Roman";">Today, the housing market in some areas have stabilized thanks to improving public policy in this area.<span style="mso-spacerun: yes;"> </span>Additionally, home owners who were able to modify their loans were able to receive an average of 36 percent reduction in their mortgage payments.<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: .1pt; margin-left: 0in; margin-right: 0in; margin-top: .1pt; mso-para-margin-bottom: .01gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .01gd;"><br />
</div><div class="MsoNormal" style="margin-bottom: .1pt; margin-left: 0in; margin-right: 0in; margin-top: .1pt; mso-para-margin-bottom: .01gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .01gd;"><span style="font-family: "Times New Roman";">With TARP, the government performed well as a bank and got paid back a lot sooner and more completely than expected (with more government money).<span style="mso-spacerun: yes;"> </span>In addition, unemployment has come down (although slightly).<span style="mso-spacerun: yes;"> </span>Since the government bailed out the banks, the government is relying on them to spur the economic recovery.<span style="mso-spacerun: yes;"> </span>The government<span style="mso-spacerun: yes;"> </span>(Secretary Geithner) is pushing for a more liberal monetary policy so that banks can lend more to individuals as well as businesses.<span style="mso-spacerun: yes;"> </span>Sadly, many banks (who are flush with cash) are still lending very little of its bailout funds – this needs to change in order for the economy to recover more quickly.<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: .1pt; margin-left: 0in; margin-right: 0in; margin-top: .1pt; mso-para-margin-bottom: .01gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .01gd;"><br />
</div><div class="MsoNormal" style="margin-bottom: .1pt; margin-left: 0in; margin-right: 0in; margin-top: .1pt; mso-para-margin-bottom: .01gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .01gd;"><span style="font-family: "Times New Roman";">The government proved its mettle during the most difficult time in Bush’s administration. It proved that government intervention (as opposed to Laissez Faire) does work and both the government and the private sector needs to work side-by-side.<span style="mso-spacerun: yes;"> </span>Today as borrowing costs have come down, larger businesses have raised substantial capital from private sources.<span style="mso-spacerun: yes;"> </span>Now the government should continue pushing hard for the <b style="mso-bidi-font-weight: normal;">small businesses</b> (which hires half of American workers and is thus crucial for economic recovery) to tap government money.<span style="mso-spacerun: yes;"> </span>In doing so, the government can provide incentives to banks who cater to small businesses.<span style="mso-spacerun: yes;"> </span>This can be done under the umbrella of TARP.<span style="mso-spacerun: yes;"> </span>So even with the past success, TARP can be leveraged towards creating jobs and even cutting the deficit.<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: .1pt; margin-left: 0in; margin-right: 0in; margin-top: .1pt; mso-para-margin-bottom: .01gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .01gd;"><br />
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</span></span></div></div><div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: 12pt; margin-bottom: 0.0001pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"></div></div>Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-8456851549070437054.post-60644748514519351972011-02-20T20:57:00.000-08:002011-02-27T21:02:49.844-08:00Will Dodd Frank Survive the GOP?<div dir="ltr" style="text-align: left;" trbidi="on"><br />
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<tr><td style="text-align: center;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><a href="http://images.politico.com/global/news/100527_frank_dodd_ap_218.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://images.politico.com/global/news/100527_frank_dodd_ap_218.jpg" style="cursor: move;" /></a></div></td></tr>
<tr><td class="tr-caption" style="font-size: 13px; padding-top: 4px; text-align: center;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Rep Frank and Sen Dodd</div></td></tr>
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<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span class="Apple-style-span" style="font-size: x-large;">I</span>n 2005, President <span class="Apple-style-span" style="font-family: georgia; font-size: x-small;">Bush (and also Sen McCain) Wanted to <a href="http://bellalu0.wordpress.com/2008/09/17/bush-and-mccain-proposed-oversight-of-fannie-mae-and-freddie-mac/">Transfer Oversight of Fannie and Freddie to the HUD</a>. </span><span class="Apple-style-span" style="font-family: georgia; font-size: x-small;">After the accounting scandals that hit Enron, <a href="http://www.scu.edu/ethics/dialogue/candc/cases/worldcom-update.html">WorldCom</a> and others, this seemed like a good idea. President Bush did not feel that Congress could do its job in overseeing Fannie and Freddie, who had issued over $1.5 trillion in outstanding debt. But Rep Barney Franks, the ranking Democrat in the Financial Services Committee, strongly opposed this bill. This turned out to be a big mistake, because reining in Fannie and Freddie could have significantly alleviated the housing crisis.</span></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Financial giants such as <a href="http://en.wikipedia.org/wiki/Freddie_Mac">Freddie Mac </a>and <a href="http://online.wsj.com/article/SB10001424052748704657104576141891006477826.html">Fannie Mae</a> played in intricate role in the industry and its problems. The Bush administration felt that Fannie and Freddie were cooking their books so Treasury Secretary John Snow proposed placing the companies under the Treasury oversight with strict controls over risk and capital.</div><blockquote><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><i>"These two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis," said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." Rep Frank</i></div></blockquote><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Since 2008, both Fannie and Freddie were placed in <a href="http://en.wikipedia.org/wiki/Federal_takeover_of_Fannie_Mae_and_Freddie_Mac">conservatorship </a>by the US government. Since then the Dodd-Frank Wall Street Reform act have been put into place in order to prevent market meltdowns again. However, the bill has left out Fannie and Freddie. Now with a GOP controlled Congress, the House are starting to debate how to reform these government sponsored enterprises. A <a href="http://www.electran.org/MorningScoop/?p=271">House Financial Services Committee</a> has called for weighing the "costs and benefits" of Dodd-Frank "to improve those parts that work well while changing those parts that do not." Meanwhile, <a href="http://www.newsmax.com/InsideCover/Michele-Bachmann-Frank-Dodd/2011/01/06/id/382092">Rep Michele Bachmann</a> has introduced legislation to repeal the full bill.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Contrary to this argument is that government is in place to protect its citizens from corporations that are out solely for the purpose of making a profit.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><b><br />
</b></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><b>Budget Deficit</b></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Meanwhile because the <a href="http://www.washingtonpost.com/wp-dyn/content/article/2010/07/23/AR2010072304101.html">US is over $1 trillion in the hole</a>, the government needs to start making significant cuts. This bipartisan initiative means that the government will have less capital to implement Dodd-Franks.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">America has certainly evolved from an era of sole industry giants, and government share holding. All persons most of the time are seeking what its in the best of their interest and regulations more often than not seek to prevent further abuse in such quest, often hurting opportunity and advantages one could have gained had it not been for such.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span class="Apple-style-span" style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-family: Times;"><br />
</span></span></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span class="Apple-style-span" style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-family: Times;"></span></span></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span class="Apple-style-span" style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-family: Times;"></span></span></div><span class="Apple-style-span" style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-family: Times;"><div class="MsoNormal"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span style="font-family: 'Times New Roman';">Lets looks at the facts of what has occurred since the </span><a href="http://en.wikipedia.org/wiki/Dodd%E2%80%93Frank_Wall_Street_Reform_and_Consumer_Protection_Act#Criticism"><span style="color: #0000eb; font-family: 'Times New Roman';">The Dodd-Frank Wall Street Reform and Consumer Protection Act</span></a><span style="font-family: 'Times New Roman';"> was proposed in late 2009, and shortly months afterwards was signed into law by President Obama. The Act in itself calls for a wave of sector regulations in the financial market, in hopes of identifying and prevent future market shocks as the ones created by the housing market but also calls for the creation of a new consumer agency that broadens the power of government and shifts responsibility from consumers to industry. In addition, the Obama administration will need to create a replacement for Fannie and Freddie. The creation of these bureaus are currently being scrutinized by the Senate.<o:p></o:p></span></div></div><div class="MsoNormal"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div></div><div class="MsoNormal"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span style="font-family: 'Times New Roman';">It has been over six months since the Dodd-Franks bill was passed and very little progress has been made. In fact, the SEC, one of the most important players of Dodd-Frank has been just “squeaking by” because they are quickly running out of money. Meanwhile, House Republicans today unveiled a plan to cut $61 billion from fiscal 2010 levels set by the Obama administration. If these massive cuts are passed, not only would the government find it hard to fund Obama care, but also implement the vast majority of the measures in the Dodd-Franks bill.<o:p></o:p></span></div></div></span></span><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span class="Apple-style-span" style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="font-family: Times;"><br />
</span></span></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div class="MsoNormal"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span style="font-family: 'Times New Roman';">Some of the highlights of the legislation calls for consumer protections with authority and independence. Housed at the Federal Reserve, it would provide consumers with information on financial products and market practices. Another intricate part of the bill interesting to the private sector is the end of so called government </span><a href="http://en.wikipedia.org/wiki/Bailout"><span style="color: #0000eb; font-family: 'Times New Roman';">bailouts</span></a><span style="font-family: 'Times New Roman';">. This practice which had been seen in the late 2000's and in the midst of the financial crisis had outraged million of Americans while saving some of this nations largest corporations from imminent failure. The Act also called for an advance warning system to identify and address risks in any given sector before they affect the market as a whole. This is still a controversial topic and remains to be expanded as to how far of a reaching power it may have on the free markets. Other things include such things and calls for transparency and accountability for exotic instruments, interfering in executive compensation and corporate governance, protection for investors, and a call for regulation of current statues and laws already in the books.<o:p></o:p></span></div></div><div class="MsoNormal"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div></div><div class="MsoNormal"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span style="font-family: 'Times New Roman';">This bill thus creates an independent Watchdog that is housed at the Federal Reserve with the authority to ensure that Americans get the accurate information they need on banks and other financial products. It calls for the government to have more involvement in hopes of avoiding future risks to our financial market. The Consumer Financial Protection bureau would be comprised of several pieces. These include: the necessity for a Financial Head with independent budget. They would also have an independent rule writing and examination and enforcement of these. <o:p></o:p></span></div></div><div class="MsoNormal"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div></div><div class="MsoNormal"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span style="font-family: 'Times New Roman';">The government has also set up a new hotline that consumers can use to report abuses, much like a complaint hotline. However, the Republican controlled House is hoping to </span><a href="http://www.cnbc.com/id/39537984/How_Republicans_May_Change_Dodd_Frank_After_Elections"><span style="color: #0000eb; font-family: 'Times New Roman';">eliminate the funding </span></a><span style="font-family: 'Times New Roman';">for the consumer watchdog.<o:p></o:p></span></div></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
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</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">As you might expect government is a much needed part in a civilized society. Having taking a look at our nations past history and in times of financial boom and bust, one can agree that a government that works hand-in-hand with the private sector and in the interest of the people is one that works best. The idea that a single act or piece of legislation will root out all greed and self interest in the system is certainly a fallacy. In my opinion its up to each and every one of us to take personal responsibility for our actions, including those of investments, and at the same time try to share a common sense of personal responsibility in generations to come.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span class="Apple-style-span" style="font-family: 'Times New Roman';"><span class="Apple-style-span" style="line-height: 32px;"><span class="Apple-style-span" style="font-family: Times;"><span class="Apple-style-span" style="line-height: normal;"><br />
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</div><div class="MsoNormal"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span style="font-family: 'Times New Roman';">Most of Dodd-Frank’s provisions have a deadline of one year. That means we have past the half-way point, with the second half been all uphill. Although Republicans want to repeal the act, all they might be able to do is to trim around the edges. In light of significant costs to implement and massive budget cuts been proposed, perhaps the two parties should come to a consensus on what can be trimmed, so that the Bill can take effect in protecting consumers. <o:p></o:p></span></div></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
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</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Now that the Republicans are in control of Congress, they want to roll back the bill by trimming the edges.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Contrary to what government has tried to convince the public of in the last past years, America was made great by private industry both by smalls businesses and giant corporations. Can America regain its competitive edge?</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><u><br />
</u></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">For more information and details on the act visit:</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><a href="http://banking.senate.gov/public/_files/070110_Dodd_Frank_Wall_Street_Reform_comprehensive_summary_Final.pdf">http://banking.senate.gov/public/_files/070110_Dodd_Frank_Wall_Street_Reform_comprehensive_summary_Final.pdf</a></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-8456851549070437054.post-40968204922285643472010-12-07T08:40:00.000-08:002011-02-27T21:08:44.149-08:00Obama Extending Bush Tax Cuts<div dir="ltr" style="text-align: left;" trbidi="on"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjiDf6KHCOIPTmBzRTgbHWIGVXpaYL_8kEZeJF-NkhsCS06NgepMWVt-Rkh5lkFaCKVCXlZ8xcsszjlIutPBZE5GMl-2qQNJc6qiBzh1DZakmN7jJAMP7AJ186CV26dR01-qIC91ngIlyQ/s1600/Screen+shot+2010-12-07+at+11.32.42+AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="410" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjiDf6KHCOIPTmBzRTgbHWIGVXpaYL_8kEZeJF-NkhsCS06NgepMWVt-Rkh5lkFaCKVCXlZ8xcsszjlIutPBZE5GMl-2qQNJc6qiBzh1DZakmN7jJAMP7AJ186CV26dR01-qIC91ngIlyQ/s640/Screen+shot+2010-12-07+at+11.32.42+AM.png" width="640" /></a></div><br />
<span class="Apple-style-span" style="border-collapse: collapse; font-family: arial, sans-serif;"><span class="Apple-style-span" style="font-size: x-large;">I</span></span><span class="Apple-style-span" style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;"> think stocks maybe looking up for rest of the year. Why, because short of a major conflict in the Middle East or Asia, there's no expected bad news ahead that could spook the markets. How about Gold -- perhaps Gold which had a wonderful run so far this year, can take a little respite.</span><br />
<div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;"><br />
</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;">Surprise tax cut boost from <span class="Apple-style-span" style="color: #222222;">the President</span> (I was shocked that the White House would concede w/ GOP). As you may know, I believe strongly in government intervention and regulation. I'm not a supporter of Laissez Faire and from my visit to Greece this summer, I don't believe neo-liberalism works.</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;"><br />
</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;">President Obama didn't really want to extend the cuts for the wealthy. But this was a good concession. I give him credit for this. Better for tax cuts for the wealthy than no tax cuts for the poor and middle-class.</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;"><br />
</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;">The GOP backed the President's plan to extend the 13 mos unemployment benefits paid to jobless workers -- this is huge for these folks to continue spending. And it was wise of Obama to leverage this lame duck session to get his initiatives accomplished.</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;"><br />
</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;">Additionally payroll tax was decreased for folks making less than 40K a year putting $800 more into their pockets -- these are folks throughout America.</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;"><br />
</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;">As stocks rally, Bonds slump. This pushes the Yield up.</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;"><br />
</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;"><span style="background-color: yellow;">If this stimulus and cut is the start of something big that could spur economic growth, watch rates to rise over the next year.</span></div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;">So far, retailers are doing better than expected this holiday season (both bricks and mortar and online)</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;"><br />
</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;">This helps the economy and the stock market in the short term. But how about long term? Many Dems are accusing the White House for capitulating to the GOP.</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;"><br />
</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;">Also many Monetarists claim that consumer spending is a fallacy of <a href="http://www.cato-at-liberty.org/the-consumer-spending-fallacy-behind-keynesian-economics/">Keynesian Economics</a>.</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;"><br />
</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;">They say that consumer spending does not necessarily drive the GDP.</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;"><br />
</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;">Y = C + I + G</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;"><br />
</div><div style="border-collapse: collapse; font-family: arial, sans-serif; font-size: 19px;">In this case, C increases, G increases (stimulus). But does Y increase?</div></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-8456851549070437054.post-31415562002862285822010-10-17T10:46:00.000-07:002010-10-17T10:46:26.147-07:00Artificial Diamonds and Impact of Loss in InventoryNeida makes and sells diamond earrings. Cost and market price largely determined by the price of diamonds. <a href="http://abcnews.go.com/Technology/story?id=6251103&page=1">Artificial diamonds </a>have really improved especially in China. Sometimes, <a href="http://www.professionaljeweler.com/archives/news/2000/070700story.html">detection</a> can be challenging.<br />
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Neida is concerned that these earrings will undercut her sales. But then she says "As long as I don't sell any of the diamonds that I purchased at the old, higher price, I won't make a loss."<br />
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<div style="font: 12.0px Helvetica; margin: 0.0px 0.0px 0.0px 0.0px;"><img alt="ainventory.jpg" src="webkit-fake-url://9400FE75-501F-4070-899E-56C7B0FCE5EF/ainventory.jpg" /></div><br />
<i><br />
</i><br />
<i>In this figure, Neida's old diamonds are part of the beginning inventory. So, she already took a loss on the diamonds. </i><br />
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Is this statement true?<br />
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</span></b><br />
<b>Answer: </b> No, Neida incurred a loss on the diamonds in the inventory when the market price for diamonds dropped. The current value of old and new diamonds is same and it does not matter which one she sells.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-8456851549070437054.post-22051370307787937222010-09-19T12:00:00.000-07:002010-09-19T12:00:26.612-07:00The Coming of the $1 Cupcake<span class="Apple-style-span" style="font-family: 'Lucida Grande'; font-size: small;"><span class="Apple-style-span" style="font-size: 11px;"><br />
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<span class="Apple-style-span" style="font-family: 'Lucida Grande'; font-size: small;"><span class="Apple-style-span" style="font-size: 11px;"></span></span><br />
<span class="Apple-style-span" style="font-family: 'Lucida Grande'; font-size: small;"><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span class="Apple-style-span" style="font-family: 'Lucida Grande'; font-size: small;"><span class="Apple-style-span" style="font-size: 11px;"><span class="Apple-style-span" style="font-family: Times;"><span class="Apple-style-span" style="font-size: medium;"><br />
</span></span></span></span></div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"></div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span class="Apple-style-span" style="font-size: xx-large;">S</span>o last night, my date introduced me to the wonderful world of cupcakes. Red Velvet cupcakes to be exact (Penn Quarter near Chinatown). And before last night, I was not a believer.</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div class="separator" style="clear: both; font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; text-align: center;"><a href="http://www.recipegirl.com/wp-content/uploads/2008/08/red-velvet-cupcakes.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="286" src="http://www.recipegirl.com/wp-content/uploads/2008/08/red-velvet-cupcakes.jpg" style="cursor: move;" width="320" /></a></div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">So what is behind the rise in the popularity behind the elusive world of cupcakes? Though my Red Velvet was super sweet and delightfully delicious, it wasn't something to write home about or nutritious enough to substitute for lunch or dinner.</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">So clearly, the cupcakes are considered a luxury item. And with prices that surpass $3 per cake, sampling a few can easily set you back $15-20. (For this price, I could buy a burrito and a six pack of domestics)</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">The production of cupcakes is relatively inexpensive. There are only a few flavors, the raw material is cheap and so is the labor to produce and sell. In addition, product inventory is low and since all their stores are tiny matchboxes, with lines that stretch outside a block long, the amount of rent they pay is minimized (they should pay the city for renting out the sidewalk).</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Since there were only a handful of favors (Red Velvet and Chocolate), Process Costing (used in companies that make many units of similar products) equals Total Manufacturing cost/Total Unit Produced.</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Cupcakes seem to sell well without much marketing. All you need to do is head for the long lines. Thus, they are able to bring in a lot of customers without having to spend much on overhead (marketing). The women are crazy over it, and the men are lining up because their girlfriends asked them to do it.</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">With a low <a href="http://wiki.answers.com/Q/How_do_you_calculate_manufacturing_overhead_costs">manufacturing overhead cost</a>, their <a href="http://www.brainmass.com/homework-help/economics/cost-benefit-analysis/204279">Predetermined Overhead Rate</a> is also relatively low.</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div class="separator" style="clear: both; font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; text-align: center;"><a href="http://www.raybromley.com/notes/noteimages/equilibrium/incrdemsup2.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="276" src="http://www.raybromley.com/notes/noteimages/equilibrium/incrdemsup2.jpg" style="cursor: move;" width="400" /></a></div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">So with high revenues, do things look all rosy for the cupcake industry? For the time being, yes, but in the long run -- a different picture.</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">First, I'm willing to stick my neck out and say that the cupcake industry is benefitting from its recent wave of popularity (Thanks to Sex in the City) as well as the downturn in the economy (Most people consider cupcakes as an affordable luxury -- a way to feel good about rewarding yourself with a trendy cupcake without breaking the bank).</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Since it's relatively easy to make cupcakes (I'm sure even I could learn how to if I had the patience), and the start-up investment costs is much smaller than opening a cafe or restaurant, there currently is new competition sprouting up all over town. I bet it won't be long before they open up cupcake kiosks in Giant and Safeway.</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Huge returns naturally attracts competition. Extra competition attracts capacity. Now with more supply, the cupcake stores' incentive is to lower prices so that they can retain some of that business. </div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Meanwhile demand remains constant and may decline over time, as people lose their adoration for them and the men get tired of waiting those long lines or realize this is wrecking havoc on their diets.</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">So, despite my great experience with Red Velvet (thanks to my friend), I'm not yet hooked (like I am for stand-up paddling) and fortunately for us, with new competition and lower prices, things don't look all rosy for the cupcake industry.</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="font-family: Times; font-size: medium; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Yes, my friend, there will be a $1 cupcake in the not too distant future.</div><div style="font-family: Times; font-size: medium;"></div></span>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-8456851549070437054.post-2323495001078314542010-09-19T07:13:00.000-07:002010-09-19T07:19:01.865-07:00Things No Longer Gray East of the River<span class="Apple-style-span" style="font-size: x-large;">L</span>ast week, Chairman Gray soundly beat incumbent DC Mayor, Adrian Fenty.<br />
<br />
Gray won mostly from votes in the predominantly African American neighborhoods east of the Anacostia River (<a href="http://Last week, Chairman Gray soundly beat incumbent DC Mayor, Adrian Fenty. Gray won mostly from votes in the predominantly African American neighborhoods east of the Anacostia River (83% in Ward 8) One of Gray's top campaign promises is to bring jobs and economic development to the high unemployment communities (Unemployment tops 28%) It's foreseeable that Gray can get this done. He has lived in this community for many years and major developments are already happening today. The Department of Homeland Security is currently building their headquartes in St Elizabeths (billed as the largest construction project in the history of the U.S. General Services Administration) This project is expected to bring more than 30,000 jobs (both direct and indirect employment) during its duration with a payroll earnings of approximately $1.2 billion. Gray will ensure that these projects hire local Washingtonians first and that Ward 8 will be the first to benefit. More local jobs mean more social services and less drugs. Everyone knows that illicit drugs is a major source of crime (both violent and petty). So, provided that the economy in Ward 8 improves drastically over the next four years, meaning more jobs for the residents and higher Gross Domestic Product, the crime rate will surely decrease. Here is a Supply and Demand model where the X-axis is GDP and the Y-axis is money. Over time, as the economy improves and so does the GDP, the amount of wealth within the community increases. With more jobs, greater wealth, the rate of crime (drug related, robbery, assault, rape) will also decrease. So things are no longer looking Gray for Southeast.">83% in Ward 8</a>)<br />
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One of Gray's top campaign promises is to bring jobs and economic development to the high unemployment communities (<a href="http://washington.bizjournals.com/washington/stories/2009/11/02/daily35.html">Unemployment tops 28%</a>)<br />
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It's foreseeable that Gray can get this done. He has lived in this community for many years and major developments are already happening today. <br />
<div class="separator" style="clear: both; text-align: center;"><a href="http://prorev.com/Image49.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="337" src="http://prorev.com/Image49.gif" width="400" /></a></div><br />
The Department of Homeland Security is currently building their headquartes in St Elizabeths (billed as the <a href="http://www.gsa.gov/portal/content/104271">largest construction project</a> in the history of the U.S. General Services Administration)<br />
This project is expected to bring more than 30,000 jobs (both direct and indirect employment) during its duration with a payroll earnings of approximately $1.2 billion.<br />
<br />
Gray will ensure that these projects hire local Washingtonians first and that Ward 8 will be the first to benefit. More local jobs mean more social services and less drugs. Everyone knows that illicit drugs is a major source of crime (both violent and petty).<br />
<br />
<div style="text-align: right;"></div>So, provided that the economy in Ward 8 improves drastically over the next four years, meaning more jobs for the residents and higher <a href="http://en.wikipedia.org/wiki/Gross_domestic_product">G</a>ross Domestic Product, the crime rate will surely decrease.<br />
<br />
Here is a Supply and Demand model where the X-axis is GDP and the Y-axis is money.<br />
<div class="separator" style="clear: both; text-align: center;"><a href="http://www.harpercollege.edu/mhealy/ecogif/asad/asodec.gif" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://www.harpercollege.edu/mhealy/ecogif/asad/asodec.gif" /></a></div><br />
Over time, as the economy improves and so does the GDP, the amount of wealth within the community increases. <br />
<br />
With more jobs, greater wealth, the rate of crime (drug related, robbery, assault, rape) will also decrease.<br />
<br />
So things are no longer looking Gray for Southeast.Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-8456851549070437054.post-36637699583587875832010-09-04T08:17:00.000-07:002010-10-05T08:47:46.403-07:00The Supply and Demand for Cash for Clunkers<div class="separator" style="clear: both; text-align: center;"><a href="http://cache.gawker.com/assets/images/12/2009/07/504x_CashClunkers.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="214" src="http://cache.gawker.com/assets/images/12/2009/07/504x_CashClunkers.jpg" width="320" /></a></div><span class="Apple-style-span" style="font-family: 'Lucida Grande';"><br />
</span><br />
<span class="Apple-style-span" style="font-family: 'Lucida Grande';"><span class="Apple-style-span" style="font-size: x-large;">S</span>o you want to buy a car? New or used? It does make a difference, and the Cash for Clunkers program that seemed like a great idea at first may not be so hot after all.</span><br />
<span class="Apple-style-span" style="font-family: 'Lucida Grande';"><br />
</span><br />
<span class="Apple-style-span" style="font-family: 'Lucida Grande';">Well, for starters, Cash for Clunkers seemed like a great idea at first. But it has to do with supply and demand. </span><br />
<span class="Apple-style-span" style="font-family: 'Lucida Grande';"><br />
</span><br />
<div class="separator" style="clear: both; text-align: center;"><a href="http://blog.heritage.org/wp-content/uploads/2009/08/clunkers0908111.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="198" src="http://blog.heritage.org/wp-content/uploads/2009/08/clunkers0908111.jpg" width="320" /></a></div><span class="Apple-style-span" style="font-family: 'Lucida Grande';">A lot of people, 700,000 really, traded in their old cars for a nice government rebate. So a lot of cars were being sold and inventories came down, bringing up prices.</span><br />
<span class="Apple-style-span" style="font-family: 'Lucida Grande';"><br />
</span><br />
<span class="Apple-style-span" style="font-family: 'Lucida Grande';"><br />
</span><br />
<span class="Apple-style-span" style="font-family: 'Lucida Grande';">But that was the last time auto dealers had a boon in sales. People were just buying their vehicles earlier, moving up their purchases from the fall and even spring and summer of 2010. </span><br />
<span class="Apple-style-span" style="font-family: 'Lucida Grande';"><br />
</span><br />
<span class="Apple-style-span" style="font-family: 'Lucida Grande';"><span class="Apple-style-span" style="color: #444444; font-family: Helvetica, Arial, sans-serif; font-size: 19px; line-height: 34px;"></span></span><br />
<div style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: inherit; font-size: 19px; font-style: inherit; font-weight: inherit; margin-bottom: 10px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">According to economists Amir Sufi of the University of Chicago and Atif Mian of University of California-Berkeley:<span id="more-42338" style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: inherit; font-size: 19px; font-style: inherit; font-weight: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"></span></div><blockquote style="background-attachment: scroll; background-clip: initial; background-color: transparent; background-image: url(http://blog.heritage.org/wp-content/themes/foundry09/style/images/struct/bg-quote.png); background-origin: initial; background-position: 0px 34px; background-repeat: no-repeat no-repeat; border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; color: #555555; font-family: inherit; font-size: 1.1em; font-style: italic; font-weight: inherit; margin-bottom: 15px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 15px; padding-left: 25px; padding-right: 0px; padding-top: 15px; vertical-align: baseline;"><div style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: inherit; font-size: 21px; font-style: inherit; font-weight: inherit; margin-bottom: 10px; margin-left: 0px; margin-right: 0px; margin-top: 10px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">The government’s “cash for clunkers” program boosted auto sales by 360,000 during the two months it was in place, according to a <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1670759" style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; color: #226094; font-family: inherit; font-size: 21px; font-style: inherit; font-weight: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: underline; vertical-align: baseline;" target="_blank">new study</a>. But in the seven months that followed, sales were down by 360,000 compared to what they would have been without the program, the study found.</div></blockquote><span class="Apple-style-span" style="font-family: 'Lucida Grande';">The one good thing this program did was that it saved thousands of dealerships unprepared for the economic downtown from going under. They were able to clear their huge backlog of cars sitting on their lots.</span><br />
<span class="Apple-style-span" style="font-family: 'Lucida Grande';"><br />
</span><br />
<span class="Apple-style-span" style="font-family: 'Lucida Grande';">A year later, the price of used cars have gone up about 10% because now the inventory of used cars have gone down. The government destroyed the clunkers, many of them (680,000) could have been recycled as used cars.</span><br />
<span class="Apple-style-span" style="font-family: 'Lucida Grande';"><br />
</span><br />
<span class="Apple-style-span" style="font-family: 'Lucida Grande';">Also, with consumer confidence low, Americans are forgoing buying new cars, so the demand for used cars have gone up.</span><br />
<div><span class="Apple-style-span" style="font-family: 'Lucida Grande';"><br />
</span><br />
<span class="Apple-style-span" style="font-family: 'Lucida Grande';">So was this good for consumers and the economy? Or was it just good for the environment?</span></div>Unknownnoreply@blogger.com21tag:blogger.com,1999:blog-8456851549070437054.post-66405018304176843682010-08-13T16:01:00.000-07:002010-08-13T16:01:02.155-07:00The Greek Financial Crisis<blockquote><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span class="Apple-style-span" style="color: blue;">"Greece brought us Sophocles and his tragedies. Now another huge "modern" travesty is unfolding right in front of eyes."</span></div></blockquote><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div class="separator" style="clear: both; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; text-align: center;"><a href="http://i.dailymail.co.uk/i/pix/2010/05/06/article-1273741-096C61B7000005DC-457_634x377.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="237" src="http://i.dailymail.co.uk/i/pix/2010/05/06/article-1273741-096C61B7000005DC-457_634x377.jpg" width="400" /></a></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Is the country of Greece -- the societies that brought the ancient world to its height in art, culture and warfare -- about to fall apart?</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Will this country's crisis bring an end to the European Union?</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Will Greece become insolvent?</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><b><br />
</b></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><b>The 2004 Olympics</b></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><b><br />
</b></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><a href="http://www.ronebergcairns.com/2004olympics/2004olympics_00001.gif" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="320" src="http://www.ronebergcairns.com/2004olympics/2004olympics_00001.gif" width="201" /></a>In the early part of this decade, Greece was basking in glory. Greece was preparing for the return of the olympics since the very first International games were held in <a href="http://www.2008.com/cmarter.asp?doc=189">Athens in 1896</a>, when 13 countries participated.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Greece has not exhibited much discipline in spending. Since the 1997 when Greece won the bid to hosts the games, construction was slow and costs had soared. And today, not only is Greece still paying for the olympics, but the <a href="http://www.examiner.com/business-of-sports-in-national/did-the-2004-athens-olympics-contribute-to-the-greece-financial-meltdown">Olympics</a> has not helped Greece's bottom line.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><b>Greece Greed</b></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Many young people I spoke with told me that the crisis in Greece was caused by greed, overspending and severe fiscal irresponsibility.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><b>Neo liberalism</b> empowers private corporation and banks who lend money and become richer and more powerful. It is a label for the <a href="http://en.wikipedia.org/wiki/Economic_liberalism">economic liberalism</a> which has become increasingly popular worldwide in the last 40 years.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">This type of economy de-emphasizes government intervention and instead focuses on the <a href="http://en.wikipedia.org/wiki/Free-market">free-market</a></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">In the US, President Reagan and the Republican Party were the leading proponents of new liberalism. One of the main pillars of <a href="http://en.wikipedia.org/wiki/Reaganomics">Reaganomics</a> was to reduce government regulation of the economy.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">A similar situation of a smaller scale occurred a few years ago in the US with the emergence of the sub-prime mortgage business and the government's inability to regulate business. Read the post on <a href="http://runineconomist.blogspot.com/2009/11/mighty-meltdown.html">Runin Economist</a></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><b>Greece and the IMF</b></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Breaking News: The <a href="http://www.imf.org/external/country/grc/index.htm">IMF</a> has given Greece a Euro 30 Billion three-year loan as part of a joint EU-IMF Euro 110 billion financing package. As a result, Greece will have to agree to implement some harsh steps. First, the government will cut the public sector workers' pay by 20%, raise the retirement age, increase sales tax to 23%, increase the price of tobacco products, alcohol and gas by 10%, increase taxes on property and businesses, etc. Even if all these measures are implemented, Greece's debt could actually continue to skyrocket while their economy shrinks drastically.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Now I see why the people of Greece are really upset.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">It seems in Greece, the crisis was caused by <b>corruption and cronyism</b>. In addition, the country was not diligent in collecting taxes from all its citizens. Now the common people will have to pay for the mistakes and crime<span class="Apple-style-span" style="background-color: white;">s of those in the government and corporate world.</span></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span class="Apple-style-span" style="background-color: white;"><br />
</span></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span class="Apple-style-span"><span class="Apple-style-span" style="background-color: white;">Greece brought us Sophocles and his tragedies. Now another huge "modern" travesty is unfolding right in front of eyes.</span></span></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><b><br />
</b></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><b>The Young Voices</b></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><b><br />
</b></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><b><span class="Apple-style-span" style="font-weight: normal;">I had met so many young people all around Athens who told me that they were ashamed. Despite their degrees, they didn't have a job. There was no hope; their country had no future. This is why they are speaking out; this is why they are protesting.</span></b></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><b><br />
</b></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><b>Impact on Tourism</b></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">With the economy in sad state, I am happy to be in Greece to patronize its tourism business. So far this summer, the tourism industry has taken a huge hit. During the protests, many of the ancient sites were closed, and many tourists were afraid of the <a href="http://www.dailymail.co.uk/travel/article-1273741/Athens-riots-Latest-travel-advice-Greece-debt-crisis-protests.html">violence reported in the news</a>. Meanwhile neighboring Turkey has gotten a boost in tourism.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Hopefully, London can make their 2012 Games profitable and within budget.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Hopefully Greece will not become insolvent like Iceland and Dubai.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Hopefully, the world can learn from Greece's mistakes.</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Hopefully, the young people I met in Athens were wrong -- They don't need to be ashamed and they do have a future.</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-8456851549070437054.post-21160569187951491922009-11-10T07:44:00.000-08:002009-11-10T09:43:17.426-08:00HR and Finance as One -- Previously Perceived as Toxic and UnrelatedHuman Relations and Finance are two very different departments that separate but interrelated. Normally the two departments don't talk to each other.<div><br /></div><div>Finance is critical to the bottom line and firm's existence. Since resources are scarce, it is critical for managers to keep the bottom line in mind when negotiating decisions.</div><div><br /></div><div>That is why, HR and Finance within the same company sometimes have conflicting goals.</div><div><br /></div><div>One criticism that corporate leaders have on HR is that HR managers are not very familiar with how the firm makes money. So HR professionals need to know and understand financial statements to gain credibility in the wardrooms. </div><div><br /></div><div>Often HR is encharged to provide headcount information which is critical in hiring or reducing the workforce. If an HR professional can also make an argument why the hiring or firing makes business and financial sense, then he/she can be more effective in negotiating and becoming a trusted advisor. </div>Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-8456851549070437054.post-14661308222339294562009-11-10T07:16:00.000-08:002010-05-17T22:05:14.844-07:00The History of Management<span class="Apple-tab-span" style="white-space: pre;"> </span>Modern management is the unison of people and technology to create something of worth. Earlier on in our country's history, the innovators of machines were mostly engineers. They were the ones who understood how machines worked and they operated them.<br />
<div><br />
</div><div>During the turn of the 20th century, Frederick Taylor created the term "<a href="http://www.mgmtguru.com/mgt301/301_Lecture1Page8.htm">Scientific Management</a>". Taylor started out as one of the first management theorist and consultant. </div><div><br />
</div><div>Taylor developed the following principles to his management theory.</div><div><br />
</div><div>1) Management is a true science. Creating a harmonious work environment with good work standards and practices can be executed by research and experimentation and applied across the board throughout the corporate world and government.</div><div><br />
</div><div>2) The selection of workers is a science. Taylor believed that interviewing and hiring employees and assigning them to the job that was most suitable for them and the company could be executed methodically.</div><div><br />
</div><div>3) Workers should be developed and trained -- this is management's responsibility to standardize responsibilities across the board.</div><div><br />
</div><div>4) Scientific management involves a collaboration of both workers and managers.</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-8456851549070437054.post-25069634071216436352009-11-06T18:15:00.000-08:002009-11-08T19:59:20.187-08:00How Tweeting Can Sell Seats and Save Lives<div><br /></div><div><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgA2-GoB5MTniTmFtAxPpjW5BSC0p_zzNZ2zbEC28ve08qV0Weic5BcbIGA_i-5LDkfap_l-rZKXDxeBVu3Q8CBxjeyL7PRqRJSOB83a6R4lhsplvnJtaJ1-vxXxCIU2exmW_0PTFnC9fY/s1600-h/Slide1.jpg"><img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgA2-GoB5MTniTmFtAxPpjW5BSC0p_zzNZ2zbEC28ve08qV0Weic5BcbIGA_i-5LDkfap_l-rZKXDxeBVu3Q8CBxjeyL7PRqRJSOB83a6R4lhsplvnJtaJ1-vxXxCIU2exmW_0PTFnC9fY/s400/Slide1.jpg" border="0" alt="" id="BLOGGER_PHOTO_ID_5401170248581109026" style="display: block; margin-top: 0px; margin-right: auto; margin-bottom: 10px; margin-left: auto; text-align: center; cursor: pointer; width: 400px; height: 300px; " /></a><span class="Apple-style-span" style=" ;font-size:large;"><br /></span><div style="text-align: left; "><span class="Apple-style-span" style="color:#0000EE;"><span class="Apple-style-span" style="text-decoration: underline; "><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"><br /></span></span></span></span></div><div style="text-align: left; "><span class="Apple-style-span" style="line-height: 25px; "><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> </span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">The airline industry has suffered through a tough and unforgiving decade. From the economic effects arising from the </span></span><a href="http://en.wikipedia.org/wiki/Economic_effects_arising_from_the_September_11_attacks"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">'</span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> to the current global recession to the </span></span><a href="http://en.wikipedia.org/wiki/2009_flu_pandemic"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">swine </span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">flu, the downtrodden industry has taken a huge hit in virtually every front: global terrorism on American soil, </span></span><a href="http://runineconomist.blogspot.com/2009/11/mighty-meltdown.html"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">global economic recession</span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">and a global swine flu pandemic.</span></span></span></div><span class="Apple-style-span" style="font-family:'Times New Roman', fantasy;"><p class="MsoNormal" style="line-height: 19pt; "><span><o:p><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style=" ;font-size:large;"> </span></span><span class="Apple-style-span" style=" ;font-size:large;">Even before the 9/11 attacks, the airline industry was experiencing significant losses and reduced ticket sales. After the attacks, airline share prices dropped sharply, which exacerbated the airlines' already bumpy financial situation.</span></span></o:p></span></p><p class="MsoNormal" style="line-height: 19pt; "><span><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> </span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">To boost the fledging industry, the federal government provided an aid package of $10 billion in loan guarantees and $ 5 billion in short term assistance</span></span><a href="http://www.blogger.com/post-edit.g?blogID=6778602529213654826&postID=626571948505077251#_edn1" name="_ednref" title=""><span class="MsoEndnoteReference"><span><span class="Apple-style-span" style="color:#000000;"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">[i]</span></span></span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">.</span></span></span></p><p class="MsoNormal" style="text-indent: 0.5in; line-height: 19pt; "><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">By 2006, the airline industry was just beginning to recover when it was hit again by another devastating volley.</span></span><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> </span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">This time the global economic tsunami that started in late 2007 swept the airline industry putting a sharp halt to airline ticket sales.</span></span></span></p><p class="MsoNormal" style="text-indent: 0.5in; line-height: 19pt; "><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">With the worldwide recession hitting people’s pocketbooks, less people had the disposable income to fly leisurely. </span></span><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"></span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">In addition, with the advance in technology and the speed of telecommunications, many companies began to discern the greater economic value of teleconferencing from their desktops over conducting face-to-face meetings. Moreover, the </span><a href="http://en.wikipedia.org/wiki/2000s_energy_crisis"><span class="Apple-style-span" style=" ;font-size:large;">higher oil prices</span></a><span class="Apple-style-span" style=" ;font-size:large;"> coupled with falling demand rocked the airline industry. In a sense, we had the makings of the perfect economic storm which severely affected the industry’s bottom line with a revenue downturn larger than that of 9/11</span></span><a href="http://www.blogger.com/post-edit.g?blogID=6778602529213654826&postID=626571948505077251#_edn2" name="_ednref" title=""><span class="MsoEndnoteReference"><span><span class="Apple-style-span" style="color:#000000;"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">[ii]</span></span></span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">.</span></span></span></p><p class="MsoNormal" style="text-indent: 0.5in; line-height: 19pt; "><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">Surpisingly, despite the large financial market and auto bailouts that the federal government provided over the last year, the airline industry has yet to ask for a huge infusion of cash.</span></span></span></p><p class="MsoNormal" style="text-indent: 0.5in; line-height: 19pt; "><span><o:p><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">2009, the current year, started out as a tumultuous period for aviation accidents- one with a happy ending with everyone miraculously surviving and one with a tragic ending with total loss of life.</span></span><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> </span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">Both stories garnered significant media coverage resulting in tremendous interest and concern regarding safety of flight from both Congress and the American people.</span></span><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> </span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">Thus it is critical to start our assessment and market audit analyzing the most talked-about aviation news stories and discussing the qualitative effect it had on both the airline industry and air safety.</span></span><span class="Apple-style-span" style="font-weight: bold; "><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"></span></span></span></o:p></span></p><p class="MsoNormal" style="line-height: 19pt; "><b><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">#1 Miracle on the Hudson</span></span></span></b></p><p class="MsoNormal" style="text-indent: 0.5in; line-height: 19pt; "><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">The most viewed aviation news story in the US in 2009 is luckily the most good news human interest story in this industry as far back as we can remember. </span></span><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"></span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">CAPT Sully Sullenberger’s heroic actions and poise during the historic water landing into the frigid Hudson River created the most revered aviation icon since Amelia Earhart tried to fly around the world in 1937 becoming a champion for women’s causes and a hero for all Americans who aspire to change the world.</span></span></p><p class="MsoNormal" style="line-height: 19pt; "><span><o:p><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"></span></span><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> </span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">On Jan 15, 2009, </span><a href="http://en.wikipedia.org/wiki/US_Airways_Flight_1549"><span class="Apple-style-span" style=" ;font-size:large;">US Airways Flight 1549</span></a><span class="Apple-style-span" style=" ;font-size:large;"> was a scheduled flight from New York City to Charlotte, North Carolina. While on climb, the plane struck a flock of Canadian Geese resulting in compressor stalls and a loss of thrust for both engines.</span></span></o:p></span></p><p class="MsoNormal" style="line-height: 19pt; "><span><o:p><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"></span></span><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> </span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">When the crew discovered that the plane would not be able to reach any airfield from its location, </span><a href="http://en.wikipedia.org/wiki/Chesley_Sullenberger"><span class="Apple-style-span" style=" ;font-size:large;">CAPT Sullenberger </span></a><span class="Apple-style-span" style=" ;font-size:large;">turned the plane southbound and glided it over the Hudson River where it landed near the USS Intrepid aircraft carrier museum.</span></span></o:p></span></p><p class="MsoNormal" style="line-height: 19pt; "><span><o:p><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"></span></span></o:p></span></p><p class="MsoNormal" style="text-indent: 0.5in; line-height: 19pt; "><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">Immediately after the plane had been ditched into the river. All 150 passengers exited the plane via its wings or from an inflated slide deployed from the front from the right side passenger door.</span></span><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> </span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">After twice walking the length of the cabin to confirm that no one remained inside, </span></span><a href="http://en.wikipedia.org/wiki/Chesley_Sullenberger"><u><span style="text-decoration: none; "><span class="Apple-style-span" style="color:#000000;"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">CAPT Sully Sullenberger </span></span></span></span></u></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">was the last person to exit the aircraft.</span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"><o:p></o:p></span></span></span></p><p class="MsoNormal" style="line-height: 19pt; "><span><o:p><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"></span></span><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> </span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">CAPT Sullenberger and the crew were immediately recognized for their stellar and incredible performance under immense pressure saving the lives of everyone on board. </span></span><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"></span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">Over the next several months, Sully became a national icon and </span></span><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"></span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">an American hero for an industry that desperately needed good branding and persona recognition for someone who Americans can trust and admire.</span></span><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> </span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">Today after writing a book and going on a busy speaking circuit delivering a potent message of professionalism and courage, Sully has returned to what he loves best – taking the stick in the cockpit taking responsibility of everyone’s safety and comfort within his own hands. For many flyers, there may be nothing more reassuring and inspiring than to sit in the plane and hear the voice of CAPT Sully on the PA system.</span></span></o:p></span></p><p class="MsoNormal" style="line-height: 32px; "><b><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">#2 Colgan Air Tragedy</span></span></span></b></p><span class="Apple-style-span" style="font-family:Georgia, fantasy;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiZKDZIJeTIz7kIxghft9kBqg8c3wSbi4xdHxo7fHC7Hg8mRPqDaPGtxaIfgAihEOCP_nigkN_10FcJ312sbtBjCRoJgX01MoOjEwfesELaLjHWdg9drI_U8qRzSZ317SUGdCbSmDU3M3k/s1600-h/6480863879.jpg.400.jpg"><span class="Apple-style-span" style=" ;font-size:large;"><br /></span></a></span><p class="MsoNormal" style="text-indent: 0.5in; line-height: 32px; "><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">Less than a month after the “Miracle on the Hudson”, Colgan Air Flight 3407 marked as the Continental Connection experienced the second year-to-date aviation accident in the state of New York. The commuter plane experienced significant ice buildup on the aircraft’s wings and windscreen shortly before the crash. The National Transportation Safety Board (NTSB) investigation showed that the pilot had failed numerous tests during his career suggesting that he may not have been adequately trained to respond to the emergency that led to the aircraft’s fatal descent. Crew fatigue was also a grave concern since both pilots spent the previous day and night at the Newark airport prior to the 9:18 pm departure</span></span><a href="http://www.blogger.com/post-edit.g?blogID=6778602529213654826&postID=626571948505077251#_edn1" name="_ednref" title=""><span class="MsoEndnoteReference"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">[i]</span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">.</span></span></span></p><p class="MsoNormal" style="text-indent: 0.5in; line-height: 32px; "><span class="Apple-style-span" style="font-family:georgia, -webkit-fantasy;"><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style=" ;font-size:large;"> </span><i><span class="Apple-style-span" style=" ;font-size:large;"> </span></i></span><i><span class="Apple-style-span" style=" ;font-size:large;">(Photo from Jetphoto.net)</span></i></span></p><p class="MsoNormal" style="text-indent: 0.5in; line-height: 32px; "><span class="Apple-style-span" style="font-family:georgia, -webkit-fantasy;"><span class="Apple-style-span" style="line-height: normal; font-family:Georgia, -webkit-fantasy;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiZKDZIJeTIz7kIxghft9kBqg8c3wSbi4xdHxo7fHC7Hg8mRPqDaPGtxaIfgAihEOCP_nigkN_10FcJ312sbtBjCRoJgX01MoOjEwfesELaLjHWdg9drI_U8qRzSZ317SUGdCbSmDU3M3k/s1600-h/6480863879.jpg.400.jpg"><img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiZKDZIJeTIz7kIxghft9kBqg8c3wSbi4xdHxo7fHC7Hg8mRPqDaPGtxaIfgAihEOCP_nigkN_10FcJ312sbtBjCRoJgX01MoOjEwfesELaLjHWdg9drI_U8qRzSZ317SUGdCbSmDU3M3k/s400/6480863879.jpg.400.jpg" border="0" alt="" id="BLOGGER_PHOTO_ID_5401172038851658434" style="float: right; margin-top: 0px; margin-right: 0px; margin-bottom: 10px; margin-left: 10px; cursor: pointer; width: 400px; height: 277px; " /></a><span class="Apple-style-span" style=" line-height: 32px; font-family:georgia, -webkit-fantasy;font-size:large;">Although the investigators focused on training, qualification and pilot fatigue, the media, the American public and Congress honed in on the shocking detail that Colgan Air pilots as well as many other regional aircrew face long commutes, low pay and second jobs. The analogy that resonated well with the public was the revealing comparison between a bus driver and a pilot: “Most people would be shocked to hear that the train or bus operator who ferries passengers to the airport makes a lot more money than the pilot who is responsible for all the lives onboard.” (Although true, this information can be misleading. Pilot pay per hour is higher than bus and train operators. The distinction is that bus and train operators can work overtime, while commercial air transport pilots are limited to 100 hours of lying in a month).</span></span></span></p><p class="MsoNormal" style="line-height: 32px; "><span><o:p><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style=" ;font-size:large;"> </span></span><span class="Apple-style-span" style=" ;font-size:large;">This low wage and sometimes lower skill labor situation prevalent within regionals is a tragic byproduct of the weakened economy and the overall impact on the airline industry that is struggling to streamline and pare down. As a result, many airlines have been forced to fly with more empty seats or cut back on the number of flights altogether as they watch customer traffic fall sharply from the sidelines. For many less-traveled routes, the major network airlines have shifted from the larger 100 to 150 body airplanes to the 50 to 70 seat regional jets or turboprops flown by their smaller affiliates. While the five U.S. network airlines posted a $4.4 billion operating loss over the past 12 months, the top 20 regional airlines amassed a $785 million profit.</span></span><a href="http://www.blogger.com/post-edit.g?blogID=6778602529213654826&postID=626571948505077251#_edn2" name="_ednref" title=""><span class="MsoEndnoteReference"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">[ii]</span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> This is a tremendous and well-received silver lining for the current gloomy economic downturn. However, the regional pilots are still significantly underpaid compared to their counterparts who work the same hours for the big networks. Many of these pilots are forced to work a second job in the evenings in order to make ends meet resulting in a notable impact on crew rest and fatigue.</span></span></o:p></span></p><p class="MsoNormal" style="line-height: 32px; "><span><o:p><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"></span></span><span class="Apple-style-span" style="font-weight: bold; "><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">#3 Wayward Pilots Aboard Northwest</span></span></span></o:p></span></p><span class="Apple-style-span" style="font-family:Georgia, fantasy;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhCThUFMOHziJ76pXPB4O3_nvV7YECCYwbgwwyXkz2eeDf3FDkX1QPfHpYJa4Bp5XJoKKxvmSDcE7n5POtBRytkMz33AEz1yEUnEDhf3nul7YHGmckUffLbCP29iMOzWc_1VpTVtI0TFIE/s1600-h/vlcsnap-2009-10-23-11h48m51s231-1.jpg"><span class="Apple-style-span" style=" ;font-size:large;"><br /></span></a></span><p class="MsoNormal" style="line-height: 32px; "><span class="Apple-style-span" style="font-family:georgia, -webkit-fantasy;"><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style=" ;font-size:large;"> </span></span><span class="Apple-style-span" style=" ;font-size:large;">While the airline industry has come under scrutiny in the field of customer satisfaction, the sentiment and respect the American people have for pilots have for the most part remained unscathed. That is why the story of how two pilots overflew their Minnesota airport destination by 150 miles is almost unbelievable. Normally a story that did not have a tragic ending would not garner significant news interest during a busy news season. However, because the pilots denied falling asleep on the job and admitted doing personal work on their laptops, this questionable statement increased the sensationalism and shock value of this bizarre story. It is incomprehensible for many Americans even those who don’t know the slightest thing about aircraft handling to see how the pilots could over fly their destination by such a large degree. Since the Federal Aviation Administration (FAA) has revoked the license of both pilots, the Airlines Pilot Association (ALPA) has assumed the critical role in providing legal assistance and representation of the two pilots in any legal or administrative courts. However, due to the tremendous media interest, ALPA should also consider representing the pilots in the court of public opinion since this could have more impactful repercussions in the airline industry and flight safety overall.</span></span></p><p class="MsoNormal" style="line-height: 32px; "><span class="Apple-style-span" style="font-family:georgia, -webkit-fantasy;"><span class="Apple-style-span" style="line-height: normal; font-family:Georgia, -webkit-fantasy;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhCThUFMOHziJ76pXPB4O3_nvV7YECCYwbgwwyXkz2eeDf3FDkX1QPfHpYJa4Bp5XJoKKxvmSDcE7n5POtBRytkMz33AEz1yEUnEDhf3nul7YHGmckUffLbCP29iMOzWc_1VpTVtI0TFIE/s1600-h/vlcsnap-2009-10-23-11h48m51s231-1.jpg"><img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhCThUFMOHziJ76pXPB4O3_nvV7YECCYwbgwwyXkz2eeDf3FDkX1QPfHpYJa4Bp5XJoKKxvmSDcE7n5POtBRytkMz33AEz1yEUnEDhf3nul7YHGmckUffLbCP29iMOzWc_1VpTVtI0TFIE/s400/vlcsnap-2009-10-23-11h48m51s231-1.jpg" border="0" alt="" id="BLOGGER_PHOTO_ID_5401171931950866098" style="float: left; margin-top: 0px; margin-right: 10px; margin-bottom: 10px; margin-left: 0px; cursor: pointer; width: 400px; height: 298px; " /></a></span></span></p><p class="MsoNormal" style="line-height: 32px; "><span class="Apple-style-span" style="font-family:georgia, -webkit-fantasy;"><b><span class="Apple-style-span" style=" ;font-size:large;"><br /></span></b></span></p><p class="MsoNormal" style="line-height: 32px; "><span class="Apple-style-span" style="font-family:georgia, -webkit-fantasy;"><b><span class="Apple-style-span" style=" ;font-size:large;"><br /></span></b></span></p><p class="MsoNormal" style="line-height: 32px; "><span class="Apple-style-span" style="font-family:georgia, -webkit-fantasy;"><b><span class="Apple-style-span" style=" ;font-size:large;"><br /></span></b></span></p><p class="MsoNormal" style="line-height: 32px; "><span class="Apple-style-span" style="font-family:georgia, -webkit-fantasy;"><b><span class="Apple-style-span" style=" ;font-size:large;"><br /></span></b></span></p><p class="MsoNormal" style="line-height: 32px; "><span class="Apple-style-span" style="font-family:georgia, -webkit-fantasy;"><b><span class="Apple-style-span" style=" ;font-size:large;"><br /></span></b></span></p><p class="MsoNormal" style="line-height: 32px; "><span class="Apple-style-span" style="font-family:georgia, -webkit-fantasy;"><b><span class="Apple-style-span" style=" ;font-size:large;"><br /></span></b></span></p><p class="MsoNormal" style="line-height: 32px; "><span class="Apple-style-span" style="font-family:georgia, -webkit-fantasy;"><b><span class="Apple-style-span" style=" ;font-size:large;"><br /></span></b></span></p><p class="MsoNormal" style="line-height: 32px; "><b><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">#4 Swine and Airline</span></span></span></b></p><p class="MsoNormal" style="line-height: 32px; "><b><span><span class="Apple-style-span" style=" ;font-size:large;"><span class="Apple-style-span" style="font-family:georgia;"></span></span><span class="Apple-style-span" style="font-weight: normal; "><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style=" ;font-size:large;"> </span></span><span class="Apple-style-span" style=" ;font-size:large;">Another challenge to the airline industry was the spread of the swine flu. In late April 2009, when the first cases of </span></span><a href="http://en.wikipedia.org/wiki/2009_flu_pandemic"><u><span style="text-decoration: none; color:windowtext;"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">H1N1</span></span></span></u></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> were reported in the United States, the World Health Organization declared a "public health emergency of international concern". Combined with the detrimental effects of the recession on ticket sales, the swine flu spelled deep trouble for the airlines.</span></span></span></span></b></p><p class="MsoNormal" style="line-height: 32px; "><span><o:p><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"></span></span></o:p></span></p><p class="MsoNormal" style="text-indent: 0.5in; line-height: 32px; "><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">The airline industry is very vulnerable to the spread of the swine flu and other bacterial-related communicable diseases which can be spread between humans by coughing, sneezing or by touching. The swine flu is most contagious during the first five days of the illness while children can be contagious for up to ten days</span></span><a href="http://www.blogger.com/post-edit.g?blogID=6778602529213654826&postID=626571948505077251#_edn3" name="_ednref" title=""><span class="MsoEndnoteReference"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">[iii]</span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">.</span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"><o:p></o:p></span></span></span></p><p class="MsoNormal" style="text-indent: 0.5in; line-height: 32px; "><span class="Apple-style-span" style="font-family:georgia, -webkit-fantasy;"><span class="Apple-style-span" style=" ;font-size:large;">The swine flu could not have happened at a worse time for this industry. Sadly, more than any other sector, the airline industry was hit hardest by the H1N1 pandemic.</span></span></p><p class="MsoNormal" style="line-height: 32px; "><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">With the exception of Mexicana and other Mexico-based airlines, the US airline industry was impacted the most since the World Health Organization severely restricted travel to Mexico. Every U.S. network carrier flies to Mexico. Some airlines like Continental fly an average of 450 flights a week to Mexico.</span></span><a href="http://www.blogger.com/post-edit.g?blogID=6778602529213654826&postID=626571948505077251#_edn4" name="_ednref" title=""><span class="MsoEndnoteReference"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">[iv]</span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"></span></span></span></p><p class="MsoNormal" style="text-indent: 0.5in; line-height: 32px; "><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">Swine flu originated in the rural villages of Mexico and spread briskly throughout all parts of the world, through the freedom and free limits of air travel. Many customers who didn’t want to risk getting sick or getting inconvenienced, simply cancelled their flights to and from countries of concern. Meanwhile, the airlines had to waive change fees for passengers flying through Mexico and provided many refunds for those whose plans were turned around. The airlines industry faced a difficult time adsorbing lost revenue something that took many close to their breaking point. Since another outbreak of swine flu or other communicable diseases are distinct possibilities in the near future, the airline industry must be ready to incur and respond to more damages.</span></span></span></p><p class="MsoNormal" style="line-height: 32px; "><span><o:p><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"></span></span></o:p></span></p><p class="MsoNormal" style="line-height: 32px; "><b><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">#5 Airlines Leveraging Social Media</span></span><span class="Apple-style-span" style="font-weight: normal; "><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> </span></span><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> </span><span class="Apple-style-span" style="white-space: normal; "><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style=" ;font-size:large;"> </span></span></span></span></span></span></span></b></p><span class="Apple-style-span" style="color: rgb(0, 0, 238); font-family:Georgia, -webkit-fantasy;"><div style="text-align: center; "><span class="Apple-style-span" style=" ;font-size:large;"><br /></span></div><div style="text-align: center; "><span class="Apple-style-span" style=" ;font-size:large;"><br /></span></div><img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgeGu2MCUwMIENXW-o71APBpT035ib_xCRNWvOr9WamtD1SnV8kPssiGGyIARzUo8Rk2_rIbk2couwEjk-JYc99KOH9W7aSxLpJOGsEofGzo91ZBsWUtmww1F8rpNPCq-fxDJU1NJs2kg4/s400/SN2.png" border="0" alt="" id="BLOGGER_PHOTO_ID_5401170701203490610" style="display: block; margin-top: 0px; margin-right: auto; margin-bottom: 10px; margin-left: auto; text-align: center; cursor: pointer; width: 400px; height: 251px; " /></span><p class="MsoNormal" style="line-height: 32px; "><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style=" ;font-size:large;"> </span></span><span class="Apple-style-span" style=" ;font-size:large;">Consumers have been using social media like My Space since the proliferation of Web 2.0 around the middle of this decade. Many customers found social media an effective tool to vent their annoyances and share their challenges and lessons learned with air travel. Seeing the enormous potential and instantaneous reach of social media, several airlines over the last year have began a massive </span></span><a href="http://www.chron.com/disp/story.mpl/business/6685854.html"><span style="text-decoration: none; color:windowtext;"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">campaign</span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> launching their own brand footprint into this previously-unchartered territory. These new media sites help airlines market their brand while interacting with customers simultaneously and at the same level. industries have an incentive to fill every seat on a flight. Not only does a full plane increase ticket sales, it gives the impression to flyers that their seats are in high demand. When there are last minute empty seats on a plane, some airline companies advertise these as </span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"></span></span><a href="http://www.google.com/hostednews/ap/article/ALeqM5gHczyQM4oC5637EQE5pHC8Hy0Z-AD9B9L8IO0"><span style="text-decoration: none; color:windowtext;"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">hot deals</span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> on their Twitter page--filling otherwise empty seats while building customer loyalty.</span></span></p><p class="MsoNormal" style="line-height: 32px; "><span><o:p><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style=" ;font-size:large;"> </span></span><span class="Apple-style-span" style=" ;font-size:large;">Every airline company should measure loyalty and brand satisfaction. Using readily-available social networking sites is relatively fast, easy and cost effective. In addition, ALPA should measure what the American people are saying about safety in flight. Because flyers typically have a considerable amount of downtime waiting for planes to take-off, they often have time in their hands to tweet out their frustrations or satisfactions using their cell phones or PDAs.</span></span></o:p></span></p><p class="MsoNormal" style="line-height: 32px; "><span><o:p><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"></span></span><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> </span><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style=" ;font-size:large;"> </span></span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">The popularity of </span></span><a href="http://en.wikipedia.org/wiki/Twitter"><span style="text-decoration: none; color:windowtext;"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">Twitter</span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> and other social media sites lends itself to innovative ways of measuring public sentiment across several geographic regions, relatively quickly and at very low costs. By codifying the language of tweets related to airline travel e.g. "</span></span><a href="http://en.wikipedia.org/wiki/Jetblue"><span style="text-decoration: none; color:windowtext;"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">Jetblue</span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> is a great company,” analysts are able to determine the opinion flyers have with particular airlines. In a study conducted in Oct 2009, it was determined that after reviewing all pertinent factors, Southwest had the hughest percentage of satisfied customers. </span></span><a href="http://www.blogger.com/post-edit.g?blogID=6778602529213654826&postID=626571948505077251#_edn5" name="_ednref" title=""><span class="MsoEndnoteReference"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">[v]</span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">Incidentally, </span></span><a href="http://en.wikipedia.org/wiki/Northwest_Airlines"><span style="text-decoration: none; color:windowtext;"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">Northwest</span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> had the lowest percentage of positive tweets.</span></span></o:p></span></p><p class="MsoNormal" style="line-height: 32px; "><span><o:p><span class="Apple-style-span" style=" ;font-size:large;"><span class="Apple-style-span" style="font-family:georgia;"></span></span><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style=" ;font-size:large;"> </span></span><span class="Apple-style-span" style=" ;font-size:large;"> </span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">In addition to increasing customer loyalty, social media sites are increasing the airlines' responsiveness, which will be especially valuable in times of crises. We will likely never be able to prevent fatal airline crashes. When an airline does experience a tragic crash, they could quickly transition to crisis communication mode by providing the public with the latest search and rescue information on Facebook and Twitter. Friends and family members can also communicate with the airline staff and other stakeholders by posting questions directly to the airline or collaboratively to the entire public via use of the wall. The public may understand and accept the reason for the plane to crash. But the public will be more critical in evaluating how well and how quickly the airline is able to disseminate timely and accurate information to those concerned. If an airline is able to effectively utilize all mediums at their fingertips to reach out to friends and family and the American people, then they are mostly likely able to gain the respect and trust that they deserve.</span></span></o:p></span></p><p class="MsoNormal" style="text-indent: 0.5in; line-height: 32px; "><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">Imagine if Twitter was invented prior to 9/11. If the passengers of the doomed United Flight 93 could tweet to the rest of the world that they had just been hijacked, that information could be critical and valuable for both rescue, remembrance and litigation.</span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"><o:p></o:p></span></span></span></p><p class="MsoNormal" style="line-height: 32px; "><span><o:p><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"></span></span><span class="Apple-tab-span" style="white-space: pre; "><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> </span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">Looking forward in this rocky economic environment, ALPA and stakeholders need to be fully cognizant of the top news stories past and present. How the public views the airline industry and how the airline industry responds to the latest news events and trends could set the right or wrong path for the future of commercial aviation in the United States. These second-tired effects would undoubtedly have a huge impact on the pilot labor market and thus determine which airline safety issues are negotiated and prioritized both in the air and within the halls of Congress.</span></span></o:p></span></p><div><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"><br /></span></span><div id="edn"></div></div><div><hr align="left" size="1" width="33%"><div id="edn"><p class="MsoEndnoteText"><a href="http://www.blogger.com/post-edit.g?blogID=6778602529213654826&postID=626571948505077251#_ednref" name="_edn1" title=""><span class="MsoEndnoteReference"><span><span class="Apple-style-span" style="color:#000000;"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">[i]</span></span></span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> </span></span><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">Makinen, Gail (Sept 27m 2002). "</span></span><a href="http://www.fas.org/irp/crs/RL31617.pdf"><span><span class="Apple-style-span" style="color:#000000;"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">The Economic Effects of 9/11: A Retrospective Assessment</span></span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">", Congressional Research Service. pp. CRS-4</span></span></span></p></div><div id="edn"><p class="MsoEndnoteText"><a href="http://www.blogger.com/post-edit.g?blogID=6778602529213654826&postID=626571948505077251#_ednref" name="_edn2" title=""><span class="MsoEndnoteReference"><span><span class="Apple-style-span" style="color:#000000;"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">[ii]</span></span></span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> Mutzabaugh, Ben, “Airline Outlook Worsens; Impact of Crisis Larger than 9/11”, Sept 16, 2009</span></span></p></div><div id="edn"><p class="MsoEndnoteText"><a href="http://www.blogger.com/post-edit.g?blogID=6778602529213654826&postID=626571948505077251#_ednref" name="_edn3" title=""><span class="MsoEndnoteReference"><span><span class="Apple-style-span" style="color:#000000;"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">[iii]</span></span></span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> Polek, Gregory, “NTSB scrutinizes Pilot Actions in Q400 Crash Probe” Aviation International News, May 12, 2009.</span></span></p></div><div id="edn"><p class="MsoEndnoteText"><a href="http://www.blogger.com/post-edit.g?blogID=6778602529213654826&postID=626571948505077251#_ednref" name="_edn4" title=""><span class="MsoEndnoteReference"><span><span class="Apple-style-span" style="color:#000000;"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">[iv]</span></span></span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> Grossman, David, “Regional Airlines Thrive while the Big Boys Cut Back”, USA Today, Nov 3, 2009</span></span></p></div><div id="edn"><p class="MsoEndnoteText"><a href="http://www.blogger.com/post-edit.g?blogID=6778602529213654826&postID=626571948505077251#_ednref" name="_edn5" title=""><span class="MsoEndnoteReference"><span><span class="Apple-style-span" style="color:#000000;"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">[v]</span></span></span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> </span></span><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">Swine Influenza, </span></span><a href="http://www.cdc.gov/flu/swineflu/key_facts.htm"><span><span class="Apple-style-span" style="color:#000000;"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">The Merck Veterinary Manual 2008</span></span></span></span></a></span></p></div><div id="edn"><p class="MsoEndnoteText"><a href="http://www.blogger.com/post-edit.g?blogID=6778602529213654826&postID=626571948505077251#_ednref" name="_edn6" title=""><span class="MsoEndnoteReference"><span><span class="Apple-style-span" style="color:#000000;"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">[vi]</span></span></span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> Graves, Robert, “U.S. Carriers</span></span><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> </span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">Cutting Service to Mexico”, MSNBC,</span></span><span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> </span></span></span><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">May 1, 2009</span></span></p><p class="MsoEndnoteText"><o:p><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"></span></span></o:p></p></div><div id="edn"><p class="MsoEndnoteText"><a href="http://www.blogger.com/post-edit.g?blogID=6778602529213654826&postID=626571948505077251#_ednref" name="_edn7" title=""><span class="MsoEndnoteReference"><span><span class="Apple-style-span" style="color:#000000;"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;">[vii]</span></span></span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style=" ;font-size:large;"> Warren, Christina, “Analysis: Which Airlines do Twitter Users Prefer,” Mashable, the Social Media Guide, Oct 1, 2009</span></span></p></div></div></span></div>Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-8456851549070437054.post-29667528430221534892009-11-03T11:11:00.000-08:002011-03-06T19:31:46.811-08:00How The Mighty Meltdown Could Have Been Averted<div dir="ltr" style="text-align: left;" trbidi="on"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIsFt4PFXGJ4ReLDf-ExAtYvzZUi6u4feZGeHLbOBx9TNAayk8KRn_tzDaBDdroEWB_QKSPa8TXaQEdFUwUGJ7Si8KB3Use_ZCP-iC5BaeLpLgJvpskWA-nKNdrSGuTj35CriXH6fWuLg/s1600-h/stock-down-arrow.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5401948027605800018" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIsFt4PFXGJ4ReLDf-ExAtYvzZUi6u4feZGeHLbOBx9TNAayk8KRn_tzDaBDdroEWB_QKSPa8TXaQEdFUwUGJ7Si8KB3Use_ZCP-iC5BaeLpLgJvpskWA-nKNdrSGuTj35CriXH6fWuLg/s400/stock-down-arrow.jpg" style="cursor: hand; cursor: pointer; display: block; height: 265px; margin: 0px auto 10px; text-align: center; width: 400px;" /></a><span class="Apple-style-span" style="font-family: georgia;"><br />
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<span class="Apple-style-span" style="font-size: 19px;"><div><strong><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">What caused the meltdown</span></span></strong><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"> -- Simply stated, the</span></span><a href="http://en.wikipedia.org/wiki/United_States_housing_bubble"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"> housing bubble</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">: </span></span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">By Summer 2007, the housing market was in trouble: falling prices, inventories rising and </span></span><a href="http://en.wikipedia.org/wiki/Foreclosure"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">foreclosures </span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">rising.</span></span></div><div><b><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></b></div><div><b><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Early Signs:</span></span></b></div><div><b><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></b></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Although a housing bubble is difficult to predict, there were early signs starting in 2004. Perhaps economists should have noticed that Freddie Mac was financing risk-laden loans as an early indicator. Many economists and government leaders simply failed to pay attention to the warnings or ignored it altogether -- all this happening under President Bush's watch.</span></span></div><span class="Apple-style-span" style="font-size: small;"><span class="Apple-style-span" style="font-family: georgia;"><br />
</span></span> <div><strong><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Bear in Bankruptcy</span></span></strong></div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
<span class="Apple-style-span" style="font-family: Times; font-size: 19px;"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Then two </span></span><a href="http://en.wikipedia.org/wiki/Bear_Stearns"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Bear Sterns</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"> (Global investment bank/securities trading brokerage) hedge funds are forced into bankruptcy. They had invested in AAA-rated mortgage </span></span><a href="http://en.wikipedia.org/wiki/Asset-backed_security"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">backed securities</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">. The prices of these securities had declined steeply.</span></span></span></span></span><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="color: #990000;"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Ironically as these investor losses mounted starting in 2006, Bear Sterns increased their exposure, thus resulting in more heavier losses.</span></span></span></div><div><b><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></b></div><div><b><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Saving Bear</span></span></b></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">In early 2008, the Federal Bank of NY provided an emergency loan to try to avert the company from collapsing.</span></span></div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
<span class="Apple-style-span" style="color: #990000;">In March 2008, the Fed tried hard to find a buyer for Bear. Prohibited from lending money to Bear, the Fed decided to lend money to JPMorgan, which, in turn, provided the funding to Bear.</span></span></span><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
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</span> <div><strong><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">FREDDING AND FANNIE in Conservatorship</span></span></strong></div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
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</span> <div></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">In September 2008, Secretary Paulson informed </span></span><a href="http://en.wikipedia.org/wiki/Fannie_Mae"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Fannie</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"> and </span></span><a href="http://en.wikipedia.org/wiki/Freddie_Mac"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Freddie</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"> that the g</span></span><a href="http://en.wikipedia.org/wiki/Federal_takeover_of_Fannie_Mae_and_Freddie_Mac"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">overnment is taking an 80% ownership in each.</span></span></a></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Treasury </span></span><a href="http://en.wikipedia.org/wiki/Henry_Paulson"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Secretary Henry Paulson</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"> (who previously served as the CEO of Goldman Sacks) stated that placing Fannie and Freddie conservatorship "was the only form in which I could commit taxpayer money to the </span></span><a href="http://en.wikipedia.org/wiki/Government_sponsored_enterprises"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Government Sponsored Enterprises (GSE)</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">."</span></span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><b><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Who to Blame</span></span></b></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">9/11 occurred early in President Bush's watch. Since then he experienced a major hurricane that nearly wiped out New Orleans and got the US involved in two major wars that we are losing, resulting in many </span></span><a href="http://en.wikipedia.org/wiki/Casualties_of_the_Iraq_War"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">casualties and over a thousand wounded</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">.</span></span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Sadly, while the administration was focusing on the war, their attention was diverted from the economy.</span></span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Many people judge the president's legacy mainly by the economic performance during the term. For Bush, the economy lost ground resulting in lower median household income, higher unemployment and the number of Americans without health insurance spiking (</span></span><a href="http://politics.theatlantic.com/2009/09/closing_the_book_on_the_bush_legacy.php"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">4</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">).</span></span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="color: #990000;"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">So GW Bush began his term with the worst attack on American soil since Pearl Harbor and is ending it with the worst financial crisis since the Great Depression -- what does that tell you.</span></span></span><br />
<span class="Apple-style-span" style="color: #990000;"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span></span></span></div><div><span class="Apple-style-span" style="color: #990000;"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Did the terrorists get want they wanted after all? Perhaps it wasn't just bricks and mortar and innocent people they were after -- they were targeting capitalism, and perhaps the previous administration had fallen for the bait.</span></span></span></div><div><span class="Apple-style-span" style="color: #990000;"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></span></div><div><strong><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Belligerent Fuld</span></span></strong></div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
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</span> <div></div><div><a href="http://en.wikipedia.org/wiki/Lehman_Brothers"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Lehman Brothers</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"> was next in the chopping block. </span></span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">On Sept 2008, Lehman filed for Chapter 11 bankruptcy protection after many of its clients departed due to drastic stock losses. This filing was billed as the largest bankruptcy in U.S. history (1).</span></span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">They had to sell Lehman, but CEO </span></span><a href="http://en.wikipedia.org/wiki/Richard_S._Fuld,_Jr."><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Richard Fuld</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"> (</span></span><a href="http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4761890.ece"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">2</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">) was brazen and he wanted a higher price. The last straw -- he was in Korea trying to work a deal. But Fuld wouldn't budge on the price.</span></span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">On Oct 6, 2008 Fuld testified before the US House Commitee on Oversight and Government Reform on Capitol Hill regarding the bankruptcy of Lehman.</span></span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">CNBC reported that Fuld was attacked and "knocked out cold" at the Lehman gym due to their declaration of bankruptcy. Fuld representatives denied this news report.</span></span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
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</span></span><strong><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Lehman had Buyers, but the Fed...</span></span></strong></div><span class="Apple-style-span" style="font-size: small;"><span class="Apple-style-span" style="font-family: georgia;"><br />
</span></span> <div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Bank of American and Barclays were candidates but estimated that Lehman had approximately $ 30 million of bad loans on the books. </span></span><span class="Apple-style-span" style="color: #990000;"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Sadly, the government was not willing to guarantee a portion of it.</span></span></span><br />
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<span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">They claimed that the government <a href="http://www.marketoracle.co.uk/Article13567.html">did not have the legal authority</a> to do so. However, if you read below, the Fed did not make this case when they bailed out AIG.</span></span></div><span class="Apple-style-span" style="font-size: small;"><span class="Apple-style-span" style="font-family: georgia;"><b><br />
</b></span></span> <div><b><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Regret letting Lehman Go</span></span></b></div><span class="Apple-style-span" style="font-size: small;"><span class="Apple-style-span" style="font-family: georgia;"><br />
</span></span> <div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Secretary Paulson and other conservatives did not realize how interrelated Lehman was -- even more so than Bear. So the fall of Lehman deeply afflected the global markets, global credit and freezing the markets.</span></span></div><span class="Apple-style-span" style="font-size: small;"><span class="Apple-style-span" style="font-family: georgia;"><br />
</span></span> <div><b><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Why is AIG Affected?</span></span></b></div><div><b><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></b></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">If this is a housing/mortgage crisis, then why is an insurance company that specializes in home and life insurance affected -- there is no major natural disaster -- that is exactly the same question that I chewed on.</span></span></div><span class="Apple-style-span" style="font-size: small;"><span class="Apple-style-span" style="font-family: georgia;"><br />
</span> </span> <div></div><div><a href="http://en.wikipedia.org/wiki/American_International_Group"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">American International Group</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"> (AIG) takes a huge hit because they had put tons of money betting that firms like Lehman would never go bankrupt.</span></span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">AIG experienced a liquidity crisis when its credit ratings were downgraded below "AA" in Sept 2008.</span></span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">But the US government would not let AIG fail. Letting AIG fail would not only affect the U.S. economy, it would be disastrous to the world economy.</span></span><span class="Apple-style-span" style="font-size: small;"><br />
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</span></span></span><div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Bailout -- Famous quote: "We May not have an Economy Monday."</span></span></div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span><br />
<div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">The emergency plan asks for $700 billion to buy up toxic mortgage sercurities from the banks without an oversight mechanism from Congress.</span></span></div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span><br />
<div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Both Lehman Brothers and Bear Sterns were major players in the </span></span><a href="http://en.wikipedia.org/wiki/Subprime_mortgage_crisis"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">sub-prime mortage</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"> business. They loaned money, in the form of credit, to non-bank lenders. </span></span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"> Lehman brothers knew what they were getting into, and they should have realized the risk and possiblity for disaster.</span></span><br />
<span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span></span><br />
<span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><b>TARP</b></span></span><br />
<span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span></span><br />
<span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Harry Paulson begged Congress to agree to providing taxpayer money to bail out the financial market. The Federal Reserve also told Congress if they didn't act soon, the economy would slip into another Great Depression. In some ways, the fall of Lehman helped create a climate of panic that led Congress to quickly pass the TARP. In many ways, Lehman was the necessary guinea pig. But Dick Fuld's belligerence did not help his company, either.</span></span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><b><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">AIG Backlash</span></span></b></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">in March 09, AIG executives faced public outlash for providing retention benefits of $165 million after the government bailout of $182.5 billion was approved (</span></span><a href="http://www.reuters.com/article/idUKN1644235820080917"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">3</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">).</span></span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><b><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Final Analysis</span></span></b></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">The </span></span><a href="http://en.wikipedia.org/wiki/Subprime_mortgage_crisis"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">mortgage crisis</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"> which started in 2007 was spurred by a sharp rise in mortgage delinquencies and foreclosures in the US.</span></span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">About 80% of the mortgages issued from around 2005--2007 were adjustable-rate mortgages (</span></span><a href="http://runinfixer.blogspot.com/search/label/Atlantic%20Streetb"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">I know, I was issued a couple of them from refinances</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"> on a few homes in SE DC which I used mainlh for repairs and renovation.</span></span></div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span><br />
<div></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Some may argue that the American public should have been on its toes and applied some pressure on these companies to stop such risky investment. But lets face it, middle class America was able to purchase homes that they would have never dreamed of buying in the past, and the average person would assume that these large banking and investment firms would have been reasonable and not have invested more money than they could risk in investments that were very risky. </span></span><span class="Apple-style-span" style="color: #990000;"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">The books should have all balanced out. Liabilities should never have been greater than assets.</span></span></span></div><div><b><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></b></div><div><b><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Paulson let Lehman fail:</span></span></b></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><b><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">References:</span></span></b></div><div><b><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></b></div><div><b><span class="Apple-style-span" style="-webkit-text-decorations-in-effect: underline; color: #0000ee; font-weight: normal;"><b><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">(1) "Lehman folds with Record $613 Billion Debt</span></span></b><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">", Marketwatch Sept 15, 2008</span></span></span></b></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">(2) "</span></span><a href="http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4761890.ece"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Bruiser of Wall St Dick Fuld Looked After his People, but didn't know when to Quit</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">" Times online, Sept 16, 2008</span></span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">(3) "</span></span><a href="http://www.reuters.com/article/idUKN1644235820080917"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">After AIG rescue, Fed may find more at its door</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">", Reuters, Sept 17, 2008</span></span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></div><div><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">(4) "</span></span><a href="http://politics.theatlantic.com/2009/09/closing_the_book_on_the_bush_legacy.php"><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">Closing the Book on The Bush Legacy</span></span></a><span class="Apple-style-span" style="font-family: georgia;"><span class="Apple-style-span" style="font-size: small;">", The Atlantic, Sept 11, 2009</span></span></div></div></span></div>Unknownnoreply@blogger.com0