-They would all become rich and poverty would just go away (Words of President Calvin Coolidge) Doc C: John T. Raskob, a well-known economist, told people to buy more stocks and in invest in banks and you’ll become a millionaire. -The chart in document K, shows that 20% of the income goes away if they listen to Raskob’s advice to fifteen dollars in the bank every month. When the banks failed, those people lost all that was in there. Doc G+H: With the new types of credit, margin and installment, millions were buying things they didn’t even have the money for. -They would take out a loan from the bank, but they could never pay them back and this hurt the businesses too
The stock market was allowing people to buy stocks on margin. Buying stocks on margin is the same as borrowing money to buy stocks; this caused the Dow Jones to rise from 191 in 1982 to an astounding 381 in September of 1929. When the market crashed many people simply could not afford to pay back the loans and subsequently lost everything. Because of investors losing
In a lecture by Professor Newman, it was made known of the concept “selling short”, meaning, big businessmen would try to make more money on a market they knew was going down, and with that came a lot of common people losing money. When prices started to collapse over 40 billion dollars’ worth of stock value suddenly disappeared, and so did people’s money. With this caused the famous stock market crash in 1929. Almost immediately big businessmen started shutting down factories and firing employees and the demand for products went down, and with that, unemployment reached 15 million. In the lecture, Professor Newman uses the example of steel to show how much stocks declined.
Facts In 1983, GEICO announced plans to purchase several million shares of its outstanding common stock for $60 per share. Among GEICO’s largest stockholders was Berkshire Hathaway, Inc., an investment company. Executives of the two companies decided that Berkshire would tender approximately 350,000 if its GEICO shares in the stock buyback plan, which would allow Berkshire to treat the transaction as a proportionate redemption. In a proportionate redemption, the percentage equity interest of on company in a second company is maintained at the level that existed immediately before the transaction. For federal taxation purposes, the proceeds received by the investor company in a proportionate redemption are taxed as dividends by applying the effective intercorporate dividend tax rate.
The company operate through two divisions the corporate which was launched in 1997 and the franchise which was launched in 1998. Forzani Group operates more than 400 stores around North America. The brand that they have created is constant threat to its competitors. FGL has been challenged in many ways, because of recent economy downturn the company has started to close some corporate stores and cut back on personal to bring the sales high, without filling bankruptcy. With these challenges that company faces the company are still talking about remodelling their stores, and creating new steps in order to make new profit.
During an investigation there were many questionable accounting transactions that were brought up, such as large executive bonuses as well as many loans for large amounts of money that were later forgiven without repayment. Kozlowski and Swartz were sentenced to 8 – 25 years in prison ("Investopedia", 2014). Then a lawsuit against Tyco cost the company $2.92 billion in repayment to its investors ("Investopedia", 2014). The biggest issue here was allowing for a CEO and CFO to have too much access to funds. A protocol should be in place that when a sale of stocks is made and no one authorized it then a full audit should take place from a third party or if a loan is going to be made then more then just the CEO and CFO’s approval needs to be given.
After the war companies began to combine into one legal obligation and owners now had trusts in the company so many different people were co-owners. During this time many companies became overcome by several richer companies. When this happened, monopolies started to form and nothing seemed fair anymore. No more little family companies more of one company businesses. Many Americans did not trust these new business ideas and the “Sherman antitrust act” came into play.
Lehman Brothers file bankruptcy, Merrill Lynch was bought out by Bank of America, and AIG, an insurance company that sold insurance to investment banks to cover the downturn of investments, was on the brink of financial distress along with so many other failing financial institutions. Paulson, knowing that something had to be done to stop the fall of the economy, along with Bernanke & Geithner basically went to Congress and asked for 700 billion to bail out banks. This was the creation of TARP (Troubled Asset Relief Project). Paulson was asking Congress to approve a program the size of the entire federal budget (which took around 15 months to prepare) in just a couple of week’s time. All of the big banks participated in TARP.
The stock market crashed rapidly, and took a big hit to the U.S. economy. Many investors put almost all their money into the stock markets. This made the Great Depression. On January 7th, 1953 Herbert Hoover sent a message out to the world and said please take out all of your money before you go broke and start working again. And before you go broke and don’t know what to do with your life.
Finally, in 2004 the company officially terminated its ties to the federal government. As the nation’s largest single private provider of student loan funding, SLM has to date lent to more than 31 million students. In 2009 it lent approximately $6.3 billion in private loans and between $5.5 billion and $6 billion in 2010. In the 1990s, well before its full privatization, Sallie’s operations were increasingly swept into the financialization of the economy. It jumped whole hog onto the securitization bandwagon, lumping together and repackaging a large portion of its loans and selling them as bonds to investors.