The Influence of Alan Greenspan on the Economy Scott Miller English Composition 1 October 18, 2008 Outline: The influences of Alan Greenspan on the Economy -About the Federal Reserve 1. Year Alan Greenspan appointed. 2. Duties of the Federal Reserve -Alan Greenspan as Federal Reserve Chairman (1987) 1.Stock Market crash -Savings and Loan Crisis (1988-1982) 1. Bank Failures 2.
In 2007, the defaults of subprime mortgage industry reached its peak. The Federal Deposit Insurance Corporation (FDIC) shut down several key subprime financiers. In March 2008, the Federal Reserve intervened with a $30 billion assurance to facilitate J.P. Morgan’s acquisition of investment bank Bear Stearns. In the month of September 2008, the investment bank Lehman Brothers Holdings, Inc. filed for bankruptcy, Bank of America purchased the troubled investment bank Merrill Lynch, and the announcement of the American International Group (AIG) bailout worth the sum of $85 billion (Leynse, 2009). By October 2008, Congress passed the Troubled Asset Relief Program (TARP).
1.The rationale of the treasury in pressuring all eight large banks to accept capital injection is to take control of these banks. In addition, the treasury can appease the public by providing liquidity to the banks. 2. Lewis should accept the preferred stock from the U.S. Treasury under the CPP program. On January 16, 2009, Treasury made an additional investment in Bank of America by acquiring $20 billion in newly issued senior preferred stock under the TIP.
In May, Common shares were reclassified into Class A voting and Class B non-voting shares in preparation for the June issue of $ 65 million convertible debentures into Class B Shares. In July Canada’s Financial Press published articles Finning was showing signs of an approaching downturn while British Columbia’s economy was expanding. Sales actually declined if the facts for inflation not considered. In October Sood took office as CEO. o Several restraint measures had already been instigated.
The government then imposed an austerity program and began negotiations with the IMF for a rescheduling of the staggering foreign debt. The plan followed by an autumn international support operation led by the IMF. The Cruzado Plan, which created a new currency (the cruzado), eliminated monetary correction, and froze wages and prices. While inflation plunged to near-zero initially, by mid-1987, it had surged beyond 100%, fueled by increased customer spending due to the price freeze. The careful timing helped avoid impediments to President Cardoso's electoral victory in October over Lula, his left-wing challenger.
During the Financial Crisis of 2008 many factors contributed to the sustained state of economic chaos which ensued in the following months. While many financial institutions were saved by the government and other rescue operations, the collapse of Lehman Brothers remains an outlier in these instances; rather than follow the seemingly apparent protocol of “rescue” the government did quite the opposite in letting Lehman fail. This paper seeks to explain the reason for this decision and investigate the ramifications it had on the economic and political system. Much controversy surrounded the decision to let Lehman collapse and several explanations have developed to justify the actions of the government. Lehman Brothers and its collapse was at the center of a political debate during the Financial Crisis which was based on theories of conspiracy, lessons being taught, and public pressure that was tied to political motives on the part of the Fed.
Answer: F 1-8 Because bank loans have a shorter maturity than most debt contracts, FIs typically exercise less monitoring power and control over the borrower. Answer: F 1-9 FIs typically provide secondary claims to household savers that have inferior liquidity than primary securities of corporations such as equity and bonds. Answer: F 1-10 Because the average maturity of assets and the average maturity of liabilities are often different on an FIs balance sheet, the FI is exposed to liquidity risk. Answer: F 1-11 When an FI functions as a broker, they are selling a financial asset that they have created and will continue to hold on their balance sheet. 1-1 Chapter 01 - Why Are Financial Institutions Special?
Loans issued to people with poor credit history, limited or no collateral, required no proof of income and they sold those issued loans to other investors with AAA rates. This created massive amount of securitized loans. This caught lenders attention because they were able to require high interest rates. Also most of these loans were issued as adjustable rate mortgages which initially required no down payment and as low as 1% APR. The other reason was adjustable mortgage rates.
"Income Inequality". The New York Times. Archived from the original on September 21, 2012. Retrieved June 7, 2012.] The focus on income inequality by the movement was studied by Arindajit Dube and Ethan Kaplan of the University of Massachusetts Amherst, who noted that "inequality in the U.S. has risen dramatically over the past 40 years.
Finally, this position was ended because of the scandal that an employee was charged with manipulating auctions of Treasury bonds. Several senior managers left afterwards. 2 years later, LTCM (long-term capital management) is founded with pursuing the same strategies, it has generated huge returns in the first couple years until Russia defaulted on its domestic debt. Another reason should be VaR’s wrong assumptions. VaR is used under assumption that positions can be undone rapidly at low cost, while it’s not applicable to systems has potential of vicious circle losses like in this case; the assumptions of hacing normal distribution of returns is also not practical; VaR does not inform on the size of loss that might occur beyond that confidence level; It’s being generated by using historical data,