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The Great recession and its aftermath

The Great recession and its aftermath. By: Aurea Andrades and Anne Le. Federal policy effectiveness in GD vs. GR. Reinforces the severity of the GD. Again, reinforces the severity of the GD. Deflation in the GD vs. inflation in the GR. Globalization & Labor .

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The Great recession and its aftermath

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  1. The Great recession and its aftermath

    By: Aurea Andrades and Anne Le
  2. Federal policy effectiveness in GD vs. GR Reinforces the severity of the GD Again, reinforces the severity of the GD Deflation in the GD vs. inflation in the GR
  3. Globalization & Labor Globalization is the interconnectedness of countries around the world There is no organization to stop transnational corporations from outsourcing – moving jobs to the cheapest location possible takes away jobs from people in the US There also isn’t much to stop labor exploitation – slave labor, underpaid labor, and child labor still exist which creates competition in terms of labor wages Increasing rich/poor gap creates more job competition and even more competition to work for the lowest wage once a job is given Workers have nearly become dispensable If a hard-working American won’t accept anything below a certain salary, businesses can just take the job overseas or elsewhere to a foreigner that will work for practically nothing
  4. Key dates: 2007 February  Freddie Mac ( Federal Home Loan Corporation that is federally sponsored ) agrees to stop giving out risky home loans April  New Century Financial Corporation, a major lender, files for bankruptcy October  Dow Jones Industrial average hits an all time high of 14,164 December  RECESSION OFFICALLY BEGINS December  Unemployment rate is 5% Mid-December  The Term Auction Facility is created to help out failing financial institutions
  5. Key dates: 2008 January  Short term interest rate is reduced to 3% ( the fifth time it’s adjusted in the past four months ) February  Bush signs the Economic Stimulus Act – allows a tax rebate and promotes investments in businesses March  Bear Stearns broker company collapses and is bought by JP Morgan April  The short term interest rate is reduced to 2% July  Bush signs the Housing and Economic Recovery Act – FHA can refinance home loans to eligible home owners
  6. Key dates: 2008 September  The government buys two huge mortgage companies – Frannie Mae and Freddie Mac The Lehman Brothers file the largest bankruptcy case ever Feds bail out AIG insurance company Securities and Exchange Commission releases a temporary ban on short-selling stocks (anticipating a sharp decrease in stock value) Washington Mutual bank closes and is bought by JP Morgan Treasury, Fed, and FDIC bailout Citigroup
  7. Key Dates: 2008 October  Bush signs the Troubled Asset Relief Program ( TARP ) to allow the government to buy assets and equities from financial institutions to help out the financial sector First handout of TARP money amounts to $125 billion, spread out over 9 banks Interest rate drops to 1% November  Fed creates Term Asset-Backed Securities Lending Facility ( TALF ) to help owners of securities backed by credit-card debt, student loans, auto loans, and small-business loans December  Interest rate drops to 0%, for the first time ever GM and Chrysler are bailed out with TARP funds amounting to $13.4 billion National Bureau of Economic Research announces that start of the Recession was Dec. 2007 GDP is decreasing at a rate of 8.9%
  8. Key dates: election of 2008 Barack Obama – Democratic nominee Pledged to help out the economy with his economic policies Specific in his proposals Advantage of his party not being blamed for the War in Iraq John McCain – Republican nominee Weird, unfortunate comments were his downfall “The fundamentals of our economy are strong” , said the morning of the Lehman Brothers bankruptcy case “I’ll-I’ll have to get back to you on that”, said when asked how many homes his family owns Ultimately created an non- relatable image to the public
  9. Key dates: 2009 February  Obama signs the American Recovery and Reinvestment Act of 2009 – widespread tax cuts and decrease in government spending A day later, he signs the Homeowner Affordability and Stability Plan and creates the Homeowners Stability Initiative to help decrease monthly payments and allow homeowners to be refinanced Late February  Fed and FDIC introduces “stress tests” to gage US bank holding companies with assets of more than $100 billion March  DJIA hits another low -  6,547 Mid-March  Fed implements the Auto Supplier Support Program to provide money for the car industry
  10. Key dates: 2009 May  10 banks fail the stress test – means they could lose $600 billion dollars in a worse-case scenario for 2009/2010 May  Obama signs the Helping Families Save Their Homes Act which increases the FDIC’s insurance coverage from $100K to $250K per depositor June  GM files for bankruptcy – the Fed agrees to buy it for $30 billion A total of 140 commercial banks fail in 2009 Second Quarter  The economy begins to grow and get better
  11. Economic Stimulus Act (2008) Passed by congress during George Bush’s presidency to avoid a recession and boost the economy The law gave tax rebates to low- and middle-income U.S. taxpayers. 300$ per person provided they met minimum qualifying income of $3,000 per year and taxpayers with incomes greater than $75,000, rebates were reduced at a rate of 5% of the income above this limit Tax incentives to stimulate business investment Increased the limits imposed on mortgages eligible for purchase by government-sponsored enterprises The total cost of this bill was projected at $152 billion for 2008 Tax rebates wereimposed because it would hopefully cause a boost in consumerism and tax incentives were passed to boost business spending
  12. Economic Stimulus Act (2008) Put into action because the credit crunch caused by the mortgage crisis which threatened the financial well-being of homeowners, banks and other financial entities holding jumbo mortgages so. It hoped to stop the decline in house prices. Effects: The researchers found that the stimulus checks increased spending for the typical family by 3.5% when the rebate arrived, increasing overall consumption by 2.4% in the second quarter of 2008. The research showed that the rebate payments for U.S. households were an effective stimulus method by increasing disposable income despite the predictions of certain economic theories. Hospitals visits increased after the stimulus payments Immigration restrictions were placed: individuals with an ITIN (Individual Taxpayer Identification Number ) couldn’t get their rebates. Even if one parent in a family of 5 for example had an ITIN instead of a social security number no money was given out. At least one million legal residents and tens of thousands of troops were affected by the law, which was designed to keep illegal immigrants from getting stimulus checks.
  13. American Recovery and Reinvestment Act (2009) Passed on February 17, 2009 during the presidency of Barack Obama Its primary objective was to save and create jobs as soon as possible Secondary objectives were to provide temporary relief programs for those most impacted by the recession and invest in infrastructure, education, health, and renewable energy Its approximate cost was $787 billion at the time of passage, and later revised to be $831 billion between 2009 and 2019 It created the President’s Economic Advisory Board
  14. American Recovery and Reinvestment Act (2009) Enactment of the Health Information Technology for Economic and Clinical Act, also known as the HITECH Act Its rationale derived from the Keynesian macroeconomic theory, which called for an increase in public rather than private spending. Soon after it was passed ARRA was criticized for being too weak however in February 2014, the White House stated that the Act saved and created an average of 1.6 million jobs per year during 2009 and 2012.
  15. Federal debt in bush/obama years President Barack Obama: FY 2013 - $672 billion. FY 2012 - $1.276 trillion. FY 2011 - $1.229 trillion. FY 2010 - $1.652 trillion. FY 2009 - $253 billion. (Congress passed the Economic Stimulus Act, which spent  $253 billion in FY 2009. This rare occurrence should be added to President Obama's contribution to the debt.)  Total so far $5.081 trillion, a 44% increase to the $11.657 trillion debt level attributable to President Bush at the end of his last budget, FY 2009. President George W. Bush FY 2009 - $1.632 trillion. (Bush's deficit without the impact of the Economic Stimulus Act). FY 2008 - $1.017 trillion. FY 2007 - $501 billion. FY 2006 - $574 billion. FY 2005 - $554 billion. FY 2004 - $596 billion. FY 2003 - $555 billion. FY 2002 - $421 billion. Total-$5.849 trillion.101% increase to the $5.8 trillion debt level at the end of Clinton's last budget, FY 2001.
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