Occupy Wall Street.
What is it?
A protest that claims that 1% of the people
(Banks, Financial institutions -Wall
Street)
controls the laws and policies in this
nation that allow them to take money from Main Street (99% of
Americans) without government regulation. Their policies
caused the economic collapse of 2008-9 and there have been no
changes, no penalties and they continue to operate as before.
OWS Protesters, what they are
protesting:
1. Wall Street purchase of political protection and support for
fraudulent practices.
2. They want laws put into place to restrict lending fraud and
other mismanagement that caused the crisis in 2008.
3. They want the people responsible for the original crisis
brought to justice.
Background:
Cause of economic crash of
2008:
- Unregulated
banks and lending institutions making bad loans & bad
mortgages with the idea that the worst of these can be
packaged and resold to foreign investors in bulk.
- Mortgages were being written for people who could
not afford them to finance 100% of the homes they were
buying.
- When defaults followed, banks or investors would
take losses.
- Bonuses were paid to top producers of these loans/
mortgages at the corporate level.
How the Stock Market Crashed in
2008-2009: Wikipedia
Role of the Real Estate Bubble:
- Housing prices skyrocketed
because banks were willing to finance at higher prices than
the value of the homes being sold.
- Appraisers consistently turned
out appraisals that matched sellers prices. Banks underwrote
these loans.
- Why? Higher loans require more
interest over time = greater profits for the banks.
- What about defaulters? Not
everyone who got a loan was qualified for it.
- - bad loans were packaged along
with a few good ones and sold in bulk to foreign investors
for top dollar by American banks.
Additional factors that
created the crash of 2008:
According to Paul Krugman
All these things happened at once: (The Perfect Storm)
Short term impact:
- New homes not being sold/ built
- Cars, other big ticket items unsold- Automotive
industry employs large percentage of Americans. Car Makers
fail. (Chrysler)
- Unemployment rises to dangerous levels
- Middle Class income shrinks; Middle
class becomes divided
What can the government do?
How will Government bail
out businesses and banks?
With TARP money: Troubled Asset Relief Program, Gov. bought
assets from businesses and took part ownership until they could
recover and pay the government back. Other bailout programs were
set up too.
Cost to tax payers after all was paid back: over $300 Billion.
What laws and regulations have
been put into place to prevent this from happening again?
The Wall Street Reform and Consumer Protection Act (does
it do enough?)
Who was responsible for
this and how were they punished?
Executives
like Angelo Mozilo paid a fine for knowingly
condoning fraudulent loan practices.
Benefits reaped by Mozilo in the mortgage fraud: $200 million.
Fined by SEC: $67 million.
Amount paid
in settlement: $20 million.
And then Countrywide was sold to Bank Of America.
BOA's sub prime mortgage losses/
fraud are said to be greater than Countrywide, according
to Feds.
Impact of economic crash of
2008:
- Evictions
- Foreclosures
- Loss of 30% (average) home equity
- Business failures
- Bank failures
- Bailouts of the automotive and banking industries
- High unemployment
- Disrupted domestic and foreign trade
- Wealthiest 1% control additional 3% of total wealth
of US
- 50% of poorest families suffered no additional drop
of wealth
- Middle class losses were greatest
Eurozone
Financial Crisis of 2011 Explained
Causes
of the European Debt Crisis
Ehow explains that when 16 nations went over to the Euro in
2002, countries like Greece, left out, had interest rates fall,
leading to their own housing market bubble. When that burst and
the job market fell, their government pulled pension funds to
create jobs but mismanaged the money. They spent additional
hundreds of millions covering that up. Consumers stop spending;
banks stop lending, unemployment skyrockets and EU bailed out
Greece twice. Now, to avoid another collapse, austerity programs
are put into place.
Spain, Italy and Portugal are following in the same path as
Greece.
Changes as a result of the
economic crash of 2008:
Problem: Politicians run expensive campaigns
They need money.
Donations
from banks, investment firms and other Wall Street
Interests fuel campaigns, gain support to block legislation that
would regulate banking or investments.
Additional information:
Meltdown,
a timeline of economic events