Changes

The '''Financial Crisis of 2008''' was a global financial crisis that is the worst the world has seen since 1933 with the [[Great Depression]]. Drastic measures to confront seemingly insurmountable financial calamity resulted in the creation of '''TARP''' (Troubled Assets Relief Program), $700 billion safety net [[appropriation|appropriated]] by the U.S. Congress.  The National Bureau of Economic Research<ref>NBER is a private organization that follows its own standards as set by eminent economists such as [[Milton Friedman]]; its dating of business cycles is widely accepted by conservatives.</ref> has identified the peak of the last boom cycle in December 2007; the U.S. economy has been in decline ever since.<ref>See "Text of the NBER's statement on the recession and FAQ's" [https://www.usatoday.com/money/economy/2008-12-01-recession-nber-statement_N.htm ''USA Today'' Dec 1, 2008]. "The U.S. economy entered a recession in December 2007, a committee of economists at the private National Bureau of Economic Research said," at [http://www.marketwatch.com/news/story/US-recession-began-December-2007/story.aspx?guid={7DCF90E4-D61A-4014-83CE-45E938CD632C} Rex Nutting] - MarketWatch</ref>  [[Image:CRASH08.JPG|thumb|330px|Oct 11, 2008 editorial; cartoon by Horsey stresses the global collapse]]  The crisis has caused the [[Recession of 2008]], which reached bottom in summer 2009, causing a worldwide economic decline that is the most severe since the 1930s. As of 2013, there are still 4 million fewer jobs in the U.S. than in 2008 - despite $5 trillion in federal [[stimulus]] spending.   

The '''Financial Crisis of 2008''' was a global financial crisis that is the worst the world has seen since 1933 with the [[Great Depression]]. Drastic measures to confront seemingly insurmountable financial calamity resulted in the creation of '''TARP''' (Troubled Assets Relief Program), $700 billion safety net [[appropriation|appropriated]] by the U.S. Congress.  The National Bureau of Economic Research<ref>NBER is a private organization that follows its own standards as set by eminent economists such as [[Milton Friedman]]; its dating of business cycles is widely accepted by conservatives.</ref> has identified the peak of the last boom cycle in December 2007; the U.S. economy has been in decline ever since.<ref>See "Text of the NBER's statement on the recession and FAQ's" [https://www.usatoday.com/money/economy/2008-12-01-recession-nber-statement_N.htm ''USA Today'' Dec 1, 2008]. "The U.S. economy entered a recession in December 2007, a committee of economists at the private National Bureau of Economic Research said," at [https://www.marketwatch.com/news/story/US-recession-began-December-2007/story.aspx?guid={7DCF90E4-D61A-4014-83CE-45E938CD632C} Rex Nutting] - MarketWatch</ref>  [[Image:CRASH08.JPG|thumb|330px|Oct 11, 2008 editorial; cartoon by Horsey stresses the global collapse]]  The crisis has caused the [[Recession of 2008]], which reached bottom in summer 2009, causing a worldwide economic decline that is the most severe since the 1930s. As of 2013, there are still 4 million fewer jobs in the U.S. than in 2008 - despite $5 trillion in federal [[stimulus]] spending.   

Some [[free market]] advocates believe Congress and the [[Federal Reserve]] should not have bailed out failing firms and instead should have allowed market mechanism to operate.<ref>Free market advocates assert successful enterprises should be rewarded for doing things right, and failing businesses should be allowed to perish for making mistakes and not providing the public with the things they need or are in demand; government intervention can drag out recessions and depressions. [https://www.youtube.com/watch?v=zzTXaAXusiI]</ref><ref>https://www.youtube.com/watch?v=czcUmnsprQI</ref>  A 2005 study found that government corporate bailouts are often done  more for political considerations, and the economic resources allocated exhibit significantly worse  performance than resources allocated using practical considerations <ref>http://papers.ssrn.com/sol3/papers.cfm?abstract_id=676905</ref>

Some [[free market]] advocates believe Congress and the [[Federal Reserve]] should not have bailed out failing firms and instead should have allowed market mechanism to operate.<ref>Free market advocates assert successful enterprises should be rewarded for doing things right, and failing businesses should be allowed to perish for making mistakes and not providing the public with the things they need or are in demand; government intervention can drag out recessions and depressions. [https://www.youtube.com/watch?v=zzTXaAXusiI]</ref><ref>https://www.youtube.com/watch?v=czcUmnsprQI</ref>  A 2005 study found that government corporate bailouts are often done  more for political considerations, and the economic resources allocated exhibit significantly worse  performance than resources allocated using practical considerations <ref>http://papers.ssrn.com/sol3/papers.cfm?abstract_id=676905</ref>

In late September the crisis focused on liquidity—financial companies owned hundreds of billions of dollars of "toxic" real estate assets, mostly based on U.S. [[Fannie Mae]]-backed [[mortgage]]s; they could not sell the toxic securities because no one knew how much they were worth, and large scale loans between major institutions stopped flowing as the system lost liquidity and froze up. A $800 billion rescue plan became law in the U.S. October 3. Meanwhile, Europe's sovereign debt crisis continued to deteriorate, as trillions of dollars in losses accumulated there and in many other countries.  International agencies such as the International Monetary Fund are giving guidance for medium-sized countries, like Pakistan and Ukraine.  In the panic, people around the world sent their money to the U.S. and Japan because the banks there are more tightly regulated and considered safer than their own banks.  The price of oil, which reached $145 a barrel in the summer, plunged to under $50. That plunge eased pump prices, helped commuters, and the airline industry.

In late September the crisis focused on liquidity—financial companies owned hundreds of billions of dollars of "toxic" real estate assets, mostly based on U.S. [[Fannie Mae]]-backed [[mortgage]]s; they could not sell the toxic securities because no one knew how much they were worth, and large scale loans between major institutions stopped flowing as the system lost liquidity and froze up. A $800 billion rescue plan became law in the U.S. October 3. Meanwhile, Europe's sovereign debt crisis continued to deteriorate, as trillions of dollars in losses accumulated there and in many other countries.  International agencies such as the International Monetary Fund are giving guidance for medium-sized countries, like Pakistan and Ukraine.  In the panic, people around the world sent their money to the U.S. and Japan because the banks there are more tightly regulated and considered safer than their own banks.  The price of oil, which reached $145 a barrel in the summer, plunged to under $50. That plunge eased pump prices, helped commuters, and the airline industry.

[[Image:BRIDGE.JPG|thumb|400px|Tom Toles cartoon lampoons Federal bailout efforts as a badly designed [[bridge to nowhere]], Dec. 1, 2008]]

[[Image:BRIDGE.JPG|thumb|400px|Tom Toles cartoon lampoons Federal bailout efforts as a badly designed [[bridge to nowhere]], Dec. 1, 2008]]

Both parties have expressed anger at the crisis, and have promised extensive new regulations of the financial industry. The Republicans opposed additional bailout aid to General Motors, which was on the verge of bankruptcy.<ref>Treasury Secretary Paulson told Congress on Nov. 18 that the Bush administration remains "firmly opposed" to using any of the $700 billion financial bailout fund to keep afloat auto manufacturers, "no matter how badly they need the help." [http://www.foxnews.com/politics/2008/11/18/paulson-rejects-bailout-money-automakers-senate-considers-legislation/ Fox news report]</ref> Democratic Congressional leaders and President [[Barack Obama]] had the [[United States Treasury]] take control of General Motors while paying existing shareholders 22 cents on the dollar for their investment and claims, and not demanding any meaningful concessions from the [[labor union]]s to bring wages more in line with a competitive world standard.

Both parties have expressed anger at the crisis, and have promised extensive new regulations of the financial industry. The Republicans opposed additional bailout aid to General Motors, which was on the verge of bankruptcy.<ref>Treasury Secretary Paulson told Congress on Nov. 18 that the Bush administration remains "firmly opposed" to using any of the $700 billion financial bailout fund to keep afloat auto manufacturers, "no matter how badly they need the help." [https://www.foxnews.com/politics/2008/11/18/paulson-rejects-bailout-money-automakers-senate-considers-legislation/ Fox news report]</ref> Democratic Congressional leaders and President [[Barack Obama]] had the [[United States Treasury]] take control of General Motors while paying existing shareholders 22 cents on the dollar for their investment and claims, and not demanding any meaningful concessions from the [[labor union]]s to bring wages more in line with a competitive world standard.

The Bush administration undertook a program in which it took control of several of the largest financial institutions and [[government sponsored entities]] ([[Fannie Mae]], [[Freddie Mac]], and AIG insurance) at the heart of the crisis, forced mergers of others, purchased $125 billion of ownership in the 9 largest banks in the U.S., and provided relief to the largest bank, Citigroup.

The Bush administration undertook a program in which it took control of several of the largest financial institutions and [[government sponsored entities]] ([[Fannie Mae]], [[Freddie Mac]], and AIG insurance) at the heart of the crisis, forced mergers of others, purchased $125 billion of ownership in the 9 largest banks in the U.S., and provided relief to the largest bank, Citigroup.

==Troubled Asset Relief Program (TARP) ==

==Troubled Asset Relief Program (TARP) ==

"We're in the midst of a serious financial crisis," [[George W. Bush|President Bush]] warned the nation on Sept. 25, 2008.:

"We're in the midst of a serious financial crisis," [[George W. Bush|President Bush]] warned the nation on Sept. 25, 2008.:

{{QuoteBox|Major financial institutions have teetered on the edge of collapse, and some have failed. As uncertainty has grown, many banks have restricted lending. Credit markets have frozen. And families and businesses have found it harder to borrow money....without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold: More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically. And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs. Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And ultimately, our country could experience a long and painful recession.<ref>see [http://www.whitehouse.gov/news/releases/2008/09/20080924-10.html Bush speech online]</ref>}}

{{QuoteBox|Major financial institutions have teetered on the edge of collapse, and some have failed. As uncertainty has grown, many banks have restricted lending. Credit markets have frozen. And families and businesses have found it harder to borrow money....without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold: More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically. And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs. Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And ultimately, our country could experience a long and painful recession.<ref>see [https://www.whitehouse.gov/news/releases/2008/09/20080924-10.html Bush speech online]</ref>}}

On September 19, 2008, the Treasury and Federal Reserve proposed a major rescue plan—the largest government intervention in the economy since [[World War II]]. The plan was for the Treasury to purchase $700 billion of the CDOs. The buyout was needed, Bush said, to avert a major disaster for the economy.  Most (but not all) Democrats signed on to the plan, adding provisions for Congressional oversight and caps on CEO compensation; but at the last moment on Sept 25, 2008 House Republicans said no, and GOP presidential nominee [[John McCain]] held off endorsement.   

On September 19, 2008, the Treasury and Federal Reserve proposed a major rescue plan—the largest government intervention in the economy since [[World War II]]. The plan was for the Treasury to purchase $700 billion of the CDOs. The buyout was needed, Bush said, to avert a major disaster for the economy.  Most (but not all) Democrats signed on to the plan, adding provisions for Congressional oversight and caps on CEO compensation; but at the last moment on Sept 25, 2008 House Republicans said no, and GOP presidential nominee [[John McCain]] held off endorsement.   

The Treasury TARP program proved erratic and had to be radically modified several times. The Treasury dropped the original plan to buy toxic securities and instead has used $250 billion to prop up major banks. In October Paulson and Bernanke used their new powers to take an ownership stake in the nine largest U.S. banks, of $7 to $25 billion each. These banks are now partly owned and controlled by the government. However those banks are keeping the money and not lending it out. The price of bank stocks has fallen sharply since the relief program was passed. The world's largest bank, Citigroup, was on the verge of collapse in late November and received a second loan of $20 billion (in addition to $25 billion in October), and a federal guarantee to cover most of its toxic investments.

The Treasury TARP program proved erratic and had to be radically modified several times. The Treasury dropped the original plan to buy toxic securities and instead has used $250 billion to prop up major banks. In October Paulson and Bernanke used their new powers to take an ownership stake in the nine largest U.S. banks, of $7 to $25 billion each. These banks are now partly owned and controlled by the government. However those banks are keeping the money and not lending it out. The price of bank stocks has fallen sharply since the relief program was passed. The world's largest bank, Citigroup, was on the verge of collapse in late November and received a second loan of $20 billion (in addition to $25 billion in October), and a federal guarantee to cover most of its toxic investments.

In mid-December Bush announced that $17.4 billion of TARP funds would be given to the automobile industry in the form of bridge loans,<ref name=bushremarksautobailout>http://blogs.wsj.com/autoshow/2008/12/19/bushs-remarks-on-the-auto-rescue-plan/ Wall Street Journal, "Bush’s Remarks on the Auto Rescue Plan," December 19, 2008</ref> just enough to prevent the companies from going bankrupt for a few weeks.<ref>http://online.wsj.com/article/SB122969367595121563.html Wall Street Journal, "U.S. Throws Lifeline to Detroit," December 20, 2008</ref> Bush defended the move by saying "if we were to allow the [[free market]] to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers."<ref name=bushremarksautobailout />

In mid-December Bush announced that $17.4 billion of TARP funds would be given to the automobile industry in the form of bridge loans,<ref name=bushremarksautobailout>https://blogs.wsj.com/autoshow/2008/12/19/bushs-remarks-on-the-auto-rescue-plan/ Wall Street Journal, "Bush’s Remarks on the Auto Rescue Plan," December 19, 2008</ref> just enough to prevent the companies from going bankrupt for a few weeks.<ref>http://online.wsj.com/article/SB122969367595121563.html Wall Street Journal, "U.S. Throws Lifeline to Detroit," December 20, 2008</ref> Bush defended the move by saying "if we were to allow the [[free market]] to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers."<ref name=bushremarksautobailout />

By mid-November the market had lost confidence in Treasury Secretary Paulson, who indicated he was baffled and would let the incoming Obama administration handle the unspent $450 billion.  The stock market jumped 6% on the news that Obama had picked New York banker [[Timothy Geithner]] to replace Paulson.<ref>Theo Francis, "Obama to Nominate New York Fed Chief Timothy Geithner as Treasury Secretary," [http://www.businessweek.com/election/2008/blog/archives/2008/11/obama_to_nomina.html?chan=top+news_top+news+index+-+temp_top+story ''Business Week'' Nov. 21, 2008]</ref>  In late November the Federal Reserve announced it will buy up to $600 billion in mortgage-related assets from Fannie Mae and Freddie Mac, hoping to restart the housing and credit markets.  Under the new "Term Asset-Backed Securities Loan Facility," or '''TALF''', the Federal Reserve will loan up to $200 billion to financial companies that hold securities backed by consumer and small-business loans.  

By mid-November the market had lost confidence in Treasury Secretary Paulson, who indicated he was baffled and would let the incoming Obama administration handle the unspent $450 billion.  The stock market jumped 6% on the news that Obama had picked New York banker [[Timothy Geithner]] to replace Paulson.<ref>Theo Francis, "Obama to Nominate New York Fed Chief Timothy Geithner as Treasury Secretary," [http://www.businessweek.com/election/2008/blog/archives/2008/11/obama_to_nomina.html?chan=top+news_top+news+index+-+temp_top+story ''Business Week'' Nov. 21, 2008]</ref>  In late November the Federal Reserve announced it will buy up to $600 billion in mortgage-related assets from Fannie Mae and Freddie Mac, hoping to restart the housing and credit markets.  Under the new "Term Asset-Backed Securities Loan Facility," or '''TALF''', the Federal Reserve will loan up to $200 billion to financial companies that hold securities backed by consumer and small-business loans.  

:America is a debtor nation, we spend more than we save. The dollars value has plummeted against world currencies. Gold prices remain at record levels.The money that we don't have, but spend, will be a debt that future generations will have to worry about. This has brought rise to the term 'Generational Theft' in describing Obama policies.

:America is a debtor nation, we spend more than we save. The dollars value has plummeted against world currencies. Gold prices remain at record levels.The money that we don't have, but spend, will be a debt that future generations will have to worry about. This has brought rise to the term 'Generational Theft' in describing Obama policies.

:"It's time to terminate the TARP program," Rep. Jeb Hensarling, R-Texas, told reporters on Monday. "TARP is increasingly not being a vehicle for economic stability and taxpayer protection but is evolving into 700 billion dollar revolving slush fund that the administration can use to advance economic, social and political agenda items far and apart from what Tarp was ever designed to do." <ref>[http://www.foxnews.com/politics/2009/06/08/house-republican-moves-terminate-tarp/ House Republican Moves to 'Terminate the TARP'] Fox News,  June 08, 2009</ref>

:"It's time to terminate the TARP program," Rep. Jeb Hensarling, R-Texas, told reporters on Monday. "TARP is increasingly not being a vehicle for economic stability and taxpayer protection but is evolving into 700 billion dollar revolving slush fund that the administration can use to advance economic, social and political agenda items far and apart from what Tarp was ever designed to do." <ref>[https://www.foxnews.com/politics/2009/06/08/house-republican-moves-terminate-tarp/ House Republican Moves to 'Terminate the TARP'] Fox News,  June 08, 2009</ref>

In the view of 51 mostly conservative economists polled by the ''Wall Street Journal'' in July 2009, the Obama administration's performance is problematic. President Obama and Treasury Secretary Geithner both got an average grade of 70 out of 100 for their handling of the financial crisis, but those grades varied widely. Former President Bush and ex-Treasury chief Paulson got average grades of 50 and 60, respectively, when economists were asked how they handled the crisis while in office. By contrast, Fed chairman Bernanke scores much better, with an average grade of 85; in addition 93% of respondents said he should be reappointed by Obama when Bernanke's term expires early next year.<ref>Phil Izzo, "Few Economists Favor More Stimulus," [http://online.wsj.com/article/SB124708099206913393.html ''Wall Street Journal'' July 10, 2009]</ref>

In the view of 51 mostly conservative economists polled by the ''Wall Street Journal'' in July 2009, the Obama administration's performance is problematic. President Obama and Treasury Secretary Geithner both got an average grade of 70 out of 100 for their handling of the financial crisis, but those grades varied widely. Former President Bush and ex-Treasury chief Paulson got average grades of 50 and 60, respectively, when economists were asked how they handled the crisis while in office. By contrast, Fed chairman Bernanke scores much better, with an average grade of 85; in addition 93% of respondents said he should be reappointed by Obama when Bernanke's term expires early next year.<ref>Phil Izzo, "Few Economists Favor More Stimulus," [http://online.wsj.com/article/SB124708099206913393.html ''Wall Street Journal'' July 10, 2009]</ref>