LEAPS: Presentation on Economy:
Talking Points:

9/29/08:
- S&P 500 down 102.7 points 8.75%: one of largest percent decreases
- Nasdaq down 199.61 points or 9.14%
- Dow Jones Industrial down 777 points – lost 1.2 trillion dollar market value
- 700 billion dollar bailout fails on Monday after House rejection: 205 Yes / 228 No
Possible failures:
o Only 15% republicans pass bill in House
o Failure to lead/organize republicans
o Lack of executive lead (President, vice president, John McCain)

- Bailouts:
1) Bear Sterns bought by Chase for 10 dollars a share
2) Fannie May and Freddie Mac bailed out by government
3) Lehman Brothers fails
4) AIG bailed out for ~80 billion by government
5) Warren Buffet bailed out Goldman Sachs for 5 billion dollars
6) WaMu bought over by Chase
7) Wachovia fails: Citicorp acquires for 96 cents a share. Also…
- Monday’s closings: Citicorp and Chase down 15%
- 13 banks closed so far this year

- Presidential Candidate Standpoints
o Obama
 Pro-Middle Class
 Main Street, Not Wall Street
 No Golden Parachute
 Help the much neglected middle class America get jobs; put the money where it matters to help the common man and thus ease out of the recession, increase consumer confidence and spending
o McCain
 Corporate America: compared Ireland corporate taxes vs U.S’s. Wants less restriction on corporate America to encourage companies to do business and open up jobs from the top.
 The “Trickle-Down Effect”: help the top to help the bottom.
 Deregulation vs Regulation? As early as a week before the $700 billion bailout plan was proposed, John McCain had praised himself as a maverick for deregulation of Wall Street. Now he argues S.E.C chairman Chris Cox should be fired.

The Dow Jones and S&P more critically illustrates how tightly the frozen credit markets are right now. With credit markets frozen, and the inability of congress to pass legislation, small and large businesses are being affected. Mortgages are harder to get: affects housing market, it is harder to raise money, banks are withholding their capital, making it harder to get loans and thus stunting economic growth. This is exemplified by the recent 25 billion dollar government loan for American automotive companies Chrysler, General Motors, and Ford. It also reflects the consumer spending in an economy that is weak and lacking confidence, especially while Congress itself is in hesitation over passing any sort of beneficial legislation.

The Dow Jones reflects not a weak market but the frozen credit markets that have been the result of the failure of banks and housing. Incredulous Loans accounting for the price of entire houses were irresponsibly distributed for real estate; investment banks then repackaged these loans and depended on high interest rates for greater profits. However, when the loans could not be repaid, the property was foreclosed and banks lacked the capital to sustain themselves. Banks and financial institutions often repackaged these debts with other high-risk debts and sold them to world-wide investors creating financial instruments called CDOs or collateralized debt obligations. The serious subprime mortgage crisis began in June of 2007 when two Bear Stearns hedge funds collapsed.

“If BS was currency, Palin could bail out Wall Street herself” --Kathleen Parker