...There are two choices in order to try to “smooth out” the business cycle. One of these ways is by utilizing fiscal policy; however, this is time consuming due to the recognition lag, the administrative lag, and the operational lag. The other choice is by utilizing monetary policy, which is a much faster way to create change in the money supply and therefore affects everyone. The Fed chairman, Alan Greenspan, holds the majority of the control over the Federal Reserve bank, the entity in charge of monetary policy. About predicting unemployment rate in the United States, “ it will be what Greenspan wants it to be, plus or minus a random error reflecting the fact that he is not quite God.” The Federal Reserve Bank greatly influences the lives of all American citizens. Although it does not directly affect the people, as does fiscal policy, it indirectly, and with more speed, reaches all people. I agree with Wheelan’s statement because it is quite obvious the amount of power that the Federal Reserve Bank, and even more so Alan Greenspan, holds over the money supply. The Federal Reserve Bank controls the amount of money in circulation: a greatly important decision. If they wish to have more money in circulation, they buy bonds or securities in order to allow the commercial banks to have more money that they can lend, resulting in more money in the hands of the people. This process continues on to the businesses. With more money, the people spend more. With more spending comes greater...
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...RONALD REAGAN ECONOMIC POLICIES Name: Instructor: Ronald Reagan Economic Policies Reaganomics was the popular term that was used to describe Ronald Reagan’s economic policies, which advocated for a decreased social spending, widespread tax cuts, increased military spending, and deregulation of the domestic markets. This paper aims at analyzing the economic policy of President Reagan’s administration. Generally, Reagan pledged to advance, or return, to a free market and that involved getting the government off the citizens’ backs. Specifically, he was in favor for a massive deduction in government spending, a balanced budget by the year 1984, and a more drastic cut in taxation. His main concern was the reduction of income tax, and ensuring a come back to the gold standards, when money supply was done by the markets and not the government. Besides calling for free markets domestically, Reagan asserted deep commitment to liberty of international trade. However, when the president’s advisors went to office with the idea of cutting both taxes and spending, they found out that the first objective was easier to achieve than the second because of politics of the day. Cutting tax was popular and they did come down substantially. The top marginal rate reduced to 28 per cent from 70 per cent (Magazzino, 2010). Many loop holes were eliminated and the tax base broadened. However, cutting the spending was unpopular and the democratic...
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...thing; the housing bubble was one factor that generated this financial crisis. So, who is to be blame for creating the housing bubble? According to John Taylor’s article, “How Government Created the Financial Crisis,” lax policies implemented by the Federal Reserve (Fed) caused the financial crisis. As a response to John Taylor’s opinion, Alan Greenspan’s article, “The Fed Didn’t Cause the Housing Bubble”, defends the Fed’s policies and places the fault on mortgage rates, such as long-term or fixed mortgages, as the real cause that triggered the Housing bubble. Even though John Taylor’s, a professor of Economics at Stanford, and Alan Greenspan’s, a former chairman of the Federal reserve, opinions are strongly supported by facts, I’m truly fed up of hearing excuses and finger pointing about the current financial crisis. The fact is that both the Fed’s policies and the rates on mortgages initiated the housing bubble, and I can’t reject either explanation. However I believe that it is time to start thinking about the future, thus, we should worry about how the Fed’s policies should be managed to stimulate the domestic and international US economy for the future. According to John Taylor, it’s the Government’s fault for maintaining interest rates lower than normal during 2003-2005. Even though he is right, one should remember that the Fed lowered the interest rates as a...
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...|Corporate Governance | |The Importance of Corporate Governance in Organizations | |Final paper | SOUTHERN TAIWAN UNIVERSITY DEPARTMENT OF BUSINESS ADMINISTRATION | | Julia Vassiljeva m987z202 Taiwan 2010 The importance of corporate governance in organizations With the recent financial crisis, companies’ defaults and crushes, the importance of corporate governance has risen significantly. Corporate scandals that have impacted companies all over the world have led to the re-examination of the role of corporate governance in their day to day operations. The Organization of Economic Cooperation and Development (OECD, April 1999) defines corporate governance as follows: "Corporate governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants...
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...an increasing need for these banks as the means to fund the necessary investments in the economy. 13 bankers, breaks down the American banking industry in how they have grown so big, so profitable, that they have become resistant to regulations. The banks grown to the enormous that the stability of the economy was dependent, giving they a political influence by pouring money into campaigns of congressional candidates and congressmen, assuring investment banks to maintain influence and position in the White House and the Treasury department. Theses “megabanks” had balance sheet assets that accounted for more than 60 percent of the country’s gross domestic product. In March of 2009, the presidents of thirteen of these “Megabanks” met at the White House with the President, Obama that gave a message, “everybody has to pitch in. We’re all in this together” –President Obama (13 Bankers, page 4) this message giving a clear indicator the thirteen bankers needed the government and in turn, the government needed these 13 bankers to maintain stability of the economy. Thomas Jefferson was strongly suspicious of the financial industry and of banks and feel they are more dangerous than standing armies. Jefferson feared that the economic power held by banks have the possibility to grow out of government control. Jefferson’s vision for the United States was more of a farming and agricultural economy, in such had little political and economic power. The opposition to Jefferson, came from...
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...The Federal Reserve System I would like to start this paper by giving a clear definition of the federal reserve system: The Federal Reserve System most well known as “the Fed” is the central banking system and monetary authority of the United States. The Fed is made up of regional Federal Reserve banks and the Federal Reserve Board of Governors, which their main responsibility is to supervise and to examine the state-chartered member banks, also to regulate banks holding companies, and finally to be responsible for the conduct of the monetary policy. Furthermore, some of the most important duties of the Fed are to keep full employment and to maintain a low state of inflation (CPI= 2%). In order to clearly understand this concept and its purpose, it is also necessary to give a clear definition of the word money. As stated in the Webster dictionary, money is: “A commodity, such as gold, or an officially issued coin or paper note that is legally established as an exchangeable equivalent of all other commodities, such as goods and services, and is used as a measure of their comparative values on the market.” Money has three basic functions: a medium of exchange, a measure of value, and a store of value. Goods and services are paid for in money and debts are brought upon and then paid off in money. Without money, economic transactions would have to take place on a trading basis. In conclusion, money is a good thing for Humanity. It frees people from spending too much time running around...
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...reflects their own influence over their boards rather than a disinterested evaluation of their worth. Management and investors are wrestling over their roles in structuring executive compensation through sign on pay and the role of proxy advisory services. We will be addressing Executive Compensation in three parts. We will begin with where we have been, where are we presently and then where we need to be in the future. We will go back to October 23, 2008, which was the height of the financial crisis. The Federal Reserve had intervened to save BEAR-STEARNS from financial collapse. In the pervious month Merrill-Lynch had been sold to Bank of America and AIG had just received a $85 billion dollar bail-out from United States taxpayers. The 158-year-old Lehman Brothers financial firm had just collapsed and filed for bankruptcy. It was an uncertain and extremely precarious time. The then President Bush asked for an astonishing 700 billion dollars to prevent a contagion from spreading through the financial markets and it was approved by Congress. So, what went wrong? How did our nation go from record surpluses in the late 90’s to the most devastating economic collapse since the Great Depression at the end of the Bush Administration? On that date October 23, 2008, these were the questions members of the Committee on Oversight & Government Committee Reform were asking at a hearing with Alan Greenspan (former Chairman of the Federal Reserve). During the hearing Mr. Greenspan made a surprising...
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...Subprime Lending Discuss in detail the event, the people involved, and its background and impact of America. Before 1930, features of Housing loans presented significant challenges. To obtain a home loan a down payment of half the value the house was required. Further issues with these loans were large balloon payments and short maturities. The pricing for mortgage loans varied widely due to no nationwide housing market. The main funding for these loans was provided by life insurers, thrifts, and commercial banks. By 1932, a housing crisis was wreaking havoc on home loans. The estimated defaulted loans were rising to twenty –five percent. In response to this crisis, the FHL Bank System was designed to provide relief to lending institutions and homeowners. In 1933, President Roosevelt birthed two Acts regarding the housing market. The first was the Home Owners Loan Act. This act established the HOLC, which was designed to slow down the quickly rising foreclosure rate. Under this act, long-term self-amortizing fixed rate mortgages became the new norm. The second act in the New Deal was the National Housing Act. The FHA was created in this act. This protective measurement was used to help the lenders maintain foreclosed homes by adding automatic insurance payments to active loans. The FHA also expanded the use of a fixed rate long-term home loan. In 1938, the American government formed Fanny Mae to provide a secondary market for home mortgages. This secondary market gave...
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...standard. Should we return to it? The gold specie standard arose from the widespread acceptance of gold as currency. No, The gold standard limited central banks from printing money when economies needed central banks to print money, and limited governments from running deficits when economies needed governments to run deficits. It was a devilish device for turning recessions into depressions. The answer is that some people aren't worried about depressions. Some people are worried about inflation. 2. Who was J. Pierpont Morgan? What was his role in stopping the Panic of 1907? John Pierpont "J. P." Morgan (April 17, 1837 – March 31, 1913) was an American financier, banker, philanthropist and art collector who dominated corporate finance and industrial consolidation during his time. In 1892 Morgan arranged the merger of Edison General Electric and Thomson-Houston Electric Company to form General Electric. After financing the creation of the Federal Steel Company, he merged in 1901 with the Carnegie Steel Company and several other steel and iron businesses, including Consolidated Steel and Wire Company owned by William Edenborn, to form the United States Steel Corporation. - The Panic of 1907 was a financial crisis that almost crippled the American economy. Major New York banks were on the verge of bankruptcy and there was no mechanism to rescue them until Morgan stepped in personally and took charge, resolving the crisis.[10][11] Treasury Secretary George...
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...Running Head: CLEAN UP THE HOUSE 1 Clean Up the House: An Analysis of the Housing Crisis and the Endeavor to Lift the US Housing Market Neil Smith Wilmington University MBA 6400 Economic and Financial Environment of Business CLEAN UP THE HOUSE 2 ABSTRACT This is an inquiry of the Housing Crisis that culminated to the Great Recession of 2007-2009. A review of the aspects that led to the Housing Crisis will be considered. The causes that contributed to the Housing Crisis will range from the Community Reinvestment Act of 1977 to the greed and voracity that engulfed the Financial Markets. Such greed maligned the financial markets causing eventual bailouts and measures that the US Federal Government employed to avert a major financial depression. This paper will discuss definite recommendations that will improve the US Housing Market. CLEAN UP THE HOUSE 3 Clean Up the House: An Analysis of the Housing Crisis and the Endeavor to Lift the US Housing Market In today’s world it is generally accepted that a home is the most expensive thing that any American can buy. The idea of home ownership - a chance to own a home - is a dream fulfilled for many. To have a piece of property and call it your own is reflected...
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...Ethical Leadership: Right Relationships and the Emotional Bottom Line The Gold Standard for Success by Desmond Berghofer and Geraldine Schwartz Fraud and falsification are highly destructive to market capitalism and, more broadly, to the underpinnings of our society…Our market system depends critically on trust. Trust in the word of our colleagues and trust in the word of those with whom we do business. Alan Greenspan (1) Former Federal Reserve Chairman Wisdom traditions that encompass the history of human civilization have right relationships as their core value. Each of these traditions enjoins their leaders and citizens to act with compassion and thoughtful tenderness towards others, which is the hallmark of the noblest spirit of our humanity. Trillions of acts of decency, respect and fair play have allowed societies to evolve from their primitive beginnings to conditions where the rule of law and a constitution of rights and privileges protect men and women in modern diverse democracies. Unfortunately, it is when hard won improvements to the common good go terribly wrong that we most notice them. This does not mean, however, that we should take rare incidents of wrong doing to be the description of society. Rather, we need to mine human wisdom for the gold standard across time in order to establish “best practices” for the future. In so doing we come to understand that we are social creatures, driven by our emotions whose life force flows into the spaces between...
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...twelve privately controlled regional banks catering to the specific needs of twelve geographical regions of the country. Traditionally, the New York Fed has held a prestigious, and somewhat dominating, position among regional banks because of its hegemony over implementing the monetary policy of the Federal Reserve Bank and the fact that most of the financial powerhouses have concentrated operations in New York. Its organizational structure is composed of nine members (three bankers, three non-bankers chosen by the local banks and three members chosen by the Federal Reserve Board of Governors to represent the public); other regional reserve banks have the same structure. By design, this structure is dominated by bankers and can potentially influence Fed’s policy for the benefit of bankers at the detriment of other stakeholders including taxpayers. This concern was particularly evident during the Great Recession. The President of the New York Fed, Timothy Geithner, furiously advocated governmental intervention in support of the troubled financial...
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...Introduction: According to Heskett, 2012, leadership requires many top noch qualities which includes: competence, interpersonal skills, administrative, should be a snooping follower, a virtuous eavesdropper, a quest of veracity, instigator as well as empathizer, no autocraticness etc. But the main delimas that organizations are facing today is how to motivate their employees in order to improve their efficiency which will halp them in sustaining their competative advantage. Teresa M. Amabile and Steven J.Kramer had provided a breakthrough idea to deal with the motivational issues i.e. “managers are a powerful influencer, they can provide their employees with stimulating yet attainable gaoals, resources, encouragement, should protect the employees from the irrelevant goals, to cut short he/she should provide him a podium to aid him headway with a sanguine attitude.” Leaders Role: To implement the idea the companies either need to train the existing leaders or higher new ones which are having such qualities. As Barbara Kellerman in her book “the end of Leadership”, says “Teaching how to lead is where the money is,". In current eon, the utmost important practice that every organization should adopt is to have their employees satisfied yet motivated only then you will be able to achieve sky high profits. We have many examples like 3M Corp. there is a creative time for them in which they are allowed to invent small things the sticky note was one of the ideas. Now the question is...
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...Occupy Wall Street Professor Sanjib Guha Business Ethics November 12, 2012 Occupy Wall Street Many Americans have wanted to take a stand against the corruption that occurs within big business, banks, and Wall Street. It was not until September 2011 that people band together to take a stand in Liberty Square, which is located in Manhattan’s Financial District (2012). This movement started with many passionate people that would no longer hold their silence. Having to deal with an economy that tanked and a high unemployment rate brought this to a head. The message was clear – a change was needed. It is said that the collective worker in America does not have a voice (About, 2012). Many are told to just deal with the outlined terms of employment or find another job. Union workers would say that they have choices, and their representatives fight for them. The union workers also have a higher salary than non-union workers in the same field of work. Occupy Wall Street (OWS) provided a springboard for a joint voice that was loud enough for some to hear. Many that were out of work and many that needed to speak up band together to focus on this inequality. Moral that was once low, soon increased as the movement took form. The movement had some setbacks a few months after it started which included protestors being faced with arrest. Looking from the outside into the movement, one would wonder if all involved had the same goals as the movement, or were they there to simply...
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...The bailout proposal, initiated by the Secretary of the Treasury, Henry Paulson, a former executive of Goldman Sachs, was intended to create an entity whereas the government was going to buy those mortgage backed securities from the banks in order to provide liquidity to the banks and clear their balance sheets of these unmarketable assets. Although nobody understands exactly what the plan is and how it will help the economy, since it has changed since the legislation was passed by the U.S. Congress (angering investors in the meantime), there is a consensus that the government will have to step in to clear up the mess on “wall street” and on “Main Street”. In order to understand why there is a need for a bailout, I will retrace the roots of the crisis up to the point where the government decided to intervene. Also, I will address the issue of how the measures undertaken will impact on the banks, the credit markets, mortgage markets and the overall economy. Finally, I will provide an opinion as to why I think the bailout is a bad measure that will hurt the economy on the long term. The last major bailout before the current financial crisis was the bailout in 1998, of Long Term Capital Management, a hedge fund and a one time big player on Wall Street. LTCM undertook a huge risk by engaging in highly leveraged positions, which resulted in mounting losses due to...
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