I’m not following financial markets and economic news on a daily basis like I follow some other issues. I’ve become increasingly alarmed in the past few weeks, however, with headlines like these. Can we connect the dots?
September 7, 2008
U.S. seizes Fannie and Freddie
Treasury chief Paulson unveils historic government takeover of twin mortgage buyers. Top executives are out.
Federal officials on Sunday unveiled an extraordinary takeover of Fannie Mae and Freddie Mac, putting the government in charge of the twin mortgage giants and the $5 trillion in home loans they back. The move, which extends as much as $200 billion in Treasury support to the two companies, marks Washington’s most dramatic attempt yet to shore up the nation’s housing market, which is suffering from record foreclosures and falling prices.
September 15, 2008
U.S. bank giant Lehman to file for bankruptcy
After enduring one of the most dramatic days in its history, Wall Street received a climactic jolt Monday when Lehman Brothers, a 158-year-old investment bank undermined by bad bets on real estate, said it will file for bankruptcy. The fall of Lehman followed a wild, three-day scramble by top Wall Street executives and federal regulators who worked around the clock to come up with a solution to a still-unfolding financial crisis.
September 16, 2008
Fed in AIG rescue – $85B loan
Government response reaches dramatic new level: U.S. will take 80% stake in nation’s largest insurer to prevent global financial chaos.
In an unprecedented move, the Federal Reserve Board is lending as much as $85 billion to rescue crumbling insurer American International Group, officials announced Tuesday evening. The Fed authorized the Federal Reserve Bank of New York to lend AIG (AIG, Fortune 500) the funds. In return, the federal government will receive a 79.9% stake in the company.
Note the words I’ve bolded in the quotations above. Extraordinary. Most dramatic. Unprecedented.
Wow. We’re in trouble folks. These aren’t symptoms of a minor problem. I’m not an economist by trade, but my friend and fellow USAFA grad Tim Kane is, and I’ve been thinking about reaching out to Tim to record a podcast interview with his take on these scary economic headlines. Tim hasn’t blogged in awhile, but he’s got a good excuse as an economic advisor for the John McCain presidential campaign. I’m not sure if Tim can speak publicly on this at this point but I’m going to find out.
You don’t have to have a PhD in economics to see these headlines are elements of a MAJOR story which should concern us all, because it is and will affect us all. I don’t have answers to offer in this post, but I can share a question.
Are your students following these economic headlines and connecting the dots? I’d love to see a StoryChasers group focused on economic issues.
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