25/11/13


Mid
Term
Elec1ons
of
2006
 Bush
at
the
end
of
his
presidency
 
The
Economic
Crisis
of
2008


•  War
in
Iraq,
Katrina
disaster,
scandals
in
 •  Foreign
policy:
most
of
the
world
alienated,
US

weakened
militarily,
isolated
diploma1cally

Congress
=
mass
dissa1sfac1on
with

•  Planned
Iraqi
withdrawal
by
2011,
but
more

government.
 troops
sent
in
2007

•  2006
congressional
elec1ons:
unusually
high
 •  Over
4000
US
soldiers
killed
in
Iraq
by
the
end
of

turnout
(40%)
 Bush’s
presidency

•  Economy:
tax
cuts
and
military
spending
turned

•  Democrats
took
both
Houses
 budget
surplus
into
massive
deficit

•  Nancy
Pelosi
(D‐California)
becomes
first
 •  More
and
more
Americans
living
in
poverty,

female
Speaker
of
the
House
 without
health
insurance


Recession
and
the
Stock
Market
Crash,
 The
effects
of
«
subprime
»
loans
 Banks,
Wall
Street
and
the
Subprime
Crisis


2007‐2008
 •  Bank
loans:
several
factors:
 •  Banks
willing
to
make
more
risky
loans
(good
housing

market)

•  Roots
of
the
economic
crisis:
public,
private
 •  Income,
jobs

•  Wall
street
sold
these
mortgages
to
investors
based
on

policies
that
favorized
specula1on,
spending,
get‐ •  Other
debt
(car
loans,
student
loans,
credit
card
debt)
 the
same
idea.
Insurance
companies
guarnateed
risky

rish
schemes
over
more
tradi1onal
investments
 •  Credit
ra1ng
(history
of
paying
bills,
loans)

 loans,
credit
ra1ng
agencies
gave
high
ra1ngs
to
these

risky
investments.

•  Low
interest
rates
=
housing
bubble
 •  «
subprime
»
loans:
higher
risk,
so
higher
 •  2006‐2007,
housing
prices
begin
to
fall,
property
values

•  Average
household
debt
greatly
exceeded
income
 interest
rates
(ojen
low
for
the
first
year,
then
 plunge.
People
owe
more
money
than
their
homes
are

worth

($50,000/year
earnings,
+$120,000
debt).
Yearly
 much
higher:
«
variable
rate
»)

•  Value
of
mortgage‐based
securi1es
plummeted:

savings
low
(avg.
$400/year)
 •  Banks
willing
to
make
risky
loans
because
 investors
lost
billions.

•  China:
reduced
manufacturing
jobs,
but
also
 housing
market
was
growing
(in
case
of
 •  Banks
stopped
making
loans,
business
dried
up,
the

stock
market
collapsed.
The
Dow
dropped
6000
points,

provided
cheap
goods
 default,
they
could
sell
the
property)
 $7trillion
in
shareholders’
wealth
wiped
out.


Changing
Percep1ons
of
Business
 Bush
and
the
collapse
of


Short
term
effects
of
the
crisis
 market
fundamentalism

•  Americans
cut
back
on
spending
 •  As
ajer
the
Great
Depression,
public
 •  Dark
side
of
«
market
fundamentalism
»:
idea
that
an

•  Businesses
failed,
unemployment
rose
(2.5
million
jobs
 confidence
in
Business
greatly
damaged
 unregulated
free
market
will
provide
results
that
are

lost
in
2008)
 best
for
all
concerned.

•  One
social
group
poll
ranked
bankers
slightly

•  Manufacturing,
construc1on
hardest
hit.
 •  Bush
did
not
intervene
at
first:
Lehman
Brothers

above
pros1tutes
and
convicted
felons
 collapse
created
a
domino
effect
on
other
businesses

•  By
2009;
more
women
than
men
had
paying
jobs.

•  October
2008‐March
2009,
GDP
fell
by
6%

•  Resentment
against
Wall
Street
bonuses
not
 •  Bush
reversed
course,
asked
for
$700
billion
in
aid
to

based
on
performance
 banks

•  Longest
recession
since
the
Depression

•  Very
few
restric1ons
placed
on
how
the
money
was
to

•  Minori1es
hardest
hit
by
loan
foreclosures,
job
losses
 •  Bernard
Madoff
and
his
Ponzi
scheme
 be
used.

•  Spaked
a
worldwide
financial
crisis
 •  Collapse
of
dozens
of
banking,
insurance
firms
 •  Crisis
revealed
how
fragile
workers’
«
safety
net
»
was

•  American
confidence
shaoered
 •  Fewer
profits=lower
state
tax
revenues,
program
cuts


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