Transcript No Names
Team No Names: Kaitlyn Graber, Kenny Henault, Mike Hoelzel and Aaron Hall Housing Market Automobile Industry Small Business Government Spending Photo from: www.bankforeclosuressale.com/wp/article-02055... The housing industry has taken blame for current economic condition “Subprime” loans led to defaults and debt for both homeowners and banks Interest rates spike causes even more defaults on mortgages There were two main causes that led to the current housing crisis The first “major blow” can be attributed to subprime loans High risk loans, financed to poor credit borrowers Borrowers could not afford the mortgage, which resulted in nationwide defaults and foreclosures Despite foreclosures, home builders kept building new homes which eventually exceeded demand The second “major blow” to the housing industry is the steady rise in unemployment Fear of losing jobs, defaulting on loans, and decreasing home value prevents Americans from purchasing new homes—keeping home value at low prices Foreclosures have broken records for the last three decades Many homes are selling for as much as 30% less than their value As foreclosure rates increase, nearby homeowners are losing home equity Home equity lost in Ohio due to nearby foreclosures is estimated to be 1.9 trillion between 2009 and 2012. Total foreclosure projections for 2009 to 2012 will be roughly 282,190 in Ohio. In 2008 Congress passed this act to make living more affordable for the middle class struggling with the rising cost of living, the shrinking job market, and a housing foreclosure crisis . Treasury Emergency Authority The HOPE for Homeowners Act The S.A.F.E Mortgage Licensing Act The Foreclosure Prevention Act The Housing Assistance Tax Act of 2008 Modify bank loans and mortgages Change loan terms so that mortgage owners can pay off the loan ▪ This would keep people in their homes and lower foreclosure rates and less unpaid debt expenses ▪ Lead to less depreciation in home equity, resulting in more income for Americans ▪ Eventually result in higher spending which would boost not only the housing industry but also the overall economy. connectmidmichigan.com blog.grokmedia.com justgetthere.us 2007 huge fall in sales of trucks and SUV’s High gas prices were main reason 2007 truck and SUV sales down 3 million 2009 sales down 6 million U.S. industry dominated by “big three” Chrysler, G.M., and Ford G.M. has had the most sales for 77 years “Big Three” among top 5 auto makers in the world. In 2008 Toyota overtook Ford and G.M. sales. G.M. filed for bankruptcy in 2007 Chrysler also filed for bankruptcy They got $17.4 billion in aid from U.S. government. The U.S. auto market offers 6.6 billion jobs direct and indirect G.M. and Ford alone offer jobs for over 500,000 people January 26, 2009; a day called “Bloody Monday,” 71,400 Americans lost their jobs Due to recession America was in Chrysler: Founded in 1925, in 2007 it was bought from the German group DaimlerChrysler AG. April 30, 2009, Chrysler LLC filed for Chapter 11 bankruptcy 2009 received $6.6 billion to aid with a new deal Were selling all Chrysler LLC assets to new company under Chapter 11 bankruptcy. June, 2009 Chrysler LLC became Chrysler Group LLC and Fiat, Italian automaker, has 20% share of new company Founded 1906 in Flint, Michigan. Its headquarters is currently in Detroit From 1931 to 2008 it led in global sales June 1, 2009 General Motors filed for Chapter 11 bankruptcy, from which it emerged in July 2009 NGMCO Inc. purchased the operations and trademarks from General Motors Corporation. NGMCO Inc then changed name to General Motors Company, as part of the Chapter 11 bankruptcy reorganization process GM is temporarily owned by the United States Treasury and no stocks are open to the public Ford was founded by Henry Ford in 1903 Controls Ford, Lincoln, and Mercury brands Also controls Volvo brand in Sweden Small share in Mazda and Aston Martin Currently 4th largest automaker in world In 2006 reported largest loss in company history, $12.7 billion Wasn’t estimated to have a profitable year until 2009 •Small business is the backbone of the American business environment. •It makes up 99% of American businesses, and employs more than half of our working population. •There is no doubt that the recession has dropped that number significantly. In a poll done in 2007, entrepreneurs were asked if they expected a loss or gain for the coming year. The vast majority were optimistic and believed they would churn out a profit. In 2008, the same business owners were polled, and 71% of them said they garnered net loss for the previous year. In 2008, it was reported that over a quarter of small business owners had no growth strategy for the coming year. It was also found that 55% of business owners had a hard time securing credit for everyday operations. It is well known that nearly 80% of all small businesses fail during their first year. Nearly 66% make it to their two year anniversary. But, only 44% make it past four years of business. The Rate of Small Business Bankruptcy 1. 2. 3. 4. 5. Exorbitant Credit Card Debt Fewer Customers—Lower Income Putting Mortgages in Jeopardy “Keeping the Lights On” Where Have My Savings Gone? During a seven month period, just ending in November 2009, 22 of the largest banks that received federal bailout money, decreased lending to small businesses by $12.5 billion. Wells Fargo and Bank of America, the two largest lenders to small business, reduced their lending by 4.4 and 6.2 percent, respectively. 1. 2. 3. 4. 5. Businesses that sell things that people must have. Businesses that sell things people think they must have. Businesses that keep peoples minds off of the hard times. Businesses related to education. “Make-Do” Things. During the 1930s, New Deal lawmakers doubled federal spending-yet unemployment remained above 20 percent until World War II Japan responded to a 1990 recession by passing 10 stimulus spending bills over 8 years yet its economy remained stagnant In 2001, President Bush responded to a recession by "injecting" tax rebates into the economy. In Feb. 2009 President Obama set his $787 billion economic stimulus package into law. Unemployment Healthcare According to the Bureau of Labor Statistics, the unemployment rate was 7.7 % in January of 2009 .That percentage then rose again to 10 % by December 2009 Obama's stimulus package called for $43 billion increased in unemployment benefits and job training $39 billion to support those who lose their jobs by helping them to pay the cost of keeping their employer provided healthcare under COBRA Consolidated Omnibus Budget Reconciliation Act COBRA gives you the right to choose to temporarily keep the group health insurance benefits that you would otherwise lose after you reduce your working hours, quit your job, or lose your job. An estimated 14,000 Americans were losing their health insurance each day during the recession Obama's stimulus package allotted $39 billion to subsidies of health insurance for unemployed providing coverage through Medicaid. In 2008, health care spending reached 16.6 percent of GDP. In 2009, health care’s share of GDP is approximately 17.6 percent of GDP(largest jump in history) By 2018 health care spending is projected to reach $4.4 trillion — accounting for 20.3 percent of the U.S. gross domestic product (GDP)