In the summer of 2011, nearly four years after a downturn began, the economies of the United States and the countries of Europe continue to struggle and markets were roiled by fears of new setbacks, defaults and the possibility of a double-dip recession.
Behind the turmoil lay many factors, including the stubbornly high unemployment rate in America, the sovereign debt crisis in Europe, the partisan fight in Washington over the federal debt ceiling and the decision by Standard & Poor’s to downgrade the government’s AAA rating in its aftermath.
It had been clear for some time that the modest recovery that had begun in 2009 from the recession that began in 2007 had not reached takeoff velocity. But the new figures showed how close the growth was to stalling out entirely.
New fears also arose about confidence in the banking system, after a European agreement reached in July on a new round of bailouts failed to calm the markets. Italy and Spain suddenly found themselves forced to pay the steep interest rates investors had been charging countries like Portugal and Ireland.
The European Central Bank responded with its most forceful program to date, saying it would buy large amounts of Italian and Spanish bonds. In Washington, the Federal Reserve made an unusually firm commitment, saying that in light of the weakening economy it would leave interest rates near zero into 2013 if no threat of inflation appeared.
By the beginning of September 2011,
fears were rising that European banks could be dragged down by the debt crisis, as financial institutions became increasingly wary of lending to each other, in developments recalling the days leading up to the collapse of Lehman Brothers in September 2008.
Many economists and investors had hoped for more aggressive measures to get growth going again. In a speech to Congress on Sept. 8, President Obama
pushed for a $447 billion package of tax cuts and new government spending. But it was unclear how much of the plan might make it through a Republican House that has been opposed to further stimulus, and whether the package would be big enough to make a significant difference if it did.
On Sept. 21, the Fed announced an unusual plan under which it would swap $400 billion in short-term securities for longer term securities, in the hope of driving down long-term interest rates. The move was opposed by three members of the Fed's policy making board and criticized by Republican leaders, but many economists said they had hoped for more.
Background
A housing boom in America and a number of European countries was followed by a bust and then a market tailspin that created the greatest financial crisis since the Great Depression.
In the United States, the housing market peaked in 2006. The first sign of serious trouble on Wall Street came in June 2007, when the investment bank Bear Stearns shuttered two of its hedge funds that had lost deeply in the mortgage market.
But while financial Armageddon was avoided, the crisis spread around the globe, toppling banks across Europe and driving countries from Iceland to Pakistan to seek emergency aid from the International Monetary Fund. A vicious circle of tightening credit, reduced demand and rapid job cuts took hold, and the world fell into recession.
In 2009, a number of countries moved to stimulate their economies. In the United States, Democrats in Congress passed a $787 billion economic stimulus measure requested by President Obama. China undertook a stimulus plan described as roughly $500 billion. Central banks across the globe followed the Fed's lead in cutting interest rates to close to nothing; and the Fed took other extraordinary measures, including buying up over a trillion dollars in mortgage-backed securities. The Obama administration forced General Motors and Chrysler into bankruptcy to save them, investing more than $60 billion and cutting thousands of jobs.
By the summer of 2009, it appeared that a financial meltdown had been avoided, and by the year's end, many big banks were reporting large profits and all but one had repaid or were in the process of returning their bailout money to the federal government. But unemployment rose steadily all year to the highest levels seen in a generation, and anger over the crisis, the banks, the bailout and new rounds of large bonuses became a potent force in politics.
The crisis gained a second wind in 2010 as revelations about the size of Greece's debts rippled slowly across Europe and shook markets in the rest of the world. Amid bitter wrangling, a string of aid packages were announced, culminating in a pledge in May by the European Union and the I.M.F. to make nearly $1 trillion available to euro states in need.
By the fall, it seemed clear that growth was slowing in the United States. The Federal Reserve, which in the spring had planned to unwind the portfolio it had amassed in the crisis, instead launched a second round of “quantitative easing.’’ A tax deal between President Obama and Republicans in a Congressional lame-duck session amounted to a small second stimulus, but it came as the boost to the economy from the 2009 stimulus was fading out.
In Europe, investors focused on Ireland and Portugal. Both countries eventually turned to the European Union for a bailout and saw their governments fall. Greece came to the brink of default in June 2011, barely passing a second round of austerity measures needed to keep E.U. bailout funds flowing. In all three countries, spending cuts had produced economic contraction, leading a growing number of economists to argue for writing off chunks of their debt and starting over.
Origins
The roots of the credit crisis stretch back to another notable boom-and-bust: the tech bubble of the late 1990s. When the stock market began a steep decline in 2000 and the nation slipped into recession the next year, the Federal Reserve sharply lowered interest rates to limit the economic damage.
Lower interest rates make mortgage payments cheaper, and demand for homes began to rise, sending prices up. In addition, millions of homeowners took advantage of the rate drop to refinance their existing mortgages. As the industry ramped up, the quality of the mortgages went down.
And turn sour they did, when homebuyers had to leverage themselves to the hilt to make a purchase. Default and delinquency rates began to rise in 2006, but the pace of lending did not slow. Banks and other investors had devised a plethora of complex financial instruments to slice up and resell the mortgage-backed securities and to hedge against any risks - or so they thought.
The Crisis Takes Hold
The first shoe to drop was
the collapse in June 2007 of two hedge fundsowned by
Bear Stearns that had invested heavily in the subprime market. As the year went on, more banks found that securities they thought were safe were tainted with what came to be called toxic mortgages. At the same time, the rising number of foreclosures helped speed the fall of housing prices, and the number of prime mortgages in default began to increase.
The Federal Reserve took unprecedented steps to bolster Wall Street. But still the losses mounted, and in March 2008 the Fed staved off a Bear Stearns bankruptcy by assuming $30 billion in liabilities and
engineering a sale to JPMorgan Chase for a price that was less than the worth of Bear's Manhattan skyscraper.
Sales, Failures and Seizures
In August, government officials began to become concerned as the stock prices of
Fannie Mae and
Freddie Mac, government-sponsored entities that were linchpins of the housing market, slid sharply. On Sept. 7, the Treasury Department announced it was taking them over.
The Government's Bailout Plan
The bleeding in the stock market stopped only after rumors trickled out about a huge bailout plan being readied by the federal government. On Sept. 18, Treasury Secretary
Henry M. Paulson Jr. publicly announceda three-page, $700 billion
proposal that would allow the government to buy toxic assets from the nation's biggest banks, a move aimed at shoring up balance sheets and restoring confidence within the financial system.
Congress eventually
amended the plan to add new structures for oversight, limits on executive pay and the option of the government taking a stake in the companies it bails out. Still,
many Americans were angered by the idea of a proposal that provided billions of dollars in taxpayer money to Wall Street banks, which many believed had caused the crisis in the first place. Lawmakers with strong beliefs in free markets also opposed the bill, which they said amounted to socialism.
President Bush pleaded with lawmakers to pass the bill, but on Sept. 29, the House
rejected the proposal, 228 to 205, with an
insurgent group of Republicans leading the opposition. Stocks plunged, with the Standard & Poor's 500-stock index losing nearly 9 percent, its worst day since Oct. 19, 1987.
Overseas, the crisis continued to take hold. Banks in England and Europe had invested heavily in mortgage-backed securities offered by Wall Street, and England had gone through a housing boom and bust of its own. Losses from those investments and the effect of the same tightening credit spiral being felt on Wall Street began to put a growing number of European institutions in danger. The weekend after the bailout's passage, the German government moved to guarantee all private savings accounts in the country, and
bailouts were arranged for a large German lender and a major European financial company.
Continued Volatility
And after a week in which stocks declined almost 20 percent on Wall Street, European and American officials announced coordinated actions that included
taking equity stakes in major banks, including $250 billion in investments in the United States.
The Crisis and the Campaign
The credit crisis emerged as the dominant issue of the presidential campaign in the last two months before the election. On Sept. 24, as polls showed Senator John McCain's support dropping, he
announced that he would suspend his campaign to try to help forge a deal on the bailout plan. The next day, both he and Senator Barack Obama met with Congressional leaders and President Bush at the White House, but their efforts failed to assure passage of the legislation, which
went down to defeat in an initial vote on Sept. 29, a week before it
ultimately passed.
The weakening stock market and growing credit crisis appeared to benefit Mr. Obama, who tied Mr. McCain to what he called the failed economic policies of President Bush and a Republican culture of deregulation of the financial markets. Polls showed that
Mr. Obama's election on Nov. 4 was partly the fruit of the economic crisis and the belief among many voters that he was more capable of handling the economy than Mr. McCain.
Deeper Problems, Drastic Measures
With credit markets still locked up and investors getting worried about the big banks, Wall Street marked a grim milestone in late November when stock markets tumbled to their
lowest levels in a decade. In all, the slide from the height of the stock markets had wiped out more than $8 trillion in wealth.
In December, an obscure group of economists confirmed what millions of Americans had suspected for months: the
United States was in a recession. The economy had actually slipped into recession a year earlier, a committee of economists said, putting the current downturn on track to be the longest in a generation. Unemployment rose to its highest point in more than 15 years. Trade shrank. Home prices fell farther. Retailers suffered
one of the worst holiday seasons in 30 yearsas worried consumers cut back, and stores like Sharper Image, Circuit City and Linens 'n Things filed for bankruptcy.
On Dec. 16, the Federal Reserve entered uncharted waters of monetary policy by
cutting its benchmark interest rate to nearly zero percent and declaring that it would deploy its balance sheet and essentially print money to fight the deepening recession and locked credit markets. Other countries followed the Fed with rate cuts of their own.
A New Administration
As president-elect, Mr. Obama made confronting the economic crisis the top priority of his transition. In January 2009, before taking office, he laid out a stimulus proposal for Congress, which developed into the $787 billion package passed in February - with only three Republican votes in the Senate, and none in the House.
To the dismay of some of his liberal supporters, Mr. Obama appointed Timothy F. Geithner as treasury secretary; Mr. Geither had been president of the New York Fed, and had been deeply involved in the crisis as it unfolded. In internal discussions about how to deal with the nation's reeling banks, Mr. Geithner prevailed, swinging the debate away from drastic actions like nationalization of the worst cases.
Mr. Obama also unfurled a
$75 billion plan to help as many as nine million families refinance their mortgages or avoid foreclosure - a plan that proved to be the least successful of the administration's many initiatives.
New Fears, New Lows, Then New Hopes
Countries in Eastern Europe that had embraced American-style capitalism began to teeter, raising concerns that the Baltic republics, Hungary and Romania
could be the next victims of the credit crisis, and could drag Western European banks down with them. Trade levels skidded lower and lower as demand for goods fell worldwide, hurting big exporters like China, and countries began
throwing up trade barriers as the downturn deepened.
But just as investors seemed more hopeless than ever, an unfamiliar force took hold of the markets: hope. A flurry of economic reports released by the government and private research groups showed surprising signs of stability in areas like home sales, retail spending, factory orders and consumer confidence. Leaders of JPMorgan Chase, Bank of America and Citigroup offered more optimistic projections about their profitability.
Despite sharp divisions over how to respond to the economic crisis, leaders of the world's largest economies smoothed over some of their differences at the Group of 20 meeting in London at the beginning of April. They
pledged $1.1 trillion that could be used to shore up developing countries and avoided the discord of a similar meeting during the Great Depression, but critics said the gathering failed to address some of the root problems of the global financial crisis.
A Crucial Moment for Banks and Automakers
In the spring of 2009, the banking system offered
signs of improvement. Major banks like Citigroup, Wells Fargo and Bank of America that had been deep in the red said they had
returned to profitability in the first quarter, although many of those earnings came from one-time gains and creative accounting. For the second quarter of 2009, JPMorgan Chase and Goldman Sachs posted stellar profits.
But for the country's sagging automobile makers, problems only seemed to multiply. Sales dropped by double digits, and General Motors and Chrysler, which received billions in government bailouts, rushed to complete restructuring packages, but they were unable to avoid the path to bankruptcy court.
One Year Later, Brief Signs of Recovery
A year after the credit crisis erupted, its impact was fading on Wall Street.
In June, after weeks spent jockeying with regulators and raising billions in stock offerings and debt sales, 10 big financial institutions were allowed to
return their share of the government's $700 billion financial bailout. Banks including JPMorgan Chase, Goldman Sachs and American Express paid back a total of $68 billion, a move that allowed them to stand without taxpayer dollars and operate without
increased government scrutiny over matters like executive pay.
But even as the banks wired the money back to the Treasury Department, some asked whether Washington and the banks were moving too fast. The financial system had stabilized and credit markets continued to improve, but none of the systemic problems that brought banks to their knees had been addressed. Mr. Obama called for a
broad regulatory overhaul, including increased protection for consumers, but faced resistance not only from the financial industry but within Congress, particularly for his suggestion to give the Fed more explicit authority to monitor the markets for system-wide problems.
In September, Mr. Geithner told a Congressional panel that it was
time to start winding down the government's bailout programs, and that the Treasury was expecting more banks to repay their bailout funds. A few days later, Mr. Bernanke said that the recession was "
very likely over," even though he expected the recovery to be bumpy, and marked by high unemployment.
Europe's Debt Crisis
In December 2009, the new prime minister of Greece,
George A. Papandreou, announced that his predecessor had disguised the size of the country's ballooning deficit. That declaration set in motion a chain of events that threatened not only the finances of Greece, but of other southern-tier European states, like Spain, Portugal and Italy, shook markets worldwide and raised deep doubts about the future of the euro and European integration.
The roots of the crisis go back to the strong euro and rock-bottom interest rates that prevailed for much of the past decade. Greece and other southern European countries took advantage of this easy money; in the process, some of them, like Athens, built up formidable levels of debt, others, like Spain, set off gigantic housing bubbles, and all of them became less competitive than their northern neighbors. When the global economy crumpled, those chickens came home to roost.
The financial crisis has highlighted the constraints of euro membership for these struggling economies. Unable to devalue their currencies to regain competitiveness, and forced by E.U. fiscal agreements to control spending, they are facing austerity measures just when their economies need extra spending. Other countries, like Germany, the Netherlands and Austria, have kept deficits down while retaining an edge in global markets by restraining domestic wage increases. France lies somewhere between the two camps.
The chief difficulty in working out a package to support Greece was the popular sentiment in Germany, deeply concerned about becoming the answer to the debt problems of all of Europe's endangered economies, that Greece should pay a penalty for its former profligacy.
After rounds of deep budget cuts and months of vague pledges of support from the rest of Europe failed to stop the steady rise of interest rates the market was demanding to finance Greece's debt, Mr. Papandreou in April 2010 formally requested a promised $60 billion aid package, calling his country's economy "a sinking ship.''
But global investors, who had seen Greece's bonds downgraded to junk status, were not reassured, forcing the I.M.F. and Greece's European partners to hastily prepare a far larger package. The new plan, announced May 2 and passed by Parliament on May 6, calls for 110 billion euros, or $140 billion, in loans over the next three years to avoid a debt default. In exchange, Greece had to accept deep cuts that will lead to years of sacrifice.
Yet support for the euro continued to erode, markets began to sink worldwide and signs of a renewed credit crunch in Europe appeared. Against this anxious backdrop, European leaders on May 9
agreed to provide nearly $1 trillion as part of a huge rescue package. Only hours later, central banks began the direct buying of euro zone government bonds directly - an unprecedented move to inject cash into the financial system.
Officials were hoping the size of the rescue package — a total of $957 billion — would signal a "shock and awe" commitment to such troubled countries as
Greece, Portugal and Spain, in the same vein as the $700 billion package the United States government provided to help its own ailing financial institutions in 2008.
The response to the package was not what leaders hoped: investors began driving up interest rates in Italy and Spain, economies too large to be bailed out by the new arrangements. At the same time, the fall in confidence threatened to undermine the big banks in those countries, whose large holdings of government bonds began to lose value.
Washington’s Budget Struggles
The Republican capture of the House in the November 2010 elections set the stage for a series of confrontations in 2011 between President Obama and his Democratic allies in the Senate and conservatives who campaigned on making steep cuts to government spending. The clashes played out against the backdrop of deficits that had risen sharply since the recession began in 2007, and unemployment levels that remained high even as the economy began a faltering recovery.
In April 2011, the federal government came within hours of a shutdown before Mr. Obama and
John A. Boehner, the Ohio Republican who became Speaker of the House in January, struck a deal that was described as reducing spending by $38 billion over the six months left in the 2010 fiscal year.
But even before the agreement was reached, the two sides had begun jockeying for advantage on two fronts involving far bigger numbers that could produce much larger clashes: the 2012 budget, and the federal
debt limit, which the government hit in May, although the Treasury said it could manage to pay the bills until Aug. 2.
Mr. Obama at first demanded a "clean'' debt limit bill, but entered into negotiations with Republicans, hoping for a "grand bargain'' that would reduce deficits by $4 trillion over 10 years through spending cuts, entitlement changes and new tax revenue.
By the end of July, increasingly bitter talks still continued, as an event that had one seemed unthinkable — a default by the federal government — loomed only days away.
Under the plan, which was approved by the House on Aug. 1 and the Senate the next day, a bipartisan Congressional commission will be given the task of coming up with the second round of deficit reduction by Thanksgiving; its plan would go straight to the floor of both chambers for an up or down vote. To put pressure on the committee, the failure of Congress to enact those cuts would trigger automatic spending cuts that
would trigger across-the-board cuts in military spending, education, transportation and
Medicare payments to health care providers.
It also underscored the fact that the focus in Washington remained on cutting spending, not economic stimulus, something that seemed likely to continue. The two-stage structure of the deal guarantees that Republicans and Democrats will keep wrestling over big changes to long-term budget plans through the presidential campaign in 2012.
At the same time, they face another flashpoint when the current budget expires on Sept. 30, to be replaced either by a 2012 budget or a series of continuing resolutions that would keep the government functioning until an agreement is reached or talks end in a shutdown.
財金文化董事長謝金河直言：「基因入主パン達人，是股價大漲關鍵。」過去一年多來，基因國際股價翻了近百倍，以帝寶幫為主的經營團隊拿健康養生做噱頭，利用藝人、名人光環行銷，
「台灣巴菲特」小S公公許慶祥
