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| COURSE CONNECTOR |
| ARTICLE SUMMARIES AND QUESTIONS |
"Bailing Out America: Main Street Turns Against Wall Street," pp. 96-102: In a surprise twist, a presidential election that many Americans believed would reflect voters' views about race, age and gender may actually hinge on a longstanding but newly stoked divide — class. Public outrage precipitated by the historic collapses on Wall Street and the proposed U.S. government bailout has unleashed a new era of class fury that could hurt U.S. companies, business leaders, wealthy investors, and politicians for years. Historically, Americans have been conflicted over wealth — at once resentful of the rich yet tolerant because of the prospect of their own upward mobility. Recent years, however, have found Middle America increasingly souring on the privileged class, with the Pew Research Center reporting that, at the start of the current presidential campaign, three-quarters of Americans agreed with the statement that the "rich are getting richer while the poor are getting poorer." So while Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke banked on public fear of a colossal financial crash to pass their economic rescue plan swiftly through Congress, what they got instead was taxpayer rage at having to shoulder the burden of bailing out careless financial profiteers. The fallout is affecting everyone; its ultimate effect on the upcoming presidential election remains to be seen.
Students examine the populist backlash that is changing America's political climate and could haunt business leaders for years to come.
Discussion Questions:- Why does the author of the article state that the next U.S. President
is going to inherit a damaged economy even without the credit crisis?
How will John McCain's and Barack Obama's plans likely be impacted
if Congress passes a bailout bill?
- How are members of each of the two major political parties responding to the proposed government intervention? How does this type of action specifically challenge their competing political ideologies?
- What do former presidential candidate Mitt Romney and Harvard professor Ken Rogoff fear could occur in the wake of this economic crisis? Do you agree with their thinking? What types of increased regulation, if any, would you consider to be a prudent response?
"Bailing Out America: Meanwhile, Down in Charlotte . . .," pp. 104-108: The U.S. government isn't the only one swooping in to save the day as the financial system stands on the brink of total collapse. Bank of America is doing its part by merging with the struggling Merrill Lynch, a union that marks the realization of BofA CEO Ken Lewis' dream — to make BofA the dominant player across the board in financial services. He first proposed a merger to former Merrill CEO Stan O'Neal a few years ago, but O'Neal turned him down. Merrill's near bankruptcy proved to be a lucky break for Lewis, as it put the venerable firm in a position in which it could no longer refuse BofA's offer. By capturing Merrill's 16,700 financial advisors, BofA becomes the world's biggest brokerage, with $2.5 trillion in client assets. But it's not all sunny skies ahead for BofA or for Merrill. With revenues increasingly more difficult to come by in the foreseeable future, BofA will compete in an incredibly tough market that will leave just a few giants standing among a field of casualties. And while Merrill's employees may be breathing a sigh of relief now, they might cry foul when Lewis — who notoriously hates bloated Wall Street salaries — cuts their pay to more modest BofA levels.
This article profiles Bank of America CEO Ken Lewis and his historic deal to merge with Merrill Lynch in yet another rescue mission of the economic crisis.
Discussion Questions:
- What does Bank of America CEO Ken Lewis see as the biggest problem resulting from the faltering economy? How can the problem, combined with the weakening of many BofA competitors, become an advantage for BofA?
- What edge does Lewis believe BofA has over other financial supermarkets, such as J.P.Morgan Chase and Citigroup? Why does he think Goldman Sachs and Morgan Stanley will become less formidable forces moving forward? Do you agree with his assessments? Explain.
- Why did BofA back out of a deal to acquire Lehman Brothers? Why did Lewis opt to make a deal with Merrill Lynch ahead of a potential bankruptcy? Do you think the Merrill merger will prove to be "the strategic opportunity of a lifetime" for BofA, as Lewis believes? Why or why not?
"Bailing Out America: Hank’s Last Stand," pp. 112-131: Perhaps no one is taking the Wall Street debacle as personally as Maurice "Hank" Greenberg, and with good reason. The 83-year-old former chief executive of American International Group, better known as AIG, stepped down from the job in disgrace four years ago, under pressure from the New York State attorney general's office, over questionable transactions. Now, as he remains mired in ongoing legal battles and determined to clear his name, the fall of AIG is proving to be the salt in Greenberg's costly wound. Forty years ago, the legendary Greenberg took the reins of a financially frail and poorly integrated hodgepodge of property-and-casualty and life insurance companies and built it into a powerhouse, with $190 billion in market value and operations in 130 countries. Indeed, AIG is so integral to the global economy that Treasury Secretary Henry Paulson wouldn't allow it to fail, as he did with Lehman Brothers. But that's cold comfort for Greenberg, because the government's intervention — it acquired 80% of AIG by extending a two-year loan of up to $85 billion — is designed to allow only an orderly liquidation of his once-great company, which will be sold off in pieces to buyers around the globe.
Students take a closer look at the downfall of Hank Greenberg and AIG, the insurance empire he built.
Discussion Questions:
- Describe the fraudulent reinsurance deal between AIG and Gen Re that
ultimately led to Hank Greenberg's resignation from AIG. Why did Greenberg
instigate the transactions? Do you agree with Greenberg's contention
that he has done nothing wrong?
- How did AIG become involved in credit default swaps? Why were they
deemed to be low-risk? How did they contribute to AIG's failure?
- What roles have Cornelius Vander Starr's original operating units, C.V.Starr and Starr International Co. (SICO), played since the creation of AIG? How can Greenberg use his stakes in the two companies to help take back at least part of AIG?
"The New Valley Girls," pp. 152-162: If the first thing that comes to mind when you hear the term "Valley Girl" is a teenager with ditzy dialect, you need to start thinking 21st century. The New Valley Girls hail from Silicon Valley, and perhaps the only thing they have in common with the old ones is that they are female. These super-smart, super-connected women — most with power marriages and young children — are different from their tech predecessors as well. While former CEOs Carly Fiorina of Hewlett-Packard and Meg Whitman of eBay kept their heads down, climbed the corporate ladder, and barely knew one another, the new generation of female tech leaders is all about networking. Through online social networks like Facebook, LinkedIn, and Twitter and at in-person gatherings, the women trade tips constantly on job opportunities, growing their businesses, and managing their busy family lives. Jim Breyer of Accel Partners, who serves on the Facebook board, believes this virtuous circle of women helping women has allowed them to sharpen their leadership capabilities and develop deep empathy — invaluable skills to have in an industry that relies heavily on partnerships and teams to succeed.
In this article, students read about the female leaders of Silicon Valley and the ways they use networking to thrive.
Discussion Questions:
- Lorna Borenstein, president of the online real estate service Move,
says that by socializing with other female tech leaders, "we're putting
ourselves in the pathway of opportunities." How is this statement true
with regard to the women mentioned in the article?
- Why does the article suggest that women are particularly well-suited
to careers in today's tech industry? How have men specifically helped
advance the careers of the women profiled, either directly or indirectly?
- Compare and contrast Marissa Mayer's, Theresia Gouw Ranzetta's, and Sheryl Sandberg's comments on appropriate behavior in the workplace. Are the "rules" generally different for men and women, or are they about the same? In your opinion, have women adapted to the workplace, or has the workplace adapted to them? Explain.
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