COURSE CONNECTOR

ARTICLE SUMMARIES AND QUESTIONS

"Divorce, Bank of America Style," pp. 70-76: Divorce? But they seemed so happy. Yes, the brief union of Bank of America and Merrill Lynch has produced its first break-up, just three weeks after the mega-merger became official. When CEOs Ken Lewis of BofA and John Thain of Merrill cheerfully unveiled Lewis’ $50 billion deal to buy Merrill last September, it appeared to be a match made in heaven. Merrill, an American icon, was on the verge of collapse following a foray into trading those now famously toxic CDOs. For its part, BofA was like a knight in shining armor swooping in to the rescue. Lewis' plan was to impose some commonsense discipline on a company nearly destroyed by its own imprudent actions. Unfortunately, it looks like Wall Street is taming Lewis rather than the other way around. Since the deal was announced, BofA's stock price has plummeted 80%, erasing $170 billion in market value for the two companies. After taking a look at Merrill's fourth-quarter write-downs, Lewis balked, but the federal government forced the deal. So Lewis did the next best thing and dumped a seemingly detached Thain. Will the struggling bank survive? Let’s hope so — the American taxpayer has $45 billion in TARP funds invested in it.

In this article, students read how the brief, troubled union of Bank of America and Merrill Lynch has led to the firing of Merrill CEO John Thain.

Discussion Questions:

1. What specific actions — or inactions — by John Thain do you believe led to his dismissal? Do you think letting Thain go was a smart move? Why or why not?

2. Why were Merrill Lynch’s fourth-quarter losses so excessive? Why wasn’t Ken Lewis able to opt out of the deal by invoking the "material adverse effect" clause?

3. What immediate challenges does Bank of America face in the wake of the merger? What can it do to avoid nationalization?

"The Most Wanted Man on the Planet," pp. 80-84: For someone who was fired from his last high-profile job, Tom Freston sure is in demand. Then again, it's not at all clear why Viacom chairman Sumner Redstone abruptly removed Freston from his job as CEO back in September 2006. After all, he had built MTV and Nickelodeon, a pair of well-known Viacom brands, into two of the most widely distributed cable networks on earth. Plus, he had a reputation as a talent magnet, and his people loved him. Freston took it in stride, using his $60 million severance package to travel the world. In the meantime, powerful folks like Oprah Winfrey and U2's Bono were hot on his heels tracking him down. Winfrey hoped to tap Freston as CEO of her media conglomerate, Harpo, while Bono wanted him to help restructure his humanitarian organizations, the advocacy group ONE and the fundraising campaign Product RED. Bono was more persistent, so a year ago, Freston agreed to chair ONE and join the RED board. He's also consulting for Winfrey, including playing a key role in recruiting former MTV president Christina Norman as CEO of Winfrey's soon-to-be-launched cable network, OWN. And what about Viacom? Its shares are now trading around $16, versus $37 the day Freston was canned. Sounds like karma.

Students take a closer look at the career of sought-after entertainment executive and globetrotting adventurer Tom Freston.

Discussion Questions:

1. Why has Oprah Winfrey had such relative difficulty in recruiting Tom Freston to work with her? Why does the author of this article state that his current title of consultant understates his involvement with Winfrey's business ventures?

2. What measures did Bono take to enlist Freston's help in running his philanthropic organizations? Why was this sort of work appealing to Freston?

3. What reasons has Sumner Redstone given for firing Freston? Why do you believe he was let go? How has Freston managed to turn the experience into a positive development in his life and career?

"Galbraith on the Crash . . . It Has a Familiar Ring," pp. 88-92: Around the time James Galbraith completed his Yale doctorate in economics in 1981, the nation stood at the dawning of the Reagan Revolution. That was back when free markets and supply-side economics first replaced proactive government planning and economic intervention — key elements of a philosophy known as Keynesianism, after its leading proponent, John Maynard Keynes — as the preferred means of American governance. Those were tough times for the liberal Galbraith, who embraced Keynesianism as his economist father, John Kenneth Galbraith, did before him. But times have changed, and with the economy in a shambles, Keynesianism is no longer a dirty word among politicos. That said, while economists from across the political spectrum have given their blessing to some form of fiscal stimulus, Galbraith's prescription goes above and beyond almost anything anyone else is suggesting. He believes the stimulus package must include massive, enduring increases in federal spending as well as wage standards and price controls set by the federal government. Will his agenda gain traction in Washington? As recently as a year ago, probably not. But now all bets are off, and Galbraith may finally get his chance to lead a revolution of his own.

This article profiles James Galbraith, professor of public policy at the University of Texas, and the new voice of Keynesianism in a changing political landscape.

Discussion Questions:

1. Why had Keynesianism fallen into disrepute by the early 1980s? In what ways is the version of Keynesianism that James Galbraith espouses somewhat different than the brand that was swept away nearly 30 years ago?

2. What argument does Galbraith make about "small government" conservatives in his 2008 book, The Predator State? Do you agree with his assessment? Why or why not?

3. In your opinion, are Galbraith's solutions a sensible response to the economic crisis? Explain your answer.

"China's New King of Solar," pp. 94-97: Shi Zhengrong is truly a man of his generation. The founder of Suntech Power Holdings has benefited as few others have from evolving business policies in his native China. He was among the first wave of bright young Chinese students to take advantage of the economic open-door policy begun in 1978 by the late Chinese leader Deng Xiaoping. Following graduate studies in Australia and working with Pacific Solar, a venture that developed the technology to dramatically reduce the cost of solar energy, Shi was lured back to his homeland by the Chinese government. In 2001, he received $6 million in startup money from the government of Wuxi in China’s Jiangsu province to launch a solar energy company. With that, he created Suntech, which quickly surged from nothing to a $1.3 billion firm, employing 4,300 and earning profits of $171 million. Even more astounding, by basing all of Suntech's manufacturing in China, Shi single-handedly started to shift the balance of power in the solar industry. When Suntech went public in late 2005, raising $400 million on the New York Stock Exchange, the local Communist officials who backed Shi not only got their money back, with plenty of interest, but also learned a valuable lesson about the benefits of capitalism.

Students examine the remarkable rise of Suntech, a China-based company that has rapidly become one of the world’s leaders in solar power.

Discussion Questions:

1. What challenges does Suntech face as a result of the global economic crisis? Why is the solar market currently plagued by overcapacity? How has Suntech's founder and chief, Shi Zhengrong, responded?

2. What is grid parity? Why does Shi believe Suntech will achieve grid parity by 2012? Is that plausible? Why or why not?

3. In the article, Shi says that he sees both politics and economics going his way. What do you think he means by that? Do you agree? Explain.