1. 2008 Macroeconomic Highlights

2. Economic Slowdown Begins Q4 of 2007: – Real GDP declines in Q4 of 2007 Shaded area = recession

3. Economic Slowdown Begins Feb 2008: – Approval of $168 billion stimulus package – Tax rebates to 130 million households $600 for single $1200 for married – “booster shot” for the U.S. economy

4. The sub-prime crisis High risk (“sub-prime”) mortgages became more common over past decade – Low down-payments; – Poor credit histories Mortgage default rates rise in 2008 because – Housing prices fell – Adjustable rate mortgages “reset” – Worsening economic conditions 5.2 million homeowners predicted to lose their homes between 2008 & 2010 according to Economy.com

5. The Bailout Losses on sub-prime loans cause significant losses at financial institutions March 2008: – Federal Reserve purchases some assets, arranges sale of some troubled institutions. Treasury Troubled Asset Relief Program – TARP – Up to $700 billion used to “bail out” financial institutions. – Auto industry? Homeowners? …. “Credit Crisis” emerges

6. The stock market crash

7. Stock market crash is world-wide WSJ map of stock market performance – (http://online.wsj.com/article/SB1223858113552 27445.html#articleTabs%3Dinteractive)http://online.wsj.com/article/SB1223858113552 27445.html#articleTabs%3Dinteractive

8. Current Economic Data From wsj.comwsj.com

9. The next stimulus? $700 billion or more? Tax cuts for individuals & business Increased spending on infrastructure, alternative energy, ….