1. Global Economic Crisis What happened?  Last half of 1990s: unprecedented growth and prosperity  2000: dot com bubble burst  2001: 9/11 terrorist attacks; stock market dropped; unemployment rose; fear country was on brink of full-blown recession  By end of 2002: Fed decreased interest rates from 6.5% to 1.25%  Economy awash in money; subprime mortgage loans came into play  Home prices rose as demand skyrocketed

2. If it sounds too good to be true, it probably is.  Banks and investment houses invented complex ways to resell the mortgages as securities  No government regulation  Fin. Institutions did not maintain reserves in case mortgage-backed funds lost value  2006: housing prices peaked; prices fell  Subprime borrowers owed more than homes worth; unable to refinance to lower payments  Foreclosures climbed  Fin. Institutions feel pressure  July 2008: Bear Stearns forced to merge with JPMorgan

3. A billion here and a billion there, pretty soon you’re talking real money.  July 2008: Fannie Mae, Freddie Mac, Lehman Brothers, file for bankruptcy  Sept 2008: Fed lends $85b to AIG, for 80% stake  Sept. 29, 2008: Dow falls 700 points; House fails to pass bailout of other financial institutions  Oct 12, 2008 CEOs of nine major banks called to Treasury Dept. Federal Gov’t to become major stockholder in exchange for $1.25b taxpayer money  Oct. 2008: 6.5% rate of unemployment versus 4.3% March 2007

4. Another shoe drops  April 2009 Chrysler files for BK; purchased by Fiat  June 2009: GM files for bankruptcy  Fed pours $50b into GM reorganization for 60% stake  GM sheds Pontiac, Saturn, Hummer, and Saab brands  Plants, assembly lines, distribution warehouses close  GM stock falls to 75 cents/share and is replaced on Dow Jones index by Cisco Systems  Three of largest BKs in history occurred in 2008-09: GM, Lehman Brothers, Washington Mutual

5. Where we are today  July 2009: 9.4% U.S. unemployment rate; 11.9% California  83 bank failures YTD  Dow up 8.75% YTD; NASDAQ up 28.64%; S&P up 13.91%  Cash for Clunkers results in sales of 690,114 vehicles at cost to taxpayers of $2.88b  Fed provides $300m for Cash for Appliances  Fed about $2.1Trillion in debt, and growing  AIG has repaid $85b of Fed loan, with interest  Goldman Sachs has repaid $1.1b Fed loan, with interest  Small signs of recovery appearing worldwide

6. CA Bankruptcy Filings  Filings in 2007: 72,615  Filings in 2008: 133,223  Filings in 2009: 205,705  95% of bankruptcy filings were consumers, not businesses  O.C. Bankruptcy filings Jan-Mar 2010: 4,292, an increase of 46.8 percent more than same period last year