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Researching the Collapse of 2008: The Rise, Fall, and Flat Line

Mitchyy 1 / -  
Mar 30, 2014   #1
Hello, All. I have prepared the following and would like your thoughts on how to improve it. This is supposed to be a research paper with 8 pages for the rough draft. The final will need to be 10+ so I will have to add some additional information. The specific requirements are as follows:

Use effective transitions between paragraphs.
Include only those details and sources that support your thesis. Don't go off on tangents or include opinions that don't point back to the thesis.

Each paragraph should have a topic sentence. A paragraph needs at least 5-8 sentences that fully and adequately support the topic sentence.
Use appropriate tone, voice, and persuasion.
Don't use too many quotations in your paper.
Cite your sources properly IN THE BODY OF YOUR PAPER (the text of your paper) according to MLA formatting.
Read your sentences aloud to check for run-ons and fragments.
Don't end a paragraph with a quote. If you quote something, your next sentence should be your own thoughts, analysis, and comments on that quote.

I have included the essay below.

In 2008, the world watched in horror as the American financial system collapsed, followed by financial systems the world over. As American financial products began to turn toxic, exacerbated by unmanageable amounts of leverage and unregulated credit default swaps, the world derivatives market crashed and brought American and European stock markets to their knees. On March 6 2009, the Dow Jones Industrial Average hit a decade low of 6,626.94 points. To put this number into context, the Dow Jones Industrial Average closed at 16,302.77 point on 3/21/2014. The cause of the financial collapse of 2008 lay in a multitude of factors, chiefly among these being the creation of the Residential Mortgage Backed Securities Collateralized Debt Obligation (RMBSCDO). The simplest explanation for such a complicated product is as follows: mortgage lenders would grant mortgages to borrowers, bundle up thousands of their mortgages into pools and assign them a grade, break up the pools into individual securities, and sell them on a secondary market. Fannie Mae and Freddie Mac, which were government-sponsored entities at the time, were the main players in this market. They were created to acquire Residential Mortgage Backed Securities from mortgage lenders so that there was always credit available to potential borrowers. When the loans turned sour and borrowers began defaulting, the RMBSCDO's began to collapse, bringing down investment banks and hedge funds, most of which had over-leveraged their positions. As these banks and funds began to collapse, the banks and hedge funds that had initially loaned them the money to borrow against their portfolios began to collapse as well and the government had to step in and either bailout the largest institutions or sell off the smaller institutions to competitors to avoid systemic consequences to the global financial market. In retrospect, it seems glaringly obvious that these institutions were taking on more risk than they could handle, but as the saying goes, "hindsight is 20/20." As the world continues to recover from the financial collapse of 2008, American corporations are posting record profits while the average American continues to struggle to make ends meet, and this situation needs to be rectified.

As most Americans still struggle to find a way to improve their prospects in today's job market, it is important to reflect upon how the financial system originally found itself in this position. Following the dotcom boom of the early 2000's, lending began to increase and clients were qualified for loans they could not afford triggering the beginning of the so-called real estate boom. Leading up to 2008, mortgages were widely available and poorly regulated which allowed many people the ability to borrow that did not qualify by today's standards. This created a market boom as property values appreciated due to the increase in demand coupled with a limited supply of housing. As these property values began to increase, many homeowners began to take second mortgages and home equity lines of credit so they could indulge in lavish expenses and remodels. While this type of borrowing was sustainable during the market boom, when the market eventually crashed those who had borrowed against the equity in their homes saw their loans become "upside down" overnight. As Americans found themselves with loans they could not afford and a lack of credit offered by banks, they began defaulting on their credit obligations. As Americans stopped paying their loans and banks stopped receiving their monthly payments, the debt became unsustainable for both parties and ultimately led to the collapse of the financial system.

Since the financial collapse of 2008, American corporations have seen an impressive bounce back while the average American still struggles to make ends meet. As referenced earlier, the DJIA has climbed more than 10,000 points in the five years since the collapse of the economy. This number is staggering when one realizes that the original New York Stock Exchange (NYSE) was established in March of 1817 and did not cross the 10,000-point threshold for the first time until April of 1999. Similar to the amazing rebound and record highs seen by the NYSE, the Standard & Poor's (S&P) 500 and the National Association of Securities Dealers Automated Quotations (NASDAQ) are closing at all-time highs and recovering quickly. While these major indices continue to do well and make record profits for investors, average Americans have seen little in the way of breaks or subsidies that have any real impact. In an article by Cecilio Morales, he outlines the current state of affairs in the American suburbs. While most traditional research focuses on urban areas when calculating unemployment, Mr. Morales paints a different picture entirely. "Forget the inner city; poverty has moved to the suburbs like everyone else... the poor population of the suburbs shot up 64 percent (compared with 29 percent in cities)" (Morales). Similarly, The Federal Reserve Bank of New York also recently published an article in which they describe the current state of affairs for new college graduates.

College graduates as a whole fared the best throughout the sample period, experiencing unemployment rates that were about half the rate all workers experienced. But for recent college graduates-the group of immediate interest for our study-unemployment was consistently higher than for college graduates as a whole. After the Great Recession, for example, the unemployment rate for college graduates as a whole peaked at around 5 percent in 2010, while the unemployment rate for recent college graduates peaked at around 7 percent. For the period 1990 through the first quarter of 2013, the unemployment rate averaged 4.3 percent for recent college graduates compared with 2.9 percent for all college graduates. These results suggest that finding a job tends to be more difficult for those just out of school than for those who have been out of school longer; moreover, this disparity exists at all points in the business cycle.

The studies outlined in the article indicate that just having a college degree is not enough to remain competitive in today's business world. This is not to say, however, that a college degree is not necessary. Rather, this information shows how difficult it is to get started in today's business world. America must find a way to employ and benefit from the new wave of recent college graduates.

Exemplified by the current state of affairs in America, congress has failed to pass any initiatives that have the ability to influence the overall state of the economy. As the main compliment to the pool of labor in this country, education is the key to recovering from the collapse. Despite this, however, congress continues to approve a total defense budget in excess of $1 Trillion dollars while the Department of Education was allotted $71.2 Billion for the fiscal year 2014. The fact that education is underfunded is evidenced by the fact that American test scores have been slipping over the last few years. Currently, America is ranked 26th in math, 21st in science, and 17th in reading globally when compared to other industrialized nations (Resmovits). While Arne Duncan has been the Secretary of Education for the entire duration of the Obama Administration, the fight to improve national test scores has been an uphill battle. Contention on Capitol Hill and recent attempts by the Republican Party to reduce overall spending for education has impeded the ability for teachers to have an impact on their students.

After the 2008 collapse, one of the first casualties of the downturn was the American automotive industry. Specifically, the city of Detroit, Michigan went into a downward financial spiral that eventually drove the city into a state of emergency and bankruptcy. As the city found itself unable to cover its substantial debt burden, the state of Michigan took over some of the city's municipal sectors, including all of the city's public schools. Nancy Jackson wrote an article outlining the benefits of this takeover for students. Ms. Jackson explains that the school districts have collaborated with local community colleges, employers, and skill centers to allow students to pursue an Associate's degree or trade certificate while still attending high school. This improves a student's ability to pursue post-secondary education and find a job immediately out of high school. The main benefit to this particular approach is that high school students get real world work experience in a particular field. This makes them employable and competitive in an overcrowded job market.

As the financial picture in America remains glum, many people are finding themselves out of both a job and their homes. With the lack of readily available jobs in the United States, many Americans are finding themselves underemployed or out of the workforce entirely. While the system will continue to grow and recover over time, right now it is leaving many Americans without a roof over their head. In a recent article by Ms. Foscarinis, she outlines the fact that veterans are at the greatest risk for being homeless, but it is affecting Americans from all occupations. Further, people from all industries are finding themselves on the streets in the city as well as the suburbs. This fact becomes even more alarming considering that entire families are finding themselves on the streets. America must take action to ensure that all of its citizens are housed, fed, and properly taken care of. While abuses of the credit market are the root cause of the current financial situation, the country should not be holding those who cannot help themselves accountable for this ordeal.

Though the government has taken some steps to protect American citizens from future financial meltdowns, it has taken greater action in the realm of corporate protections. In 2011, Barack Obama signed into law the Dodd Frank Wall Street Reform as a vehicle for greater regulation of the finance industry. In practice, however, this reform has further obfuscated the complexities involved in handling an insolvent financial institution with assets over $100 Billion. The new system handles the bankruptcy proceedings of these large institutions behind closed doors and under the jurisdiction of many different federal departments depending on the type of institution (bank, brokerage, insurance, etc.). This has not streamlined the process as many were hoping or made any real improvements on the way the government handles and punishes corporations that fail to uphold the law. In all of this, however, there is one ray of light for Americans in general. One major reform of the Obama Administration has been the creation of the Consumer Financial Protection Bureau, which is tasked with analyzing financial products and determining their market suitability. The CFPB's mandate is to prevent any future collapses based on a scenario similar to the collapse of 2008.

When an economy enters into a situation in which it cannot support all of the participants in the job market, the labor pool stagnates while the number of jobs available begins to decline. This creates a situation in which degrees become a necessity, school becomes more expensive, and potential job candidates are willing to accept either a reduction in pay or a job that does not require their particular skill set. As America enters into the sixth year of the recovery, the price of private education has range. According to The National Center for Education Statistics:

Between 2000-01 and 2010-11, prices for undergraduate tuition, room, and board at public institutions rose 42 percent, and prices at private not-for-profit institutions rose 31 percent, after adjustment for inflation. The inflation-adjusted price for undergraduate tuition, room, and board at private for-profit institutions was 5 percent higher in 2010-11 than in 2000-01.

While the price of education has increased across the board, lenders for private loans have restricted their lending. At this time, the price of a degree from a private institution can be as high as $60,000 per year. This not only makes a quality education expensive, but increasingly difficult to achieve. As banks begin to expand their portfolios, it may become easier to finance a college education but at what cost? If education continues to become more expensive and wages do not improve, degrees will become a luxury for the rich. This coupled with the fact that unemployment remains over 7% and the Federal Reserve is still pumping $65 Billion per month into corporate bonds means that corporations are still recovering faster than the private citizens that promote their bottom-line. As these citizens graduate from college, they are not only having trouble finding work but paying back their crushing debt. As of 2013, the amount of student loan debt in the United States crossed the $1 Trillion threshold.

As the markets continue to rebound, corporations are posting record profits and multi-year highs on the stock market. As the corporations continue to do well and their valuations drive the major stock indices higher and higher, investors are making more money than they have under any other president. While it may seem beneficial to the entire economy for these corporations to do well, it is only the investors who benefit from the growth. In fact, as the recovery continues, many companies have utilized mass layoffs to reduce operating costs and boost profits. Further, as Obamacare is now fully in effect as a federal law, some corporations have eliminated their corporate healthcare programs and instead directed their employees to the state and federal healthcare exchanges to further reduce costs and improve their bottom line. These actions reduce the number of employees needed in Human Resources and improve the overall efficiency of the corporation, but may not be in the best interest of employees and their families. While one fringe benefit of these actions is that enrollment in the healthcare exchanges is on the rise, these new plans may not have the same benefits these employees and their families had come to rely upon. As unemployment remains over 7% and wages remain stagnant, it is the employees of major corporations who are most contributing to the recovery. As the American middle class feels more secure about their overall economic situation, they have started borrowing money again for cars, credit cards, personal loans, etc. While there are only so many people who have the income to borrow money, those who do qualify are borrowing at historical lows. When the recovery effort began, the Federal Reserve reduced the rate that banks could borrow money to 0%. This allowed banks to take emergency loans that were cheap to repay and allowed the lowest recorded mortgage rate of 3.31% to be profitable. Mortgages are currently under 5%, which is still lower than any rates before the recession. As the recovery continues, some Americans are finding themselves better than they were before the market crash while it will take the majority of Americans many more years to recover to pre-recession levels.

Works Cited

Abel, Jaison R., Richard Deitz, and Yaquin Su. "Are Recent College Graduates Finding Good Jobs?" Current Issues in Economics and Finance 20.1 (2014): 1-8. Academic Search Premier. Web. 25 Feb. 2014.

Foscarinis, Maria. "There are More Homeless then our Leaders Think." USA Today. 17 Jan. 2014: 08a. Academic Search Premier. Web. 1 Mar. 2014.
Jackson, Nancy Mann. "Rebuilding with Education." ACTE Online. Academic Search Premier. Web. 28 Feb. 2014.
Kuttner, Robert. "Too Big to be Governed? Financial Reform Will Fail if Industry Writes the Rules." The American Prospect. Dec. 2010. Web. 13 Feb. 2014.
Mian, Atif, and Amir Sufi. "The Great Recession: Lessons from Microeconomic Data." The American Economic Review 100.2 (2010): 51-56. JSTOR. Web. 26 Feb. 2014..
Morales, Cecilio. "What Recovery?" American Magazine: 33-35. Academic Search Premier. Web. 27 Feb. 2014.
Resmovites, Joy. "U.S. Test Scores Remain Stagnant While Other Countries See Rapid Rise." Huffington Post. Dec. 2013. Web. 21 Mar. 2014.
Scaggs, Alexandra. "Stocks Nudge Higher." The Wall Street Journal. 27 Feb. 2014, Eastern edition. Academic Search Premier. Web. 1 Mar. 2014.
"Tuition Costs of Colleges and Universities." National Center for Education Statistics. 2011. Web. 26 Mar. 2014.
eddies [Contributor] 25 / 1,208 476  
Apr 23, 2014   #2
But for recent college graduates- (I prefer using a comma, instead of hyphen) the group of immediate interest for our study-unemployment was consistently higher than for college graduates as a whole.

Overall, I like the way you use comparison. Also, you have good grammatical mechanics and vocabularies. I think you are ready for the final draft.

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