Macroeconomics Song Essay Example for Free

macroeconomics Song EssayThe poems major root revolves around the unravelling of the US financial sector and particularly its impact on coronation banks in the wake of the recent global economic recession that affected the US and most of the world economies. Some of the macroeconomic concepts addressed tacitly and explicitly include executive compensation, and the business cycle (Paxton, 1).The crisis is said to have mainly been triggered by the sub prime mortgage crisis. Traditionally, investment banks and other lending institutions have financed their customers borrowings from the deposits they collect from the members of the public. With the consume for credit finance to purchase essential items such as homes rising exponentially, the deposits became inadequate to finance the borrowing requirements and many of these financial institutions resorted to innovative financial products such as the securitization model or mortgage approve securities.Here, the financial i nstitutions sell bonds. Those buying the bonds are guaranteed of getting their money back after a genuine duration plus an attractive interest, and the money raised from floating these bond is advanced to the borrowers (in this case, prospective homeowners). The bondholders exit be paid back their money whether the borrowers sacrifice the bank back or default. Thus, it can be seen that the investment banks here shoulder substantial risks (Zeese, 1 Rasmus, 3 BBC, 1).The main problem was that these loans were make go away to a segment of the market that is considered risky due to its low income and despicable credit history. This segment has been referred to as the sub-prime mortgage segment. As long as the prices of homes continued to rise, this model of financing home purchases made intellect because the borrowers could refinance their home purchases. However, and against all expectations, the real estate bubble that had been so prolonged in the nation burst, and home prices began trending south at a dramatic rate. The import of all these is that the sub prime mortgage borrowers were unable to pay back what they had borrowed. They defaulted, leading to massive foreclosures (Zeese, 1 Rasmus, 3 BBC, 1).The loans that had been made out by the financial institutions were in the tune of billions of dollars. When these borrowers defaulted, the banks were left holding toxic assets, which they wrote down leading to massive prejudicees. A number of them were pushed to the brink of bankruptcy. These include Fannie Mae and Freddie Mac, Goldman Sachs, AIG, Merrill Lynch, Bears Stearns and Lehman Brothers (Zeese, 1 Rasmus, 3 BBC, 1).It is this backdrop that provides the context for the poem. The poet parodies the false sense of warrantor that these institutions had projected for long, investment bankers such as Lehman Brothers had been viewed as beacons of stability in the American economy, doling out valuable advice to Americans on maters economic.But as the p oet shows, the sub prime mortgage crisis unmasked them for who they are, left them at a loss of what to do, and they have turned out to be the blind leading the blind(Paxton, 1). One wonders how, with all their wisdom, the investment bankers could have hedged their risks upon such a risky market as the sub-prime mortgage segment.One of the agile responses to the financial crisis was the rollout of a bailout package by the US government (whose worth was seven hundred gazillion grand, in the words of the poet) (Paxton, 1). The failing institutions were major beneficiaries of this bailout package. According to Nanking (1), Bears Stearns was bought by JP Chase for $236 million, with the Federal Reserve bound providing a staggering $30 billion to facilitate its purchase. Courtesy of the Housing and Economic Recovery locomote of 2008, the government is said to have put in some $400 billion in Fannie Mae and Freddie Mac. The AIG on its part authoritative at least four cash bailouts, all of them amounting to $180 billion in total (Nanking, 1).The poet strongly questions the ethics behind these bailout packages, given that the crisis that affected the investment banks was largely self-inflicted. For example, apart from poor judgment resulting in the sub-prime mortgage crisis, the problems which the banks faced were also catalyzed by poor management practices such as excessive executive pay.The problems facing the banks also broke out at a time the issue of executive pay was coming under the spotlight. For example, Linn (2) writes that in 1970, top executives were earning 44 times what subordinate workers got and that by 2007 this had jumped to 344 times what the subordinate employees got. More telling is the fact that the CEOs of Lehman Brothers and Merrill Lynch, two of the failed investment bankers, received a total of over $117 million in spite of leading their organizations down the drain (Bass and Beamish, 1). Lloyd Blankfein, Goldman Sachs top honcho, got $ 54 million, when the bank made a loss, with the 116 investment banks that had been short listed for aid under the bailout package having paid a cool $1.6 billion as bonuses to their CEOs.AIG was mulling paying its CEO $165 million, when it had made a loss of over $60 billion (Bass and Beamish, 1). Given that these banks had been advanced cash under the bailout mean (which itself is from taxpayer funds), it is logical to assert that it is the average American (who earns 344 times less what the CEO gets) who is being made to pay for the mistakes of the CEOs. It is this obscenity that the poem seems to rant about. Listen to the poet And it said that failure was the only crime. If you really screwed things up, wherefore you were through Nowsurprisethere is a different point of view. All that crazy rooty-tootin And that prosperous parachutin Means that someones making millionsjust not youWorks CitedBBC. (2007). The downturn in facts and figures. 21 Nov 2007. 28 whitethorn 2010. http// news.bbc.co.uk/2/hi/business/7302341.stmBass, Frank and Beamish, Rita. (2008). AP Study Finds $1.6B Went To Bailed-Out Bank Execs. 22 declension 2008. 29 whitethorn 2010. http//corridornews.blogspot.com/2008/12/investment-bank-executives-pork-out-on.htmlLinn, Allison. (2009). AIG flap gives ammunition to critics of high pay. MSNBC. Mar 20th 2009. 29 May 2010. http//www.msnbc.msn.com/id/29791834/Nankin, Jesse. (2009). History of U.S. govt bailouts. 1 Nov 2009. 29 May 2010. http//www.propublica.org/special/bailout-aftermathspenncentralPaxton, Tom. I am changing my name to Fannie Mae.Rasmus, Jack. (2008). Fannie Mae, Freddie Mac phase two of the financial crisis. Sep 2008. 28 May 2009. http//www.zcommunications.org/zmag/viewArticle/18717Zeese, Kevin. (2008). The causes of the auto crisis. 25 Nov 2008. 28 May 2009. http//www.countercurrents.org/zeese251108.htm