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PrintMarch 23, 2009
Pop quiz for Democrats
Welcome, President Obama, Messrs Frank, Dodd, Reed, Ms. Pelosi and the rest of the Democratic members of Congress, to Economics and Finance 101 with an emphasis on the effect of Government actions on the decision making process. In order to determine your depth of knowledge we are going to open the class with a pop quiz, so get out your paper and pencils and begin.
Question 1) You are the CEO of a major bank that accepted TARP money as of today (March 23) you are planning to:
a) Lend out money to almost all applicants with reasonable but less than good credit on order to, per government orders, stimulate the economy. Agree to caps on salaries and bonuses and have Congress look over your shoulder questioning every decision.b) Lend money only to excellent credit risk applicants, retain as much cash as possible in high yield instruments and do everything to repay the TARP money as quickly as you can.
Question 2) You are on the Board of a mid-sized domestic manufacturing company faced with the possibility of the passage of the "Union Card Check" bill. At a Board meeting on that subject the decision will be:
a) Hope your employees do not get intimidated into signing the cards, but if they do, the Company will cheerfully accept the result and assume they will still be competitive against non-union foreign and domestic companies manufacturing the same products.b) Lay out a new business plan if the company goes union to have the option of: 1) look into buying new equipment to reduce labor costs and overhead and 2) review and lay out the possibility of selling or liquidating the business.
Question 3) You are self-employed or the owner of a small business living a state with an income tax whose family taxable income is above $250,0000.00 You are now aware that the Federal Government plans to raise your income tax rate and impose the social secuity tax on all taxable income above $250,000.000. Coupled with the state income tax your effective tax rate will be 62% on every dollar above $250,000.00 as a result you will:
a) Do everything possible to keep your taxable income below $250,000.00 and consider joining the underground economy (cash or barter) or moving to a non-income tax state.b) Cheerfully do your "patriotic duty" and be happy to keep 38% of what you earn before including any other taxes you might pay.
Question 4) The Treasury Department wants your hedge fund company to join in their efforts to acquire and sell the toxic assets of the various financial institutions they have or will acquire to the private sector you will:
a) Look at what happened at AIG, Citibank et al and decide your company is better off not being involved despite the money you could make as what you do could be easily demogogued since the public doesn't understand the business.b) Join in the effort, agree to the conditions set by Treasury, hire a major law firm to be available for the many trips to Washington to appear before congressional committees and hire a security firm to protect your executives.
Question 5) You are the COO of a major international company with operating facilities in the United States. You have been made aware of the proposed carbon cap and trade tax, higher corporate taxes, union card check, and other pending regulations. Your American work force has the highest productivity of all your worldwide operations. With this as a backdrop you will:
a) Continue to do business in the U.S. despite these higher costs that you will be unable to pass on to your customers throughout the world and raise the price of the products the company manufactures that are sold only in the U.S.b) Begin the review process to determine if the higher productivity of the american worker offset the increased cost of manufacturing in the U.S. If not, then start the process to close the facilities and move them to another country where you have an ongoing manufacturing operation and export products to the U.S.
Question 6) You are the Premier of China, your country holds over a trillion dollars in U.S. bonds and has been asked to continue to purchase the future bonds issued to finance the deficit spending of the U.S. Government, your reaction will be:
a) Tell the U. S. government China will no longer buy the bonds if the huge deficits continue as the confidence in the credit worthiness of the U.S. will rapidly erode; what bonds you will buy must carry a signifigantly higher interest rate reflective of the risk.b) Continue to buy the bonds as issued.
Question 7) Your aunt Matilda recently died and left you $150,000.00. You are 55 years old and hope to retire by age 65. Based on the markets and economy today you will invest your legacy in:
a) The stock market as you believe the policies of the current administration in Washington will cause the economy to recover and enact policies favorable to businesses in the United States.b) The purchase of gold to hedge against inflation and insured certificates of deposit despite their low yield.
Question 8) The Congress passed and President Obama signed into "The Lily Ledbetter Act" which allows plaintiffs to sue for job discrimination regardless of when in the past it may have occurred, thus eliminating the current statute of limitations on such filings. As a owner of a business that has and currently employs many women you will:
a) When feasible look to hiring future employees, particularly women, through a temp agency. Your business will only then have to pay a pre-determined rate to the agency and they will pay the employee. While this may result in a lower rate of pay for women it will no longer be an issue for possible future expensive litigation.b) Go on about your business continue hiring and hope that no one that worked for the company many years ago will file a complaint.
Alright ladies and gentlemen please turn in your papers and we will let you know your scores.
