Economics Report

U.S. Health Spending: Looking for a Cure

What the presidential candidates are proposing on health care and the millions of uninsured people. Transcript of radio broadcast: 04 September 2008

This is the VOA Special English Economics Report.

Health care costs are a major concern of Americans. The percentage of people covered by private health insurance dropped last year. Yet more people had insurance than the year before.

The Census Bureau says that was because of an increase in government health programs. Government programs covered eighty-three million people last year, about twenty-eight percent of the nation.

Federal and state programs insure older people, the poor and members of the military. But unlike other developed countries, the United States does not offer health insurance to all its citizens.

A nurse helps a patient in the emergency room at Harborview

Forty-seven million people were uninsured in two thousand

Medical Center in Seattle. The

six. The Census Bureau says that number fell by more than

number of people on government

a million last year. But experts predict that the current

health programs for the old, the poor

economic downturn will again raise the number of

and for children is growing.

uninsured.

People buy health insurance to pay some or all the costs of medical care. But plans can be costly, and people with existing conditions may not be able to get coverage at all.

Yet even people with insurance may not have enough coverage to pay high medical bills. The Commonwealth Fund, a research group, says twenty-five million adults are underinsured. It says that is a sixty percent increase in five years.

The United States now spends more than two trillion dollars a year on health care. Health spending could represent one-fifth of the economy in less than ten years.

Republican presidential candidate John McCain has proposed tax credits to help pay for insurance. He also has ideas for ways to make health care more competitive and less costly. And he has

called for a Guaranteed Access Plan to help get coverage for people who have difficulty getting insurance.

Democrat Barack Obama has a plan that he says would guarantee health insurance for all

Americans. It includes a requirement to insure all children. He also proposes a National Health Insurance Exchange to make it easier to buy private plans or to continue coverage when changing jobs.

Sixty percent of Americans are insured through plans offered by employers. As costs increase, employers often have workers pay more for doctor visits and other services. The Mercer consulting company says employee cost-sharing has risen sharply over the past five years. Early reports suggest that next year's cost increase for employers will fall below six percent, to the lowest growth in more than ten years.

And that's the VOA Special English Economics Report, written by Mario Ritter. I'm Steve Ember.

Too Big to Fail, the Next Step: US Seizes Fannie Mae, Freddie Mac

Government plans to invest billions after taking control of huge mortgage-finance companies. Transcript of radio broadcast: 11 September 2008

This is the VOA Special English Economics Report.

This week, the government took control of America's two biggest housing finance companies. Fannie Mae and Freddie Mac are under conservatorship. This process of supervision will continue until the new Federal Housing Finance Agency decides they are back in financial health.

In July, Congress gave the Treasury new powers to save them, using as much money as needed. At first, Treasury Secretary Henry Paulson said he had no plans to use those powers.

But on Sunday he announced that new findings about the condition of the companies forced action. He said a failure of either would shake financial markets at home and around the world.

Treasury Secretary Henry Paulson,

Fannie Mae and Freddie Mac buy loans from lenders to

left, speaks during a news conference

provide more money for housing finance. They own or

with Federal Housing Finance

guarantee five trillion dollars in debt and securities. They

Agency Director James Lockhart in

keep some loans but resell others as mortgage-backed

Washington on Sunday

securities. These are held by central banks and other

investors worldwide.

As the housing and credit crisis deepened, Fannie and Freddie have had trouble raising capital to cover bad loans. The government saw a risk to the financial system.

As part of the rescue, the Treasury plans to buy at least five billion dollars of their

mortgage-backed securities. And it plans to buy up to one hundred billion dollars of preferred stock in each company.

The Federal Reserve will also lend money as needed.

Critics say taxpayers could lose a lot. But Treasury officials say the plan should save money in the long term, and might even bring a profit.

Each company will give the Treasury one billion dollars in stock that pays at least ten percent a year. And the Treasury could buy up to eighty percent of their common stock if it chooses. Under the takeover, existing owners of common stock will lose most of their investment.

Mortgage interest rates dropped this week following the takeover. Marc Savitt, president of the National Association of Mortgage Brokers, called it a good sign for the housing market. Yet Fannie Mae and Freddie Mac still face a conflict between serving a public interest and a private one. Congress created them so more Americans could buy houses. Then Congress made them into shareholder-owned companies.

Some people say, nationalize them. Others say, break them up into new companies without any government support, or sell them to other businesses.

And that's the VOA Special English Economics Report, written by Mario Ritter. I'm Steve Ember.

Trying to Contain the Credit Crisis

Central banks inject money into markets. U.S. government seizes control of insurer A.I.G. with an $85 billion dollar rescue loan. Transcript of radio broadcast: 18 September 2008

This is the VOA Special English Economics Report.

The Federal Reserve and other major central banks pumped extra money into financial markets on Thursday. The aim was to help calm investors and persuade nervous banks to lend to each other. President George Bush canceled travel plans and stayed in Washington on Thursday to meet with economic advisers about the financial crisis. He made a brief public statement on the extraordinary measures taken by the federal government in recent weeks. He said his administration will continue to act to strengthen financial markets and improve investor confidence.

Last week, the government took control of the nation's two biggest housing finance companies. And this week the Fed agreed to lend up to eighty-five billion dollars to the

nation's largest insurance company, A.I.G., the American International Group. In return, the government will own eighty percent of A.I.G. and receive interest on the two-year loan.

A.I.G. is one of the world's largest insurance companies

President Bush says the failure of A.I.G. could have caused severe problems in financial markets and threatened other parts of the economy.

A.I.G. got into deep trouble on insurance policies that it provided for securities tied to risky home loans. It has dealings with every major financial company in the United States. And it operates in more than one hundred thirty countries.

In a speech in July, Treasury Secretary Henry Paulson said: \"We need to create a resolution process that ensures the financial system can withstand the failure of a large, complex financial firm.\"

He said that today, expectations that the government will intervene to prevent a failure are based on two concerns. These concerns are that a company may be too interconnected to fail or too big to fail. Policy makers, he said, must take steps because the tools now available are limited. This week, while the government agreed to help A.I.G., it refused a bailout for a big investment bank, Lehman Brothers. That forced Lehman to seek Bankruptcy Court protection from its creditors.

The United States had five big, independent investment banks before the credit crisis began more than a year ago. Now Lehman has failed. Merrill Lynch agreed Sunday to sell itself to Bank of America. And the Fed agreed in March to provide twenty-nine billion dollars in loans for the sale of Bear Stearns. The two left are Morgan Stanley and Goldman Sachs.

And that's the VOA Special English Economics Report, written by Mario Ritter. To learn more about the financial crisis, go to voaspecialenglish.com. I'm Steve Ember.

US Developing Financial Rescue Plan

Bush administration seeks quick action by Congress on measures to rescue financial companies from bad housing debts; other steps also taken. Transcript of radio broadcast: 18 September 2008 Updated

This is the VOA Special English Economics Report.

The United States government is working on a plan to rescue banks from the bad debts at the center of the financial crisis. World stock markets have risen sharply Friday on the news. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke met with

congressional leaders Thursday night. Secretary Paulson says the measures will require legislation to deal with the bad housing debt held by financial companies. He says work on details of the plan will continue through the weekend and Congress will be asked to take action next week. Also, the Treasury Department has announced a temporary insurance program to protect money market mutual funds in the United States. Concerns in financial markets spread this week even to money market funds -- normally considered among the safest investments.

And, in another move, the Securities and Exchange Commission has temporarily barred short selling of stocks in financial companies. Short selling is selling borrowed stock in the expectation of buying it back later at a lower price, and keeping the difference. The commission said its

emergency action should prevent short selling from being used to drive down share prices. Britain took similar action on Thursday.

Also Thursday, major central banks pumped extra money into financial markets to try to persuade nervous banks to lend to each other.

Last week, the United States government took control of the nation's two biggest housing finance companies. This week the Federal Reserve agreed to lend up to eighty-five billion dollars to the nation's largest insurance company. In return, the government will own eighty percent of A.I.G., the American International Group, and get interest on the two-year loan.

A.I.G. got into deep trouble on insurance policies that it provided for securities tied to risky home loans. It has dealings with every major financial company in the United

States and operates in more than one hundred thirty countries.

A.I.G. is one of the world's largest insurance companies

While the government took over A.I.G., it refused a bailout for a big investment bank, Lehman Brothers. That forced Lehman to seek Bankruptcy Court protection from its creditors.

The United States had five big, independent investment banks before the credit crisis began a year ago. Now two remain: Morgan Stanley and Goldman Sachs.

And that's the VOA Special English Economics Report, written by Mario Ritter. I'm Bob Doughty.

Wall Street, Without the Big Investment Banks

Credit crisis leads last two to become commercial banks; Goldman Sachs and Morgan Stanley get new access to capital, but closer supervision. Transcript of radio broadcast: 26 September 2008

This is the VOA Special English Economics Report.

Many financial companies have moved to other New York streets. But Wall Street still holds its

place in the language as the capital of American finance.

Now Wall Street is being reshaped by the crisis over mortgage-related securities. The markets are unable to place a value on them. So banks and other investors are unable to find a buyer except possibly the government.

The aim is to unblock the flow of credit markets now, then sell the securities later, when the housing market improves.

But the new shape of Wall Street will be missing a piece. The credit crisis has ended the age of big investment banks. This week the last two, Goldman Sachs and Morgan Stanley, became bank holding companies.

As commercial banks, they can take deposits from the public and borrow from the Federal

Reserve at any time. This will help them raise capital. But they will also face closer government supervision.

Henry Paulson headed Goldman Sachs before he became treasury secretary in two thousand six.

Morgan Stanley also agreed this week to sell up to twenty percent of itself to Japan's largest bank, Mitsubishi UFJ. And investor Warren Buffett agreed to buy at least five billion dollars in Goldman stock.

Six months ago, there were five big, independent investment banks. Then, in March, J.P. Morgan Chase bought Bear Stearns in a rescue sale. And this month Merrill Lynch agreed to be sold to Bank of America.

The government provided loans to aid the sale of Bear Stearns. But officials decided to let

Lehman Brothers, a one hundred fifty-eight year old investment bank, fail. Last week the British bank Barclay's purchased much of Lehman in bankruptcy court.

Investment banks raise money for companies through offerings of stocks and bonds. They also sell and trade securities and provide other services.

The banks could borrow huge amounts against relatively little capital. And they created ever more complex securities.

The Glass-Steagall Act of nineteen thirty-three barred commercial banks from owning investment banks. Morgan Stanley split from J.P. Morgan as a result of Glass-Steagall.

Congress passed the law to reduce risk to deposits following the stock market crash of nineteen twenty-nine. But Congress ended Glass-Steagall in nineteen ninety-nine. Now, commercial and investment banks are together again, much as they were before nineteen thirty-three.

And that's the VOA Special English Economics Report, written by Mario Ritter. I'm Steve Ember.