Hair Balls got that warm fuzzy feeling (don't worry, it's not swine flu) when a publicist called to tell us that students from Bellaire High will be competing in the 2009 National Economics Challenge, to be held in New York City May 18. The Challenge is done in a "college bowl tournament" style, featuring eight teams who have "defeated nearly 1,000 teams from 34 states" to get this far.
First- and second-place teams (as well as their teacher-coaches) will receive over $100,000 in U.S. Savings Bonds, which Hair Balls understands is well over $35 in real money.
The event is sponsored by the Council for Economic Education....and the Goldman Sachs Foundation. Yup, the good folks at Goldman Sachs will be ushering these budding Bernankes into the brave new world of quasi-socialist, not-so-laissez-faire free-market economics. Which is good, because this is challenging stuff, as evidenced by an advance copy we got of some of the test questions. Take a look yourself and see how you'd measure up!
1. You work in the Mortgage Research Group of the Fixed Income, Currency and Commodities division of Goldman, Sachs & Co. A nosy reporter from The New York Times somehow gets your phone number and stars asking you questions about the $12.9 billion your firm received from AIG as a result of the insurance giant's $180 government bailout. The reporter wants to know why Goldman demanded 100 cents on the dollar to cover commercial contracts if your chief financial officer already told investors that Goldman wouldn't take any losses if AIG declared bankruptcy, since your firm was protected by third-party hedges. What do you tell him?
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2. You're a top executive at Lehman Brothers in early September 2008, tasked with last-minute negotiations with Bank of America and Barclay's, to see if either wants to purchase your firm and assume over $600 billion in bank debt and bond debt of $155 billion. With the clock winding down and both prospective buyers appearing less and less interested, the International Swaps and Derivates Associations proposes an exceptional Sunday trading session that would allow traders to offset positions on futures and options, if you agree to file for bankruptcy by the end of the day. Do you take the deal?
3. You're a mid-level accountant in a small Bear Stearns hedge fund division in spring 2007. A special agent from the New York office of the FBI calls you late at night and asks if you would be able to provide e-mails between two executives who he believes misled investors regarding the health of two highly leveraged funds totaling approximately $1.6 billion. The special agent, who gives you the code name "Strep Throat," says these e-mails are the key to proving that the executives knew of the funds' extreme exposure to subprime mortgage-backed securities, yet told investors their assets were safe. Do you snitch on your colleagues?
4. You're an AIG executive celebrating your $1 million bonus by snorting fluffy crystalline flakes of cocaine off the ass of a $5,000-a-night Slavik escort girl while lounging in the plush leather couch aboard your Gulfstream jet. Somehow, the New York Times reporter from Question #1 calls you on the plane's phone to ask if you will return your bonus, as 15 of your colleagues have decided to do. How long do you cackle in the reporter's ear before you loudly declare that you are Shiva, God of Death?
So remember: support these kids, as they'll be tomorrow's economic leaders and bailout architects.