Gale Encyclopedia Of American Law 3Rd Edition Volume 4 P8 pot

and for civil liberties. During her life she worked to improve working conditions for U.S. laborers, helped establish the AMERICAN CIVIL LIBERTIES UNION (ACLU), and lobbied for the enactment of the EQUAL RIGHTS AMENDMENT.Inmanyofherexploits she partnered with her younger brother Max. Max Eastman gained fame as a Marxist writer and journalist who later rejected SOCIALISM and became a supporter of the virulently anti- communist senator, JOSEPH MCCARTHY.Incon- trast, Crystal Eastman was a consistent supporter of socialist politics, the suffragist movement, and feminism throughout her life. Eastman was born on June 25, 1881, in Glenora, New York, to Samuel Eastm an and Annis Ford Eastman. Both her parents were ordained church ministers and ardent believers in women’srights,beliefsthatEastman absorbed. In a 1927 autobiographical essay written for Nation magazine, E astman talked about her father’s support of her mother’sgoal of becomin g a m inister and his support of Crystal when she decided to study law. He even supported the rebellious Crystal when she led her teenage friends in revolt against the wearing of skirts and stockings as part of the swimming attire of proper young l adies. Her father knew that he would not want to wear a skirt and stockings when he went swimming, shewrote,sohecouldseewhyhisdaughter would not want to either. Eastman also credited her mother with encouraging Crystal and her two brothers to be independent thinkers and to advocate for the causes that were most important to them. Eastman graduated from Vassar College in 1903 and earned a master’s degree in sociology from Columbia University in 1904. She attended New York City School of Law where she graduated second in her class in 1907. Until 1911, Eastman lived in a Greenwich Village commune that included her brother Max. Paul Kellogg, social work advocate and editor of a publication called Charities and the Commons, hired the young attorney as part of a team charged with investigating conditions among steel workers in Pittsburgh, Pennsylva- nia. The resulting survey, published between 1909 and 1914, was a groundbreaking six- volume study that was the first to combine the collection of scientific data with management techniques. Eastman’s portion of the survey, a report titled Work Accidents and the Law, was published in 1910. The report, which focused on unsafe working environments and the corruption of officials and others, was a startlin g revelation to many politicians and citizens. In 1909 Eastman became the first woman appointed to the Employer’s Liability Commis- sion. In that role she drafted the first workers’ compensation law for the state of New York. Eastman married Walter Benedict and moved to Milwaukee, Wisconsin, where she continued be involved in women’s suffrage issues. Eastman eventually separated from her husband and moved back to New York where she became an investigating attorney for the U.S. Commission on Industrial Relations in 1913. That same year, Eastman, along with suffragist ALICE PAUL and several others, helped to found the militant Congressional Union for Woman Suffrage that was a forerunner of the National Woman’s Party. In 1915 Eastman joined over three thousand women for a meeting in Washington, Crystal Eastman 1881–1928 ▼▼ ▼▼ 18751875 19251925 19001900 ◆ ◆ ❖ ◆ ◆ ◆ 1881 Born, Glendora, N.Y. 1914–18 World War I 1903 Graduated from Vassar College ◆ ◆ ❖ ◆ ◆ ◆ 1920 Nineteenth Amendment ratified, gave nationwide suffrage rights to women 1918 Palmer Raids target left-wing political dissenters 1912 Congress passed eight-hour day labor law for federal employees 1904 Earned M.A. from Columbia University 1907 Graduated from New York City School of Law 1917–21 Editor of The Liberator magazine 1928 Died, Erie, Pa. 1923 Authored Equal Rights Amendment with Alice Paul 1910 Published Work Accidents and Laws 1913 Helped found Congressional Union for Women Suffrage 1916 Helped found National Civil Liberties Union GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION EASTMAN, CRYSTAL 59 D.C., where they founded the Woman’sPeace Party with famed social worker JANE ADDAMS as chair. Eastman became president of the New York branch of the party which, in 1921, was renamed the Women’s International League for Peace and Freedom. That organization, which exists to this day, supports disarmament, women’s rights, civil liberties, and ABOLITION of CAPITAL PUNISHMENT. Eastman also served as executive director of the American Union against Militarism (AUAM), an organization that lobbied to keep the United States from entering into war against Mexico in 1916 and to support American neutrality during WORLD WAR I. Within the AUAM, Eastman along with social reformers ROGER BALDWIN and Norman Thomas established a subsection called the National Civil Liberties Bureau (NCLB) whose primary purpose was to advocate for and protect the BILL OF RIGH TS . Eastman worked on the left-wing political journal The Masses with her brother Max who was editor. When that periodical was closed down due to lawsuits, Eastman and her brother joined with several others to found a similar journal, The Liberator. Eastman was editor of the magazine from 1917 to 1921. In 1922 The Liberator was taken over by the Communist Party, which later renamed it The Workers’ Monthly. Eastman had always been a passionate defender of free speech, but her support for the concept strengthened in the face of the suppression of antiwar activists during and afterWorldWarI.PresidentWoodrow Wilson’s attorney general A. Mitchell Palmer and Palmer’s special assistant J. Edgar Hoover used the ESPIONA G E AC T O F 1917 and the 1918 Sedition Act to commence a campaign against those perceived to be radic als or members of left-wing organizations. Palmer and Hoover conducted Palmer Raids, casting a large net that involved the arrest, in over 30 cities around the country, of thousands of suspected anarchists and supporters of socialism and COMMUNISM. Arrests were often made without warrants and several hundred, including noted feminist and radical EMMA GOLDMAN,were deported. In 1920 the NCLB, which had been established with the aim of protecting the Bill of Rights against encroachments such as those encompassed by the Palmer Raids, became the American Civil Liberties Union (ACLU). The purpose of the organization was to advo- cate for FIRST AMENDMENT rights including FREEDOM OF SPEECH, freedom of RELIGION, and FREEDOM OF THE PRESS, as well as EQUAL PROTECTION and due process rights, and the right to privacy. In 2003 the ACLU, which remains headquar- tered in New York City, had grown from a roomful of activists to an organization with over 300,000 members, and supporters and offices all over the country. In the 1920s Eastman traveled between New York and London where her second husband, British poet and peace activist Walter Fuller, had gone to look for work. During this period she worked as a journalist, writing columns for several U.S. periodicals including the Nation and Alice Paul’s Equal Rights, and British publications such as the Daily Herald and a British feminist weekly called Time and Tide. Shortly after women gained the right to vote, Eastman, along with Alice Paul, became one of the authors of the Equal Rights Amendment (ERA), which proposed amend- ing the U.S. Constitution to invalidate numer- ous state and federal laws that discriminated against women while purporting to “protect” them. No action was taken on the ERA when it was introduced in Congress in 1923, and it languished until 1966 when the NATIONAL ORGANIZATION FOR WOMEN (NOW) revived interest in it. The amendment was approved by Congress in 1972 and given a seven-year deadline for ratification by 38 states. The amendment was ratified by 30 states within one year of S enate approval. But opposition from conservative political and religious groups halted the m omentum. Despite an extension of the deadline to 1982 and ratifica- tion by five more states, the amendment failed to be ratified by the required three-fourths and did not become law. After her husband’s death in 1927, Eastman returned to live permanently in the United States. She died just one year later, in July 1928, at her brother’s home in Erie, Pennsylvania. She was 48 years old. In 2000 Eastman, along with 19 other distinguished American women, was inducted into the National Women’s Hall of Fall in Seneca Falls, New York, the birthplace of the women’s rights movement. I AM NOT INTERESTED IN WOMEN JUST BECAUSE THEY ’RE WOMEN .IAM INTERESTED , HOWEVER, IN SEEING THAT THEY ARE NO LONGER CLASSED WITH CHILDREN AND MINORS . —CRYSTAL EASTMAN GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 60 EASTMAN, CRYSTAL FURTHER READINGS Cook, Blanche Wiesen. 1993. “Radical Women of Green- wich Village.” In Greenwich Village: Culture and Counterculture, edited by Rick Beard and Leslie Berlowitz Cohen. Newark N.J.: Rutgers Univ. Press. Cook, Blanche Wiesen, ed. 1976. Toward the Great Change: Max and Crystal Eastman on Feminism, Antimilitarism, and Revolution. New York: Garland. Kerber, Linda K., and Jane Sherron DeHart, eds. 2003. Women’s America: Refocusing the Past. 6th ed. New York: Oxford Univ. Press. v EATON, DORMAN BRIDGMAN Dorman Bridgman Eaton was born June 27, 1823, in Hardwick, Vermont. He was a successful lawyer who achieved prominence for his work in the establishment of the U.S. CIVIL SERVICE Commission. After receiving a doctor of laws degree from the University of Vermont in 1848, Eato n attended Harvard Law School in 1850 and was admitted to the New York bar, practicing law there until 1870. Eaton was a staunch believer in a merit system as opposed to a spoils system in the acquisition of local or national government employment. In 1873 he became the chairper- son of the U.S. Civil Service Commission, an organization that embodied the ideas of the merit system. He served until 1875, when funding for the commission ceased, and he subsequently went to England to examine the structure of the English Civil Service Commis- sion. In 1883, he formulated the Pendleton Act (5 U.S.C.A. § 1101 et seq. [1883]), which provided for the foundation of the permanent Civil Service Commission. He performed the duties of chairperson of this new commission from 1883 to 1886. Eaton died December 23, 1899, in New York City. In 1880, Eaton wrote the publication The Civil Service in Great Britain: A History of Abuses and Reforms and their Bearing upon American Politics. ECCLESIASTICAL COURTS In England, the collective classification of particu- lar courts that exercised jurisdiction primarily over Dorman B. Eaton. LIBRARY OF CONGRESS Dorman Bridgman Eaton 1823–1899 ❖ ❖ 1823 Born, Hardwick, Vt. 1850 Graduated from Harvard Law School; admitted to New York bar 1873–75 Served as chair of the U.S. Civil Service Commission 1899 The Government of Municipalities published; died, New York City 1861–65 U.S. Civil War ◆ 1883–86 Served as chairman of the Civil Service Commission 1850–70 Practiced law in New York 1886 Returned to New York City to work on municipal government reform ▼▼ ▼▼ 18751875 19001900 18251825 18501850 ◆ ◆ ◆ 1880 The Civil Service in Great Britain: A History of Abuses and Reforms and their Bearing upon American Politics published 1883 Formulated the Pendleton Act, basis for U.S. civil service system GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION ECCLESIASTICAL COURTS 61 spiritual matters. A system of courts, held by authority granted by the sovereign, that assumed jurisdiction over matters concerning the ritual and religion of the established church, and over the rights, obligations, and discipline of the clergy. ECONOMIC BAILOUT An economic bailout is a plan through which the government provides financial assistance to trou- bled industries and companies, often during times of national economic crisis. At many times throughout U.S. history, companies and other entities have sought economic assistance during different crises. Most of this assistance has come from the government, though in some instance s, private entities have also been involved. Turbulent economic periods have often been marked with instances of government bailouts. Such periods include the Great Depression during the 1930s, the recession of the mid-1970s, the savings and loan crisis of the 1980s and 1990s, and the difficult economic periods of the 2000s. Government bailouts often cause controver- sy, especially when entities have been accused of mismanagement. During 2008 and 2009, several financial institutions, as well as the three largest automobile makers in the United States, were on the verge of BANKRUPTCY. Although the declining economic condition hastened these near-collapses, some analysts and commenta- tors believed that the companies were in poor economic health because of poor management as much anything else. Critics of government bailout programs often note that the free market system in the United States demands that companies face the risk of failure. Eco- nomic bailouts generally shift the risk of failure to taxpayers. Plus, some critics characterize bailout programs as something more like a system of SOCIALISM than part of a system of capitalism. Despite these criticisms, economists argue that bailouts are necessary because the collapse of certain important entities, including those in the transportation and financial sectors, could lead to a more widespread collapse of the economy in general. Moreover, studies have shown that the government typically earns its money back with interest when it devotes funds to struggling companies. Though bailouts are seldom popular with the public, especially when the companies seeking assistance are accused of poor management, the bailouts have saved a number of businesses and other entities throughout U.S. history. History Bailouts are nothing new in U.S. history. In 1791 the U.S. government assumed debts that several states owed as a result of the American Revolutionary War. The government’s assump- tion of these obligations increased the national debt but also spurred a market for debt SECURITIES. New York businessman William Duer developed a plan to bring down the stock prices of the Bank of New York so that he could take control of the bank. Duer also planned to corner the market on certain types of govern- ment bonds. His plan led to a sharp decrease in the value of the government bonds. The collapse in the bond value led to a sharp decline in REAL ESTATE values, which could have led to a massive depression. ALEXANDER HAMILTON was the Treasury secre- tary and one of the founders of the Bank of New York. Hamilton devised a plan in which the TREASURY DEPARTMENT bought bonds by borrow- ing money from the banks. This action increased the value of the bonds. Hamilton also instructed banks to accept bonds as collateral for loans that the banks made to securities brokers, and the government guaranteed this collateral. The result of Hamilton’s actions was that the Bank of New York did not collapse, and the United States did not fall into a major depression. In fact, no bank in the United States failed until 1809. History has seen a number of other banking panics. A notable panic occurred in 1907, when several banks and trusts had made loans for an attempt to corner the market on stock in a copper company. When that attempt failed, confidence in the banks and trusts waned, leading depositors to withdraw their capital. The Treasury Department attempted to inter- vene by injecting millions into the banking system. However, it was the actions of banker J. Pierpont Morgan that helped to resolve the crisis. He worked with several bankers to create a joint pool of capital that could be used to save banks that were at risk of collapse. One result from the panic in 1907 was the creation of the Federal Reserve System, which was designed to GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 62 ECONOMIC BAILOUT create a lender of LAST RESORT for U.S. financial institutions. The Great Depression of the 1930s led many homeowners to default on their mortgages. By 1933, banks were foreclosing on nearly one thousand homes per day. President FRANKLIN D. ROOSEVELT and Congress responded by creating the Home Owners’ Loan Corporation, which purchased defaulted mortgages from the banks and then refinanced the mortgages at lower, fixed rates. The agency issued mortgages to about one million homeowners. By the time the agency dissolved in 1951, more than 80 percent of the borrowers had repaid their mortgages on time or early. Lee Davison, a historian with the FEDERAL DEPOSIT INSURANCE CORPORATION, noted that the p rogram earned the government a small profit. “You save 80 percent of the people from being tossed o ut of their homes, and it di dn’tend up costing the government a dollar,” he said. Several companies during the 1970s and 1980s sought government assistance when they faced collapse. These companies included Penn Central Railroad in 1970, Lockheed in 1971, Franklin National Bank in 1974, Chrysler in 1980, and Continental Illinois National Bank and TRUST COMPANY in 1984. In several of these instances, the companies repaid the government loans, and the government earned interest from these loans and otherwise recouped funds through other transactions. One of the more costly bailouts involved the savings and loan industry. During the 1980s, savings and loan institutions started investing heavily in commercial real estate. By the mid- 1980s, though, interest rates had risen, and the savings and loan institutions were paying more in interest to their depositors than they were earning from their loans. Betwee n 1986 and 1995, about half of the more than 3,200 savings and loan institutions in the Unite d States closed, leaving federal insurers with billions in b ad debt. In 1989 Congress enacted the Financial Institutions Reform Recovery and Enforcement Act of 1989 (Pub. L. No. 101-73, 103 Stat. 194). This act authorized $293.8 billion in financing for folding savings and loan institutions. The act also created the Resolution Trust Corporation, which was responsible for making depositors whole and for investigating wrongdoing in the savings and loan industry. The savings and loan crisis eventually cost taxpayers an estimated $124 billion. Bailouts of the First Decade of the 2000s Several different kinds of bailouts occurred in the early 2000s. Airlines Even before the terrorist attacks on the United States in 2001, the airline industry was suffering financially. Analysts estimated before September 11, 2001, that airlines would lose $2 billion in 2001. After those terrorist attacks, the government ordered all airplanes in the United States to be grounded, thus causing greater losses in the airline industry. Eleven days after the terrorist attacks, Congress approved and President GEORGE W. BUSH signed the Air Transportation Safety and System Stabilization Act (Pub. L. No. 107-42, 115 Stat. 230). This act provided $5 billion in direct relief to the airlines and also included $10 billion in loan guarantees. Other provisions included tax relief, insurance, and limited liability to certain air carriers. The airline bailout plan allowed the Trea- sury Department to purchase stock at prices below market for any air line that received a loan guarantee. Although the loan guarantee pro- gram suffered a loss when one of the minor airlines filed for bankruptcy, the government earned at least $140 million from its acquisition of stock in the airlines. Subprime Lending Crisis The 1990s saw a boom in the issuance of what is known as subprime lending. Lenders initially targeted those with impaired credit or no credit for the types of loans offered within the category of subprime loans. The most common of these loans has been the adjustable rate loan, under which a mortgage begins at a certain rate but which the mortgage company can change depending on the market situations. Other types of subprime loans include, for example, interest-only loans and zero-down loans involv- ing more than one mortgage company (also known as piggy-back loans). Although these subprime loan packages can help some homeowners to purchase houses that these homeowners would not be able to purchase otherwise, many who took out sub- prime loans ran into unforeseen problems. In most instances, mortgage companies will in- crease the rates of adjustable rate mortgages. Thus, a borrower may be able to afford the initial rate of, for example, 7 percent interest, but when the lender increases the rate to GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION ECONOMIC BAILOUT 63 8 percent, the borrower has more difficulty paying. As the percentage continues to increase, the borrower’s ability to pay is progressively weakened. Similar problems arise with interest- only loans and zero-down loans with piggy- backs, the terms of which tend to favor mortgage companies and not the borrowers. To make matters worse, many of the subprime lenders did not require borrowers to show proof of income. Prime loans have remained the most preva- lent, representing 80 percent of the total mortgages in the United States as of 2010. However, subprime loans became increasingly popular even for those with a sufficient credit history to qualify for a conventional loan. In many cases, the rate of a subprime loan (especially an adjustable rate mortgage) initially may have been less than a conventional loan. However, when the mortgage companies in- creased those rates, the rate of the subprime loan surpassed the rate of the conventional loan. Between 2001 and 2006, the percentage of new loans characterized as subprime or near-prime rose substantially. Between 2002 and 2005, housing prices had steadily increased, which helped the subprime loan market. Companies also continued to ease their credit standards. Moreover, interest rates during this time remained low as a result of the Bailout of the American Auto Industry F or most of the twentieth century, the U.S. auto industry was domi- nated by the “Big Three” of Detroit: General Motors, Ford Motor Company, and Chrysler. The Big Three sold most of the automobiles in the American market, in the process becoming central to the U.S. manufacturing economy. Unioniza- tion of the companies in the 1930s led to high wages and benefits for union work- ers. However, problems began to develop in the 1970s, as imported cars began to enter the market and labor disputes with the United Auto Workers (UAW) esca- lated. The federal government intervened in 1979 to keep Chrysler afloat, and the industry rebounded. By 2005, Japanese auto companies commanded a large share of the U.S. market. The loss of sales eventually drove the Big Three to the brink of collapse in 2008. The U.S. government again intervened, this time by loaning billions to General Motors and Chrysler. As of the end of 2009, it was unclear whether these efforts would ultimately save these companies. The federal loan of $1.5 billion to Chrysler in 1979 saved the company. During the 1980s the Big Three again prospered, due in large part to Congress exempting truck-based vehicles—pick- ups, SUVs, and minivans—from fuel- economy regulations. Japanese and other foreign automakers initially did not try to compete with these sectors of the market, which left Detroit in the driver’s seat. Though these truck-based vehicles were not fuel efficient, the price of oil dropped steadily through the 1990s; sales in these sectors became the most profitable for Detroit. By 2000, the Big Three were making record profits and building their cash reserves. Pickups accounted for large profit margins, whereas smaller cars produced no profit and sometimes losses. This trend started to crack when oil prices began to rise in 2001. Con- sumers began to look at more fuel- efficient autos, which reduced the de- mand for trucks and SUVs. In response, Detroit began closing factories and laying off workers, yet this was not enough. In the spring of 2008, gas prices increased dramatically, rising to over $4 per gallon. Consumers panicked and stopped buying pickups and SUVs. Then, in September 2008, the STOCK MARKET and some finan- cial institutions collapsed, driving the United States into a recession. Auto sales dropped over 30 percent in October, forcing the Big Three to spend their cash reserves on parts, labor, and other overhead. Realizing that their existence was in danger, the Big Three asked the federal government in September for loan guar- antees so that they could retool their plants to produce more fuel-efficient cars. The request generated political controversy, as federal intervention went against free market ideas. Moreover, critics pointed out that many businesses were suffering from the recession, yet they could not obtain federal relief. The automakers and the UAW, along with some economists, responded that the auto industry was a linchpin of the U.S. economy. If the automakers went bank- rupt, more auto workers would be added to the unemployment lines, and the ripple effect would take down many of the companies that supplied parts and other services to Detroit. General Motors By the end of November, General Motors announced it would run out of money in early 2009 and be forced to close if it did not receive federal assistance. On December 20, 2008, GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 64 ECONOMIC BAILOUT recession of 2001. During this period, when many borrowers had difficulty making their mortgage payments, borrowers often had a few options. In many cases, borrowers could borrow against their homes through home equity loans to make mortgage payments. Borrowers could also sell their homes to settle their mortgage debts. Lenders took these circumstances into account when the lenders continued to market these subprime loans aggressively. A variety of factors caused subprime lenders to begin to experience heavy losses. First, home prices in 2006 began to decline, meaning that borrowers lost equity in their homes. In many cases, subprime borrowers owed more on their mortgages than their homes were now worth, meaning that the borrowers had few options when they could not make their payments. Delinquency rates of subprime loans issued in 2006 greatly exceeded the rates of 2004. In April 2007 one of the nation’s largest subprime lenders, New Century Financial, filed for bankruptcy. By the summer of 2007, Bear Sterns announced that it had experienced huge losses as a result of its subprime mortgage holdings. Bear Sterns had been one of the world’s largest investment banks and securities and brokerage firms, but by 2008 the firm was in ruins. In March 2008 the Federal Reserve orchestrated the acquisition of Bear Sterns by the Bush administration loaned General Motors $15.4 billion in three payments. Thegovernmentorderedthecompanyto submit a plan in February 2009 that would explain how it could restore itself to long-term profitability. To make this plan work, the UAW had to agree to cuts in benefits, and suppliers and creditors had to agree to make concessions. If the government approved the plan, it would continue to loan General Motors money. The plan th at General Motor s submitted dramatically altered the size of the company. It proposed t o cut 47,000 jobs out of a total w orldwi de workforce of 244,00 0 by the end o f 2009. The Obama administration rejected the plan in late March, giving the c ompany another 60 days to gain concessions from unions and bond- holders. A White House taskforce told the company more job cuts were needed and that more brands would have to eliminated. General Motors responded with a plan in April that would e limi- nate the Pon tiac, Saturn, and Hummer brands, s hed 42 percent of its dealers, close 13 plants, and layoff 21,000 jobs. More job s would be cut in coming years. Under the plan the federal government would become majority owne r, in ex- change for another $11 billion. General Motors concluded that this plan would allow it to break even. In late May 2009 the UAW agreed to concessions involving retiree benefits and the funding of the retiree trust. However, bondholders refused an offer that would have traded their $27 billion debt in return for 10 percent of the company. Though the negotiations continued, General Motors finally decided to file for BANKRUPTCY on June 1. It packaged all its best assets into a new company called General Motors Company and was able to exit bankruptcy quickly. The federal government owns 60 percent of the new company, the Canadian government 12 percent, and the UAW 20 percent. The Obama administration agreed to provide $30 billion in additional financing, bringing the total federal bailout money for General Motors to $50 billion. By November 2009, the company an- nounced it was returning some of the bailout money. Though it had reduced its losses, the introduction of new vehicle models in late 2009 and in 2010 would be key to the future of the company. Chrysler The financial and manage- ment history of Chrysler has been checkered. In 1998 the German auto- maker Daimler-Benz merged with Chrysler, but it soon became apparent that Daimler had taken over the com- pany. The marriage never worked out, and in 2007, Daimler sold the U.S. assets of DaimlerChrysler to Cerberus Capital Management. Cerberus, a private equity fund, had no luck in turning around the fortunes of Chrysler. The smallest of the Big Three, Chrysler sales fell 25 percent in 2008, in large part because of its reliance on selling pickup trucks and SUVs. Chrysler received a $4 billion loan in December 2008 to avoid bankruptcy and began negotiating with Italian automaker Fiat to purchase a substantial part of the company. As with General Motors, negotiating concessions from bondholders and hedge funds proved difficult. Chrysler filed for bankruptcy on April 30, 2009, and emerged from it 42 days later. The federal government paid $6.6 billion in exit financing to Chrysler but required the company to sell most of its assets to Fiat. Chrysler closed plants, laid off workers, and shuttered dealerships. It was expected that smaller, fuel-efficient Fiat models would be sold at Chrysler dealerships. The Ford Motor Company did not ask for federal bailout money. The company had begun to restructure in 2006. It introduced smaller, more fuel- efficient vehicles in 2008 and improved the quality of it products. By November 2009, the company reported increasing sales. It also stated that its North American units were profitable. FURTHER READINGS Harbour, James. 2009. Factory Man: How Jim Harbour Discovered Toyota’s Quality and Productivity Methods and Helped the U.S. Auto Industry Get Competitive. Dearborn, Mich.: Society of Manufactur- ing Engineers. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION ECONOMIC BAILOUT 65 JPMorgan Chase & Company. The Federal Reserve agreed to finance up to $29 billion to help JPMorgan to cover Bear Sterns’ losses. The government’s action represented the first bail- out of a broker since the Great Depression. Several firms that had loaned money to Bear Sterns experienced problems as a result of the Bear Sterns collapse. These firms included JPMorgan Chase, Merrill Lynch, Citigroup, and Goldman Sachs. The crisis continued in 2008. In February, with the U.S. economy as a whole struggling, President George W. Bush signed the Economic Stimulus Act of 2008 (Pub. L. No. 110-185, 112 Stat. 613). The act injected $168 billion into the economy over the course of two years. Howev- er, the economy continued to suffer due to the mortgage crisis. By 2008, agencies that rate the value of securities reduced the ratings on $1.9 trillion in mortgage-backed securities. The rating reductions had the effect of lowering the stock value of several financial firms. The situation appeared to hit rock bottom in September 2008. Fannie Mae and Freddie Mac, which owned or backed more than $5 trillion in mortgages, had experienced billions in losses in 2007 and 2008. On September 6, 2008, Treasury secretary Henry Paulson announced that the government would take over those firms. The Treasury Department also agreed to provide up to $200 billion in loans to provide funding for banks and other home lenders. Several Wall Street firms also reached the point of collapse in September 2008. Insurance company American International Group (AIG) suffered more than $18 billion in losses during a nine-month period. The company sought and received loans from the Federal Reserve to help the company avoid bankruptcy. In return, the government received a large equity stake in the company, meaning that the government effec- tively took control of one of the world’s biggest insurers. One day later, Bank of America announced that it had agreed to acquire Merrill Lynch, one of the largest brokerage firms in the world. Another major Wall Street firm, invest- ment bank Lehman Brothers, was unable to receive a government bailout and was forced to file for bankruptcy protection. By mid- September, Lehman stocks were virtually worthless. Yet another major player in the mortgage market, Washington Mutual, also collapsed. On September 15, 2008, the credit rating firm Standard and Poor’s reduced the Washington Mutual rating to JUNK BOND status. Several other firms suffered severe losses, but they survived. Banks such as Citigroup, Morgan Stanley, and Goldman Sachs lost billions as a result of the credit crisis. The meltdown led to record-setting decline in the STOCK MARKET,as the Dow Jones average dropped precipitously throughout the final quarter of 2008. Automobile Industry One of the industries hit hardest by the economic downturn in 2008 was the automotive industry. Nearly every automaker lost money in 2008, though the so-called Big Three (General Motors, Ford, and Chrysler) were hit hardest. When exe- cutives with these companies approached Con- gress for bailout money, the business strategies of these companies came into question. Though the government eventually agreed to provide the loans these companies requested, the loans came with a steep price: unprecedented govern- ment oversight of the automotive industry. Between 1998 and 2008, the market share of the Big Three fell from 70 percent to 53 percent. During this period, the number of car sales in the United States fell significantly from the all- time high of 17.4 million in 2000. The growth in the number of cars during that decade out gained the growth in the total number of drivers during the same time period. Jobs in the automotive industry also suffered a steady decline. Part of the difficulty that U.S. auto- makers had related to labor costs, which were higher due to COLLECTIVE BARGAINING agreements reached with the United Auto Workers. Rising oil prices in 2008 turned the decline of the automakers into a crisis. With gas prices rising well above $4 per gallon, consumers seeking more fuel-efficient models turned away from the vehicles offered by the Big Three and instead opted for models offered by over seas competitors. Compounding the problems for U.S. automakers was the credit crisis that deeply affected the economy in 2008. As consumers lost their ability to borrow money to make auto purchases, sales continued to drop significantly. With each of the Big Three on the verge of bankruptcy, executiv es during the fall of 2008 began to lobby Congress for bailout loans that would help the companies survive the crisis. In September 2008 Congress and President George W. Bush approved $25 billion in loans GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 66 ECONOMIC BAILOUT to the automakers. The plan for these loans had been in the works for some time, but the need became more pressing with the dir e economic news. The companies received a ve ry low interest rate (estimated at about 4 percent) and did not need t o begin paying off the loans f or f ive years. Troubled Asset Relief Program Congress passed the Emergency Economic Stabilization Act of 2008 (Pub. L. No. 110-343, 122 Stat. 3765), which created the Troubled Asset Relief Program (TARP). Under this program, the Treasury secretary was authorized to spend $700 billion to help curb the financial crisis in the United States caused in large part by the subprime lending crisis. TARP most specifi- cally authorized the Treasury secretary to purchase mortgage-backed assets from banks and bank holding companies. Several large financial institutions received TARP funds, including AIG, Citigroup, and Bank of America. Other funds went toward programs to assist mortgage lenders and home- owners; lending program s for small businesses; and other support programs. Congress in December 2008 agreed to $17.4 billion in loans to automakers that came out of the TARP package. Despite the availabili ty of money from these loans, Chrysler and General Motors continued to suffe r, and both filed for bankruptcy in 2009 . By contrast, Ford executives said that the company had enough credit t hat i t would n ot need to take its part o f t he loans. As of December 2009, the Treasury Depart- ment had extended its use of the fund until October 2010, but officials said they planned to distribute no more than $550 billion from the fund. FURTHER READINGS Branum, T ara, and Susanna Dokupil. 2002. “Security Tak eovers and Bailouts: Aviation and the Return of Big Govern- ment.” Tex as R eview of Law and P olitics 6 (Spring). Patel, Avni P. 2008. “The Bailout of Fannie Mae and Freddie Mac.” Review of Banking and Financial Law 28 (Fall). Pearse, Steven. 2010. “Accounting for the Lack of Account- ability: The Great Depression Meets t he Great Recession.” Hastings Constitutional Law Quarterly 37 (Winter). Phillips, Michael M. “Government Bailouts: A U.S. Tradition Dating to Hamilton.” Wall Street Journal. September 20. Schwartz, Nelson D. 2008. “A History of Public Aid during Crises.” New York Times. September 7. CROSS REFERENCES Automobile; Banks and Banking. v EDELMAN, MARIAN WRIGHT During her career, Marian Wright Edelman has appeared in Mississippi jail cells, Capitol Hill offices, and on TV talk shows, with the same objective: to help poor or disenfranchised U.S. citizens. Best known as the founder and presi- dent of the Children’s Defense Fund (CDF), Edelman is a lawyer, lobbyist, author, and mentor to former first lady, now Secretary of State, HILLARY RODHAM CLINTON. Edelman began her career as a CIVIL RIGHTS attorney in the Deep South during the 1960s. While working on voter registration campaigns—and keeping demon- strators out of jail—Edelman vowed to do something about the plight of children in the United States. Improving children’s lives seemed like a logical starting point for improving all of society. By the mid-1990s, Edelman’s influence extended from day care centers to the Oval Office as she helped shape the future for the youngest citizens of the United States. Edelman was born June 6, 1939, in Bennetts- ville, a small, segregated town in South Carolina. Her father, Arthur Jerome Wright, was a Baptist minister, and her mother, Maggie Leola Wright, was the director of the Wright Home for the Aged. Named after singer Marian Anderson, Edelman recalls a childhood of hard work and high expectations. She was an outstanding student whose parents instilled in her a strong sense of purpose and social awareness. Edelman’s parents extolled the virtues of self-reliance and personal initiative, and lived their own counsel when they established the Wright Home, the first African American residence for elderly people in South Carolina. Edelman’s parents founded the nursing home because they saw a need and felt obliged to fill it. Given the example set by them, it is no surprise that Edelman chose a life of self- directed social activism. After high school, Edelman attended well- respected Spelman College, in Atlanta. Edelman planned a career in the foreign service and took preparatory courses at the Sorbonne, in Paris, and at the University of Geneva, in Switzerland. After spending a summer in Moscow, Edelman returned to the United States for her senior year at Spelman. Before long, she was caught up in the emerging CIVIL RIGHTS MOVEMENT.Afteracampus visit by MARTIN LUTHER KING Jr., and considerable soul-searching, Edelman dropped her plans for the foreign service and joined other African Americans in the struggle for equal rights. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION EDELMAN, MARIAN WRIGHT 67 To make herself more valuable to the movement, Edelman decided to attend law school. After earning a degree from Yale University Law School in 1963, she became counsel for the Legal Defense and Educational Fund of the National Association for the Advancement of Colored People ( NAACP). In New York, Edelman received NAACP training in civil rights law for one year. She moved to Jackson, Mississippi, in 1964 and became the first African American woman ever admitted to the Mississippi bar. (At the time, Mississippi had a grand total of three African American lawyers.) Edelman’s f irst assignment was the Mississippi Summer Project. This was an African American voter registration drive conducted b y volunteers and college students from the North. Edelman also served a s the attorney for t he Child Development Group of M ississippi, where one of her proudest accomplishments was h elping to reinst ate federal funding for Head Start, a successful program t hat encourages the intellectual and s ocial development of poor, a t-risk children. When Senator ROBERT F. KENNEDY toured Mississippi in 1967, Edelman showed him the wretched poverty endured by thousands of African American children. Many credit her with opening Kennedy’s eyes to the reality of hunger in the United States. In 1968, Edelman married Peter B. Edel- man, a Harvard-trained lawyer who was Senator Kennedy’s legislative assistant. The couple moved to Washington, D.C., where they eventually had three sons. Edelman hoped a move to the nation’s capital would enable her to focus national attention on the poverty she witnessed in Mississippi. Edelman’s first job in Washington, D.C., was as congressional and federal agency liaison for the 1968 Poor People’s Campaign. Also during 1968, Edelman founded the Washington Research Project, an advocacy and research group that lobbied Congress for an expansion in Head Start services. In 1971 Edelman and her family moved to Boston for her to complete a Marian Wright Edelman. NEILSON BARNARD/ GETTY IMAGES Marian Wright Edelman 1939– ▼▼ ▼▼ 1930 2000 1975 1950 ❖ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆◆◆ ◆ 1939 Born, Bennettsville, S.C. 1939–45 World War II 1950–53 Korean War 1961–73 Vietnam War 1963 Earned LL.B. from Yale Law School; joined NAACP’s Legal Defense and Educational Fund 1964 Became first African American woman admitted to the Mississippi bar 1964–68 Served as director of NAACP’s Legal Defense and Educational Fund 2000 Awarded Presidential Medal of Freedom 1998 Stand for Children published 1973 Founded the Children’s Defense Fund 1979 Served on the Presidential Commission of the International Year of the Child 1992 The Measure of Our Success: A Letter to My Children and Yours published 1985 Awarded MacArthur “genius award” prize fellowship 1968 Founded Washington Research Project 1971–73 Served as director of the Harvard U. Center for Law and Education 1987 Families in Peril published 2008 The Sea Is So Wide and My Boat Is So Small: Charting a Course for the Next Generation published GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 68 EDELMAN, MARIAN WRIGHT . History of Abuses and Reforms and their Bearing upon American Politics published 1883 Formulated the Pendleton Act, basis for U.S. civil service system GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E. panic in 1907 was the creation of the Federal Reserve System, which was designed to GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 62 ECONOMIC BAILOUT create a lender of LAST RESORT for U.S. financial institutions. The. Published Work Accidents and Laws 1913 Helped found Congressional Union for Women Suffrage 1916 Helped found National Civil Liberties Union GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION EASTMAN, CRYSTAL