Tuesday, March 31, 2009
Friday, March 27, 2009
Wednesday, March 25, 2009
Tuesday, March 24, 2009
Friday, March 20, 2009
President Obama on 'The Tonight Show with Jay Leno'
March 20, 2009
Transcript
The following is a transcript of President Obama's interview on NBC's "The Tonight Show With Jay Leno," as provided by the White House.
JAY LENO The 44th President of the United States, please welcome President Barack Obama. (Applause.)
PRESIDENT OBAMA: Thank you. (Applause.)
MR. LENO. Good to see you.
MR. OBAMA: It is good to see you and –- (applause.) Thank you. Let me just say, I think Kevin looks good in a suit. (Laughter.)
MR. LENO. Thank you, sir.
MR. OBAMA: He looks a little like Secret Service. (Laughter.)
MR. LENO: He does, doesn't he? Yes. And you're the only guy who can get him to wear it. (Laughter.)
Now, you know, it's funny, because the last time you were here, you walked in, you had your jacket on your finger and you had the two guys with you.
MR. OBAMA: Right.
MR. LENO: And that was it. Big change?
MR. OBAMA: You know, I was mentioning earlier, we landed yesterday and then –- this is an example of life in the bubble. We landed at the fairground down in Costa Mesa. And I see the fairground where I think we're having this town hall and I said, well, why don't we walk over there? Secret Service says, no, sir, it's 750 yards. (Laughter.)
So I was trying to calculate –- well, that's like a five-minute walk? "Yes, sir. Sorry." (Laughter.)
Now, they let me walk on the way back. But, you know, the doctor is behind me with the defibrillator. (Laughter.)
MR. LENO: Wow.
MR. OBAMA: Michelle jokes about how our motorcade –- you know, we've got the ambulance and then the caboose and then the dog sled. (Laughter.) The submarine. (Laughter.) There's a whole bunch of stuff going on.
MR. LENO: Now it's only, what, 59 days now, right?
MR. OBAMA: Yes, 59 days.
MR. LENO: And so much scrutiny. Is it fair to judge so quickly? I mean –-
MR. OBAMA: Well, look, we are going through a difficult time. I welcome the challenge. You know, I ran for President because I thought we needed big changes. I do think in Washington it's a little bit like "American Idol," except everybody is Simon Cowell. (Laughter.)
MR. LENO: Wow. Wow. That's rough. (Applause.)
MR. OBAMA: Everybody's got an opinion. But that's part of what makes for a democracy. You know, it's contentious and people are hitting back.
I do think, though, that the American people are all in a place where they understand it took us a while to get into this mess, it's going to take a while for us to get out of it. And if they have confidence that I'm making steps to deal with issues like health care and energy and education, that matter deeply to their daily lives, then I think they're going to give us some time. (Applause.)
MR. LENO: Let me ask you about this. I know you are angry –- because, you know, doing what I do, you kind of study body language a little bit. And you looked very angry about these bonuses. Actually, stunned.
MR. OBAMA: Stunned. "Stunned" is the word.
MR. LENO: Tell people what happened. I know people have been over it, just –-
MR. OBAMA: Well, look, here's what happened. You've got a company, AIG, which used to be just a regular, old insurance company. Then they insured a whole bunch of stuff and they were very profitable and it was a good, solid company.
Then they decided –- some smart person decided, let's put a hedge fund on top of the insurance company and let's sell these derivative products to banks all around the world –- which are basically guarantees or insurance policies on all these sub-prime mortgages.
And this smart person said, you know, none of these things are going to go bust; this sub-prime thing, it's a great deal, you can make a lot of profit. So they sold a whole bunch of them –- billions and billions of dollars. And what happened is, is that when people started going bust on sub-prime mortgages you had $30 worth of debt on every dollar worth of mortgage –- and the whole house of cards just started falling down.
So the problem with AIG was that it owed so much and was tangled up with so many banks and institutions that if you had allowed it to just liquidate, to go into bankruptcy, it could have brought the whole financial system down. So it was the right thing to do to intervene in AIG.
Now, the question is, who in their right mind, when your company is going bust, decides we're going to be paying a whole bunch of bonuses to people? And that, I think, speaks to a broader culture that existed on Wall Street, where I think people just had this general attitude of entitlement, where, we must be the best and the brightest, we deserve $10 million or $50 million or $100 million dollar payouts
MR. LENO: Right.
MR. OBAMA: And, you know, the immediate bonuses that went to AIG are a problem. But the larger problem is we've got to get back to an attitude where people know enough is enough, and people have a sense of responsibility and they understand that their actions are going to have an impact on everybody. And if we can get back to those values that built America, then I think we're going to be okay.
(Applause.) MR. LENO: Well, you know, it’s interesting, when you said -– it's, like, I had to laugh the other day when the CEO of AIG said, okay, I've asked them to give half the bonuses back. Now, if you rob a bank and you go into court –- (laughter) –- and you go, Your Honor, I'm going to give you half the money back. (Laughter.) And they seem stunned that we’re not jumping at this wonderful offer.
MR. OBAMA: Well, you know, the only place I think that might work is in Hollywood. (Laughter.)
MR. LENO: Let me ask you this. Now, I heard them say, well, one of the problems is it's contractual and if we don't pay these bonuses, well, they can sue us. All the time people say, so sue me.
MR. OBAMA: So sue me, right.
MR. LENO: I mean, the federal government is in debt a trillion dollars. We're broke -- sue us. Sue me. (Laughter and applause.)
MR. OBAMA: In fairness, I think that part of the calculation they were making was the way the contracts were written said, if you don't pay us immediately, then we can claim three times as much as we were owed under the bonuses. And so they were making a legal calculation, and their legal judgment was not necessarily wrong.
But there's a moral and an ethical aspect to this, as well. And I think that's what has gotten everybody so fired up. The main thing –- we’re going to do everything we can to see if we can get these bonuses back. But I think the most important thing that we can do is make sure that we put in a bunch of financial regulatory mechanisms to prevent companies like an AIG holding the rest of us hostage. Because that's –- that's the real problem.
The problem is not just what's happened over the last six months. The problem is what was happening for years, where people were able to take huge, excessive risks with other people's money, putting the entire financial system at risk –- and there were no checks, there were no balances, there was nobody overseeing the process.
And so what we're going to be moving very aggressively on –- even as we try to fix the current mess –- is make sure that before somebody makes a bad bet you say, hold on, you can't do that.
MR. LENO: Well, here's something that kind of scared me. Today they passed this thing that says we're going to tax 90 percent of these bonuses. And the part that scares me is, I mean, you're a good guy –- if the government decides they don't like a guy, all of a sudden, hey, we’re going to tax you and then, boom, and it passes. I mean, that seems a little scary as a taxpayer, they can just decide –- you want to take a break and answer that when we come back? Okay, hold that answer.
MR. OBAMA: I will. I've got a good answer, too. (Applause.)
MR. LENO: Welcome back. We are talking with President Barack Obama.
Before the break I mentioned that they had just passed this new bill which will tax them 90 percent -- and I said it was frightening to me as an American that Congress, whoever, could decide, I don't like that group, let's pass a law and tax them at 90 percent.
MR. OBAMA: Well, look, I understand Congress' frustrations, and they're responding to, I think, everybody's anger. But I think that the best way to handle this is to make sure that you've closed the door before the horse gets out of the barn. And what happened here was the money has already gone out and people are scrambling to try to find ways to get back at them.
The change I'd like to see in terms of tax policy is that we have a system, going back to where we were back in the 1990s, where you and I who are doing pretty well pay a little bit more to pay for health care, to pay for energy, to make sure that kids can go to college who aren't as fortunate as our -- as my kids might be. Those are the kinds of measured steps that we can take. But the important thing over the next several months is making sure that we don't lurch from thing to thing, but we try to make steady progress, build a foundation for long-term economic growth. That's what I think the American people expect. (Applause.)
MR. LENO: I just read today about Merrill Lynch. They handed out $3.6 billion -- it's not even million anymore, it's billions in bonuses. I know it would make me feel good -- shouldn't somebody go to jail?
(Laughter and applause.) I say that because I watch those people in New York, even people who had lost everything -- when Bernard Madoff went to jail, at least they felt they got something.
MR. OBAMA: Right. They got some satisfaction. Here's the dirty little secret, though. Most of the stuff that got us into trouble was perfectly legal. And that is a sign of how much we've got to change our laws -- right? We were talking earlier about credit cards, and it's legal to charge somebody 30 percent on their credit card, and charge fees and so forth that people don't always know what they're getting into. So the answer is to deal with those laws in a way that gives the average consumer a break.
When you buy a toaster, if it explodes in your face there's a law that says your toasters need to be safe. But when you get a credit card, or you get a mortgage, there's no law on the books that says if that explodes in your face financially, somehow you're going to be protected.
So this is -- the need for getting back to some common sense regulations -- there's nothing wrong with innovation in the financial markets. We want people to be successful; we want people to be able to make a profit. Banks are critical to our economy and we want credit to flow again. But we just want to make sure that there's enough regulatory common sense in place that ordinary Americans aren't taken advantage of, and taxpayers, after the fact, aren't taken advantage of. (Applause.)
MR. LENO: Yes -- because when I was a kid, we would -- banks or credit cards would lend you money so you would pay it back. Now they lend you money so you can't pay it back. (Laughter.) It's like we were talking before, I mentioned we all saw A Wonderful Life -- Mr. Potter, the meanest man -- remember he owned the whole town? You know what he charged on a mortgage? Two percent. (Laughter.)
MR. OBAMA: He's like Mother Teresa now. (Laughter.)
MR. LENO: Like Mother Teresa now. (Laughter.) He makes VISA look like ohhhh --
MR. OBAMA: Well, and part of what happened over the last 15, 20 years is that so much money was made in finance that about 40 percent, I think, of our overall growth, our overall economic growth was in the financial sector. Well, now what we're finding out is a lot of that growth wasn't real. It was paper money, paper profits on the books, but it could be easily wiped out.
And what we need is steady growth; we need young people, instead of -- a smart kid coming out of school, instead of wanting to be an investment banker, we need them to decide they want to be an engineer, they want to be a scientist, they want to be a doctor or a teacher.
And if we're rewarding those kinds of things that actually contribute to making things and making people's lives better, that's going to put our economy on solid footing. We won't have this kind of bubble-and-bust economy that we've gotten so caught up in for the last several years.
MR. LENO: Now, Treasury Secretary Geithner, he seems to be taking a little bit of heat here. How is he holding up with this? He seems like a smart guy --
MR. OBAMA: He is a smart guy and he's a calm and steady guy. I don't think people fully appreciate the plate that was handed him. This guy has not just a banking crisis; he's got the worst recession since the Great Depression, he's got an auto industry on -- that has been on the verge of collapse. We've got to figure out how to coordinate with other countries internationally. He's got to deal with me; he's got to deal with Congress. And he's doing it with grace and good humor. And he understands that he's on the hot seat, but I actually think that he is taking the right steps, and we're going to have our economy back on the move.
MR. LENO: Now, see, I love that it's all his problem. (Laughter.)
MR. OBAMA: No, no, no --
MR. LENO: -- I mean, when he came in you probably said, hey, this is not a problem. Now, it's, hey, you got this, you got that, hey, good luck. (Laughter.)
MR. OBAMA: No, no, but this is the point that I made, I think two days ago, when somebody asked, well, do you have confidence in Tim Geithner. I said, look, I'm the president, so ultimately all this stuff is my responsibility. If I'm not giving him the tools that he needs to make sure that we're moving things forward, then people need to look at me.
On the AIG thing, all these contracts were written well before I took office, but ultimately I'm now the guy who's responsible to fix it. And one of the things that I'm trying to break is a pattern in Washington where everybody is always looking for somebody else to blame. And I think Geithner is doing an outstanding job. I think that we have a big mess on our hands. It's not going to be solved immediately, but it is going to get solved. And the key thing is for everybody just to stay focused on doing the job instead of trying to figure out who you can pass blame on to.
MR. LENO: Well, when will the money -- this money was given out to the banks. I would have thought by this time it would have sort of trickled down to Main Street, to people wanting to get loans -- I mean, it all went out there months and months ago. Where is it?
MR. OBAMA: Well, what's happening is a lot of these banks are keeping it in the bank because their balance sheets had gotten so bad that they decided, you know what, for us to stay solvent we need to maintain certain capital ratios; we've got to have a certain amount of capital in the bank -- and they haven't started lending it yet. And that's why what we've got to do -- right now what we're doing is essentially doing a diagnostic test -- trying to use some auto language here so you -- (laughter) -- we're doing a diagnostic on each of the banks, figuring out what are their capital levels? Can they sustain lending? And then I think we're going to separate out -- those banks that are in good shape, we're going to say to them, all right, you're on your own; go start lending again. Those banks that still have problems, we'll do a little more intervention to try to clean some of those toxic assets off their books.
But I actually have confidence that we'll get that done. In the meantime, we're taking a lot of steps to, for example, opening up -- open up separate credit lines outside of banks for small businesses so that they can get credit -- because there are a lot of small businesses out here who are just barely hanging on. Their credit lines are starting to be cut. We're trying to set up a securitized market for student loans and auto loans outside of the banking system. So there are other ways of getting credit flowing again.
But that's why we've got to solve the banking problem and we've got to solve issues like health care, energy, and education that will put us on a pathway for long-term economic growth.
MR. LENO: We're going to take a break. When we come back I want to ask you what we can do -- (applause) -- all right, we'll take a break. We'll be right back.
MR. LENO: Welcome back. Talking with President Barack Obama. So I was going to ask you before we went to the break. So you have –- obviously we have a lot of people with a few dollars -- couple of hundred, couple of thousand -- but there's millions of them. Okay, obviously that's a tremendous financial forest. What should they do? Put their money in the bank? Should they be spending money? Should they hide it under their mattress?
MR. OBAMA: Look, first of all, everybody should have complete confidence in the banks. They're deposits are protected.
They shouldn't be putting it in their mattresses. I will leave it up to others to provide individual, personal financial advice.
But I will say this, that if you're working right now, obviously you've got to be prudent and you've got to recognize that the economy has been in a tough way. But, you know, we’ve still got kids who are going to need a coat for winter or a computer for school. You know, that young family is still going to at some point need to buy a house. And right now cars, for example, we know that typically you need about 14 million cars for this population –- and right now only 9 million are being sold every year. So at some point those inventories are going to run down and people are going to start buying cars again.
So, you know, what people should not do is forget that what has built America has always been a faith and a confidence in the future.
And our future is bright if we take some smart steps right now. And that's what we're working on in Washington. And I think if everybody stays focused on getting through these tough times, the future is going to be very bright for all of us.
MR. LENO: Now, you mentioned cars a minute ago. You went to the electric car, you went to look at some batteries today.
MR. OBAMA: I did. It's spectacular what is being down now with plug-in hybrids, where not only are you getting the hybrid technology, but now you can plug it in at home in your garage. And potentially we could see cars getting 150 miles to a gallon of gas.
And when you get home you could potentially sell the energy in your car back into the grid, back to your utility and get money.
So we’re going to be investing billions of dollars in research and development around these technologies. I know that you were mentioning you've got a hydrogen car –-
MR. LENO: I've got the GM hydrogen car. That's a whole new --
MR. OBAMA: That's a whole new level of technology. That's what's going to create the auto industry of the future. That's where we're going to win back manufacturing. But right now we’re behind.
These batteries are being made in Japan –- just like wind power is being made in Europe. We need to bring that here, and that's part of what my budget and part of what our Recovery Act is all about.
MR. LENO: Let me ask you some personal things. Now, how cool is it to fly in Air Force One? (Laughter.)
MR. OBAMA: Now, let me tell you, I personally think it's pretty cool. Especially because they give you, you know, the jacket with the seal on it. (Laughter.)
MR. LENO: Oh, yeah. See, I still get the little wings when I fly.
MR. OBAMA: So you have the jacket. I will tell you, though, Malia and Sasha, my daughters, they're just not as impressed. The first time we went on Marine One -– right, you've got the Marines in front and they're saluting you. And we go up and we're passing the Washington Monument, circling around on the way to Camp David –- and Sasha looks over and she says, "Are those Starbursts?" (Laughter.) There's, like, the candy in the little canister. (Laughter.) That's –- "Can we have some?" (Laughter.)
So they're splitting up the Starbursts and we're flying over the Lincoln Memorial. So they got a whole 'nother level of cool. (Laughter.)
MR. LENO: Now, are they going to put a basketball –- I imagine the bowling alley has been just burned and closed down.
MR. OBAMA: No, no. I have been practicing all –- (laughter.)
MR. LENO: Really? Really?
MR. OBAMA: I bowled a 129. (Laughter and applause.)
MR. LENO: No, that's very good. Yes. That's very good, Mr. President.
MR. OBAMA: It's like -- it was like Special Olympics, or something. (Laughter.)
MR. LENO: No, that's very good.
MR. OBAMA: No, listen, I'm making progress on the bowling, yes.
MR. LENO: And how about, are you going to put in a basketball court?
MR. OBAMA: Oh, yes. Yes. Well, we have a basketball court already at Camp David. We just had a little rim that was inadequate
–- (laughter) –- at the White House. But there are tennis courts, so we’re going to just get those –- you know, those rims that you can roll in and out. And then we’ll just put them on either –-
MR. LENO: Let me ask you, when people –- Mr. President, would you like to play? Yes, I would. Do they throw the game? Come on. (Laughter and applause.)
MR. OBAMA: I don’t see why they would throw the game -- except for all those Secret Service guys with guns around. (Laughter.)
MR. LENO: Yes, exactly.
MR. OBAMA: I will say that I don't think I get the hard fouls that I used to. Usually I don't –-
MR. LENO: Yes, Reggie goes, ohhh, I missed, ohhh. (Laughter.)
MR. OBAMA: Reggie doesn't do that. This is Reggie Love, my assistant. He played for Duke, very competitive guy. He doesn't let me win because, as he pointed out, if you lose to Obama you never hear the end of it. (Laughter.)
MR. LENO: See, there you go. Now, have you picked a final four?
MR. OBAMA: I did.
MR. LENO: Okay. How about your final one, who do you got?
MR. OBAMA: I got North Carolina Tar Heels. (Applause.)
MR. LENO: North Carolina.
MR. OBAMA: I think I got –- I got a hard time from Reggie, because he played at Duke, and you know, Coach K, being competitive, I think was a little –- you know, pushed back a little bit today. And I understand that. That's what you want. You want everybody to be competitive. I think these are all great teams.
MR. LENO: Like, do you look at the whole picture when you do that? For example, isn’t that a swing state? (Laughter and applause.) I'm just saying, are you looking at the whole picture when you pick?
MR. OBAMA: I mean, the fact that teams from North Carolina, Indiana, Iowa, all seem to do well in my bracket –- (laughter) –- I think is a complete coincidence. Absolutely.
MR. LENO: All right, one last question. Now, when is the dog coming? I keep hearing about the dog. It seems to me –- when was the dog supposed to be there by? I thought it was, like, as soon as --
MR. OBAMA: Listen, this is Washington –- (laughter) –- that was a campaign promise. (Laughter.)
MR. LENO: Oh, wow. Wow. Man. (Laughter and applause.)
MR. OBAMA: I'm teasing. The dog will be there shortly. (Laughter.)
MR. LENO: How soon?
MR. OBAMA: We have actually sort of been laying the groundwork here. We’ve got a trip, I've got to go to the NATO summit. When we get back, dog will be in place.
MR. LENO: Wow. And it's, what, a Portuguese water head? (Laughter.) What is it, what kind of dog is it?
MR. OBAMA: It's not that. (Laughter.)
MR. LENO: It's not that.
MR. OBAMA: It's not a "water head." (Laughter.)
MR. LENO: Whatever they are, I don't know what they are.
MR. OBAMA: That sounds like a scary dog. (Laughter.) Sort of dripping around the house. (Laughter.)
MR. LENO: I don't know what it is.
MR. OBAMA: No, no. We're going to get a dog that is –- that I think the girls will have a great time –- I think I'm going to have a lot of fun with it. You know, they say if you want a friend in Washington, get a dog. (Laughter.)
MR. LENO: Exactly. Mr. President, I must say, this has been one of the best nights of my life. Thank you very much, sir.
President of the United States. (Applause.)
Transcript
The following is a transcript of President Obama's interview on NBC's "The Tonight Show With Jay Leno," as provided by the White House.
JAY LENO The 44th President of the United States, please welcome President Barack Obama. (Applause.)
PRESIDENT OBAMA: Thank you. (Applause.)
MR. LENO. Good to see you.
MR. OBAMA: It is good to see you and –- (applause.) Thank you. Let me just say, I think Kevin looks good in a suit. (Laughter.)
MR. LENO. Thank you, sir.
MR. OBAMA: He looks a little like Secret Service. (Laughter.)
MR. LENO: He does, doesn't he? Yes. And you're the only guy who can get him to wear it. (Laughter.)
Now, you know, it's funny, because the last time you were here, you walked in, you had your jacket on your finger and you had the two guys with you.
MR. OBAMA: Right.
MR. LENO: And that was it. Big change?
MR. OBAMA: You know, I was mentioning earlier, we landed yesterday and then –- this is an example of life in the bubble. We landed at the fairground down in Costa Mesa. And I see the fairground where I think we're having this town hall and I said, well, why don't we walk over there? Secret Service says, no, sir, it's 750 yards. (Laughter.)
So I was trying to calculate –- well, that's like a five-minute walk? "Yes, sir. Sorry." (Laughter.)
Now, they let me walk on the way back. But, you know, the doctor is behind me with the defibrillator. (Laughter.)
MR. LENO: Wow.
MR. OBAMA: Michelle jokes about how our motorcade –- you know, we've got the ambulance and then the caboose and then the dog sled. (Laughter.) The submarine. (Laughter.) There's a whole bunch of stuff going on.
MR. LENO: Now it's only, what, 59 days now, right?
MR. OBAMA: Yes, 59 days.
MR. LENO: And so much scrutiny. Is it fair to judge so quickly? I mean –-
MR. OBAMA: Well, look, we are going through a difficult time. I welcome the challenge. You know, I ran for President because I thought we needed big changes. I do think in Washington it's a little bit like "American Idol," except everybody is Simon Cowell. (Laughter.)
MR. LENO: Wow. Wow. That's rough. (Applause.)
MR. OBAMA: Everybody's got an opinion. But that's part of what makes for a democracy. You know, it's contentious and people are hitting back.
I do think, though, that the American people are all in a place where they understand it took us a while to get into this mess, it's going to take a while for us to get out of it. And if they have confidence that I'm making steps to deal with issues like health care and energy and education, that matter deeply to their daily lives, then I think they're going to give us some time. (Applause.)
MR. LENO: Let me ask you about this. I know you are angry –- because, you know, doing what I do, you kind of study body language a little bit. And you looked very angry about these bonuses. Actually, stunned.
MR. OBAMA: Stunned. "Stunned" is the word.
MR. LENO: Tell people what happened. I know people have been over it, just –-
MR. OBAMA: Well, look, here's what happened. You've got a company, AIG, which used to be just a regular, old insurance company. Then they insured a whole bunch of stuff and they were very profitable and it was a good, solid company.
Then they decided –- some smart person decided, let's put a hedge fund on top of the insurance company and let's sell these derivative products to banks all around the world –- which are basically guarantees or insurance policies on all these sub-prime mortgages.
And this smart person said, you know, none of these things are going to go bust; this sub-prime thing, it's a great deal, you can make a lot of profit. So they sold a whole bunch of them –- billions and billions of dollars. And what happened is, is that when people started going bust on sub-prime mortgages you had $30 worth of debt on every dollar worth of mortgage –- and the whole house of cards just started falling down.
So the problem with AIG was that it owed so much and was tangled up with so many banks and institutions that if you had allowed it to just liquidate, to go into bankruptcy, it could have brought the whole financial system down. So it was the right thing to do to intervene in AIG.
Now, the question is, who in their right mind, when your company is going bust, decides we're going to be paying a whole bunch of bonuses to people? And that, I think, speaks to a broader culture that existed on Wall Street, where I think people just had this general attitude of entitlement, where, we must be the best and the brightest, we deserve $10 million or $50 million or $100 million dollar payouts
MR. LENO: Right.
MR. OBAMA: And, you know, the immediate bonuses that went to AIG are a problem. But the larger problem is we've got to get back to an attitude where people know enough is enough, and people have a sense of responsibility and they understand that their actions are going to have an impact on everybody. And if we can get back to those values that built America, then I think we're going to be okay.
(Applause.) MR. LENO: Well, you know, it’s interesting, when you said -– it's, like, I had to laugh the other day when the CEO of AIG said, okay, I've asked them to give half the bonuses back. Now, if you rob a bank and you go into court –- (laughter) –- and you go, Your Honor, I'm going to give you half the money back. (Laughter.) And they seem stunned that we’re not jumping at this wonderful offer.
MR. OBAMA: Well, you know, the only place I think that might work is in Hollywood. (Laughter.)
MR. LENO: Let me ask you this. Now, I heard them say, well, one of the problems is it's contractual and if we don't pay these bonuses, well, they can sue us. All the time people say, so sue me.
MR. OBAMA: So sue me, right.
MR. LENO: I mean, the federal government is in debt a trillion dollars. We're broke -- sue us. Sue me. (Laughter and applause.)
MR. OBAMA: In fairness, I think that part of the calculation they were making was the way the contracts were written said, if you don't pay us immediately, then we can claim three times as much as we were owed under the bonuses. And so they were making a legal calculation, and their legal judgment was not necessarily wrong.
But there's a moral and an ethical aspect to this, as well. And I think that's what has gotten everybody so fired up. The main thing –- we’re going to do everything we can to see if we can get these bonuses back. But I think the most important thing that we can do is make sure that we put in a bunch of financial regulatory mechanisms to prevent companies like an AIG holding the rest of us hostage. Because that's –- that's the real problem.
The problem is not just what's happened over the last six months. The problem is what was happening for years, where people were able to take huge, excessive risks with other people's money, putting the entire financial system at risk –- and there were no checks, there were no balances, there was nobody overseeing the process.
And so what we're going to be moving very aggressively on –- even as we try to fix the current mess –- is make sure that before somebody makes a bad bet you say, hold on, you can't do that.
MR. LENO: Well, here's something that kind of scared me. Today they passed this thing that says we're going to tax 90 percent of these bonuses. And the part that scares me is, I mean, you're a good guy –- if the government decides they don't like a guy, all of a sudden, hey, we’re going to tax you and then, boom, and it passes. I mean, that seems a little scary as a taxpayer, they can just decide –- you want to take a break and answer that when we come back? Okay, hold that answer.
MR. OBAMA: I will. I've got a good answer, too. (Applause.)
MR. LENO: Welcome back. We are talking with President Barack Obama.
Before the break I mentioned that they had just passed this new bill which will tax them 90 percent -- and I said it was frightening to me as an American that Congress, whoever, could decide, I don't like that group, let's pass a law and tax them at 90 percent.
MR. OBAMA: Well, look, I understand Congress' frustrations, and they're responding to, I think, everybody's anger. But I think that the best way to handle this is to make sure that you've closed the door before the horse gets out of the barn. And what happened here was the money has already gone out and people are scrambling to try to find ways to get back at them.
The change I'd like to see in terms of tax policy is that we have a system, going back to where we were back in the 1990s, where you and I who are doing pretty well pay a little bit more to pay for health care, to pay for energy, to make sure that kids can go to college who aren't as fortunate as our -- as my kids might be. Those are the kinds of measured steps that we can take. But the important thing over the next several months is making sure that we don't lurch from thing to thing, but we try to make steady progress, build a foundation for long-term economic growth. That's what I think the American people expect. (Applause.)
MR. LENO: I just read today about Merrill Lynch. They handed out $3.6 billion -- it's not even million anymore, it's billions in bonuses. I know it would make me feel good -- shouldn't somebody go to jail?
(Laughter and applause.) I say that because I watch those people in New York, even people who had lost everything -- when Bernard Madoff went to jail, at least they felt they got something.
MR. OBAMA: Right. They got some satisfaction. Here's the dirty little secret, though. Most of the stuff that got us into trouble was perfectly legal. And that is a sign of how much we've got to change our laws -- right? We were talking earlier about credit cards, and it's legal to charge somebody 30 percent on their credit card, and charge fees and so forth that people don't always know what they're getting into. So the answer is to deal with those laws in a way that gives the average consumer a break.
When you buy a toaster, if it explodes in your face there's a law that says your toasters need to be safe. But when you get a credit card, or you get a mortgage, there's no law on the books that says if that explodes in your face financially, somehow you're going to be protected.
So this is -- the need for getting back to some common sense regulations -- there's nothing wrong with innovation in the financial markets. We want people to be successful; we want people to be able to make a profit. Banks are critical to our economy and we want credit to flow again. But we just want to make sure that there's enough regulatory common sense in place that ordinary Americans aren't taken advantage of, and taxpayers, after the fact, aren't taken advantage of. (Applause.)
MR. LENO: Yes -- because when I was a kid, we would -- banks or credit cards would lend you money so you would pay it back. Now they lend you money so you can't pay it back. (Laughter.) It's like we were talking before, I mentioned we all saw A Wonderful Life -- Mr. Potter, the meanest man -- remember he owned the whole town? You know what he charged on a mortgage? Two percent. (Laughter.)
MR. OBAMA: He's like Mother Teresa now. (Laughter.)
MR. LENO: Like Mother Teresa now. (Laughter.) He makes VISA look like ohhhh --
MR. OBAMA: Well, and part of what happened over the last 15, 20 years is that so much money was made in finance that about 40 percent, I think, of our overall growth, our overall economic growth was in the financial sector. Well, now what we're finding out is a lot of that growth wasn't real. It was paper money, paper profits on the books, but it could be easily wiped out.
And what we need is steady growth; we need young people, instead of -- a smart kid coming out of school, instead of wanting to be an investment banker, we need them to decide they want to be an engineer, they want to be a scientist, they want to be a doctor or a teacher.
And if we're rewarding those kinds of things that actually contribute to making things and making people's lives better, that's going to put our economy on solid footing. We won't have this kind of bubble-and-bust economy that we've gotten so caught up in for the last several years.
MR. LENO: Now, Treasury Secretary Geithner, he seems to be taking a little bit of heat here. How is he holding up with this? He seems like a smart guy --
MR. OBAMA: He is a smart guy and he's a calm and steady guy. I don't think people fully appreciate the plate that was handed him. This guy has not just a banking crisis; he's got the worst recession since the Great Depression, he's got an auto industry on -- that has been on the verge of collapse. We've got to figure out how to coordinate with other countries internationally. He's got to deal with me; he's got to deal with Congress. And he's doing it with grace and good humor. And he understands that he's on the hot seat, but I actually think that he is taking the right steps, and we're going to have our economy back on the move.
MR. LENO: Now, see, I love that it's all his problem. (Laughter.)
MR. OBAMA: No, no, no --
MR. LENO: -- I mean, when he came in you probably said, hey, this is not a problem. Now, it's, hey, you got this, you got that, hey, good luck. (Laughter.)
MR. OBAMA: No, no, but this is the point that I made, I think two days ago, when somebody asked, well, do you have confidence in Tim Geithner. I said, look, I'm the president, so ultimately all this stuff is my responsibility. If I'm not giving him the tools that he needs to make sure that we're moving things forward, then people need to look at me.
On the AIG thing, all these contracts were written well before I took office, but ultimately I'm now the guy who's responsible to fix it. And one of the things that I'm trying to break is a pattern in Washington where everybody is always looking for somebody else to blame. And I think Geithner is doing an outstanding job. I think that we have a big mess on our hands. It's not going to be solved immediately, but it is going to get solved. And the key thing is for everybody just to stay focused on doing the job instead of trying to figure out who you can pass blame on to.
MR. LENO: Well, when will the money -- this money was given out to the banks. I would have thought by this time it would have sort of trickled down to Main Street, to people wanting to get loans -- I mean, it all went out there months and months ago. Where is it?
MR. OBAMA: Well, what's happening is a lot of these banks are keeping it in the bank because their balance sheets had gotten so bad that they decided, you know what, for us to stay solvent we need to maintain certain capital ratios; we've got to have a certain amount of capital in the bank -- and they haven't started lending it yet. And that's why what we've got to do -- right now what we're doing is essentially doing a diagnostic test -- trying to use some auto language here so you -- (laughter) -- we're doing a diagnostic on each of the banks, figuring out what are their capital levels? Can they sustain lending? And then I think we're going to separate out -- those banks that are in good shape, we're going to say to them, all right, you're on your own; go start lending again. Those banks that still have problems, we'll do a little more intervention to try to clean some of those toxic assets off their books.
But I actually have confidence that we'll get that done. In the meantime, we're taking a lot of steps to, for example, opening up -- open up separate credit lines outside of banks for small businesses so that they can get credit -- because there are a lot of small businesses out here who are just barely hanging on. Their credit lines are starting to be cut. We're trying to set up a securitized market for student loans and auto loans outside of the banking system. So there are other ways of getting credit flowing again.
But that's why we've got to solve the banking problem and we've got to solve issues like health care, energy, and education that will put us on a pathway for long-term economic growth.
MR. LENO: We're going to take a break. When we come back I want to ask you what we can do -- (applause) -- all right, we'll take a break. We'll be right back.
MR. LENO: Welcome back. Talking with President Barack Obama. So I was going to ask you before we went to the break. So you have –- obviously we have a lot of people with a few dollars -- couple of hundred, couple of thousand -- but there's millions of them. Okay, obviously that's a tremendous financial forest. What should they do? Put their money in the bank? Should they be spending money? Should they hide it under their mattress?
MR. OBAMA: Look, first of all, everybody should have complete confidence in the banks. They're deposits are protected.
They shouldn't be putting it in their mattresses. I will leave it up to others to provide individual, personal financial advice.
But I will say this, that if you're working right now, obviously you've got to be prudent and you've got to recognize that the economy has been in a tough way. But, you know, we’ve still got kids who are going to need a coat for winter or a computer for school. You know, that young family is still going to at some point need to buy a house. And right now cars, for example, we know that typically you need about 14 million cars for this population –- and right now only 9 million are being sold every year. So at some point those inventories are going to run down and people are going to start buying cars again.
So, you know, what people should not do is forget that what has built America has always been a faith and a confidence in the future.
And our future is bright if we take some smart steps right now. And that's what we're working on in Washington. And I think if everybody stays focused on getting through these tough times, the future is going to be very bright for all of us.
MR. LENO: Now, you mentioned cars a minute ago. You went to the electric car, you went to look at some batteries today.
MR. OBAMA: I did. It's spectacular what is being down now with plug-in hybrids, where not only are you getting the hybrid technology, but now you can plug it in at home in your garage. And potentially we could see cars getting 150 miles to a gallon of gas.
And when you get home you could potentially sell the energy in your car back into the grid, back to your utility and get money.
So we’re going to be investing billions of dollars in research and development around these technologies. I know that you were mentioning you've got a hydrogen car –-
MR. LENO: I've got the GM hydrogen car. That's a whole new --
MR. OBAMA: That's a whole new level of technology. That's what's going to create the auto industry of the future. That's where we're going to win back manufacturing. But right now we’re behind.
These batteries are being made in Japan –- just like wind power is being made in Europe. We need to bring that here, and that's part of what my budget and part of what our Recovery Act is all about.
MR. LENO: Let me ask you some personal things. Now, how cool is it to fly in Air Force One? (Laughter.)
MR. OBAMA: Now, let me tell you, I personally think it's pretty cool. Especially because they give you, you know, the jacket with the seal on it. (Laughter.)
MR. LENO: Oh, yeah. See, I still get the little wings when I fly.
MR. OBAMA: So you have the jacket. I will tell you, though, Malia and Sasha, my daughters, they're just not as impressed. The first time we went on Marine One -– right, you've got the Marines in front and they're saluting you. And we go up and we're passing the Washington Monument, circling around on the way to Camp David –- and Sasha looks over and she says, "Are those Starbursts?" (Laughter.) There's, like, the candy in the little canister. (Laughter.) That's –- "Can we have some?" (Laughter.)
So they're splitting up the Starbursts and we're flying over the Lincoln Memorial. So they got a whole 'nother level of cool. (Laughter.)
MR. LENO: Now, are they going to put a basketball –- I imagine the bowling alley has been just burned and closed down.
MR. OBAMA: No, no. I have been practicing all –- (laughter.)
MR. LENO: Really? Really?
MR. OBAMA: I bowled a 129. (Laughter and applause.)
MR. LENO: No, that's very good. Yes. That's very good, Mr. President.
MR. OBAMA: It's like -- it was like Special Olympics, or something. (Laughter.)
MR. LENO: No, that's very good.
MR. OBAMA: No, listen, I'm making progress on the bowling, yes.
MR. LENO: And how about, are you going to put in a basketball court?
MR. OBAMA: Oh, yes. Yes. Well, we have a basketball court already at Camp David. We just had a little rim that was inadequate
–- (laughter) –- at the White House. But there are tennis courts, so we’re going to just get those –- you know, those rims that you can roll in and out. And then we’ll just put them on either –-
MR. LENO: Let me ask you, when people –- Mr. President, would you like to play? Yes, I would. Do they throw the game? Come on. (Laughter and applause.)
MR. OBAMA: I don’t see why they would throw the game -- except for all those Secret Service guys with guns around. (Laughter.)
MR. LENO: Yes, exactly.
MR. OBAMA: I will say that I don't think I get the hard fouls that I used to. Usually I don't –-
MR. LENO: Yes, Reggie goes, ohhh, I missed, ohhh. (Laughter.)
MR. OBAMA: Reggie doesn't do that. This is Reggie Love, my assistant. He played for Duke, very competitive guy. He doesn't let me win because, as he pointed out, if you lose to Obama you never hear the end of it. (Laughter.)
MR. LENO: See, there you go. Now, have you picked a final four?
MR. OBAMA: I did.
MR. LENO: Okay. How about your final one, who do you got?
MR. OBAMA: I got North Carolina Tar Heels. (Applause.)
MR. LENO: North Carolina.
MR. OBAMA: I think I got –- I got a hard time from Reggie, because he played at Duke, and you know, Coach K, being competitive, I think was a little –- you know, pushed back a little bit today. And I understand that. That's what you want. You want everybody to be competitive. I think these are all great teams.
MR. LENO: Like, do you look at the whole picture when you do that? For example, isn’t that a swing state? (Laughter and applause.) I'm just saying, are you looking at the whole picture when you pick?
MR. OBAMA: I mean, the fact that teams from North Carolina, Indiana, Iowa, all seem to do well in my bracket –- (laughter) –- I think is a complete coincidence. Absolutely.
MR. LENO: All right, one last question. Now, when is the dog coming? I keep hearing about the dog. It seems to me –- when was the dog supposed to be there by? I thought it was, like, as soon as --
MR. OBAMA: Listen, this is Washington –- (laughter) –- that was a campaign promise. (Laughter.)
MR. LENO: Oh, wow. Wow. Man. (Laughter and applause.)
MR. OBAMA: I'm teasing. The dog will be there shortly. (Laughter.)
MR. LENO: How soon?
MR. OBAMA: We have actually sort of been laying the groundwork here. We’ve got a trip, I've got to go to the NATO summit. When we get back, dog will be in place.
MR. LENO: Wow. And it's, what, a Portuguese water head? (Laughter.) What is it, what kind of dog is it?
MR. OBAMA: It's not that. (Laughter.)
MR. LENO: It's not that.
MR. OBAMA: It's not a "water head." (Laughter.)
MR. LENO: Whatever they are, I don't know what they are.
MR. OBAMA: That sounds like a scary dog. (Laughter.) Sort of dripping around the house. (Laughter.)
MR. LENO: I don't know what it is.
MR. OBAMA: No, no. We're going to get a dog that is –- that I think the girls will have a great time –- I think I'm going to have a lot of fun with it. You know, they say if you want a friend in Washington, get a dog. (Laughter.)
MR. LENO: Exactly. Mr. President, I must say, this has been one of the best nights of my life. Thank you very much, sir.
President of the United States. (Applause.)
Tuesday, March 17, 2009
Monday, March 16, 2009
Present Perfect
BBC Learning English
Grammar Challenge
Present Perfect
Grammar Challenge
Present Perfect
Welcome to Grammar Challenge from http://www.bbclearningenglish.com/
Let’s meet this week’s challenger.
Hi, I’m Fatima…I come from Iran, and I’m studying English at university of… in London. I’m planning to stay here for two or three years. I want to study genetics or marine biology.
- Now we have a little challenge for you. You’re going to hear two people talking. Which person lives in London now? Have a listen:
- Where do you call home?
Man: I haven’t experienced many cities in my life. I’ve lived in London for 5 years and although I only moved to Glasgow two years ago, it feels like home already to me. I suppose it’s because the people are so friendly.
Woman: Well, I moved here in 2001 so I’ve lived here for 6 years and London really feels like home to me now.
Which of those two people lives in London now? The first person or the second person?
Fatima: The second person.
The second person, ok. Listen again. Both of them use the verb ‘to live’. The first person we heard said “I’ve lived in London”. What does the second person say? Just have a listen:
- I’ve lived here for 6 years.
Fatima: I’ve lived here for six years.
- ‘I’ve lived here for six years.’ And do you know what that structure is? ‘I have lived’, ‘I’ve lived here’, do you know what we call that grammatical structure? It’s not important, I’m just wondering if you do.
Fatima: No.
We call that the present perfect, the present perfect. And now over to our grammar expert Nuala who is going to tell us a little bit about this grammar topic, the present perfect.
Nuala’s Grammar Explanation
Present Perfect
Nuala: Elena used the present perfect ‘I’ve lived’. We use the present perfect when we want to talk about a period of time that starts in the past and continues until now. If the activity is completed or finished or we mentioned the exact time when something happened, we use the past simple.
Listen to Finn: ‘I’ve lived in London for 20 years.”
We use the present perfect to talk about an action that began in the past and is still continuing now, sometimes called “the unfinished past”.
- I haven’t experienced many cities in my life.
He hasn’t experienced many cities in his life. The period of time we’re talking about is his life which hasn’t finished yet.
- I’ve lived here for six years.
‘She’s lived here for six years’ means she came to London six years ago and she’s still here now.
So, to recap then: We use the present perfect to talk about an action or state that began in the past and still continues now. That’s all for me. Good luck with your grammar challenge!
Grammar Challenge
- Ok, so that’s the present perfect. Are you ready for your present perfect grammar challenge?
Fatima: Yes I’m ready.
- Ok, we’re going to talk a little bit about the actor Tom Cruise. With the prompts that I’ll give you, you have to make a true sentence about Tom. Ok here is the first one:
1. He – (honk) – acting in films – in 1981 – begin
Fatima: He began acting in films in 1991.
- 1981.
Fatima: 1981.
- Ok well done. Ok. That was the simple past.
2. He – (honk) – more than 30 movies – star
Fatima: He stars…he stars…I don’t know.
- Do you think it is present perfect or past simple?
Fatima: Past simple, I think.
- Is he making movies now?
Fatima: Still.
- So he’s still making movies. He can’t star in some more movies.
Fatima: He has starred in more than 30 movies.
- Ok well done.
3. He – (honk) – three golden globe awards – win
Fatima: He has won three golden globe awards.
- Excellent.
4. He – (honk) – in the first mission impossible film in 1996 – and use the verb ‘act’
Fatima: He acted in the first mission impossible film in 1996.
- Exactly, that. It’s simple past because we heard 1996, it’s in the past, it’s finished, it’s simple past.
5. He – three times – be married
Fatima: He married three times?
- If he was dead you could say that but he’s still alive so maybe you could…
Fatima: He’s been married three times.
- Excellent. Well done. Grammar Challenge from http://www.bbclearningenglish.com/
That completes your Grammar Challenge. Well done.
http://www.bbclearningenglish.com/
Extra information
The present perfect is essentially a present tense. Although it refers to the past , it’s the effect on the present that we’re highlighting when we use the present perfect.
He hasn’t experienced many cities in her life (his life up until now).
She’s lived in London for 6 years = She came to London 6 years ago (and she’s still here now).
Let’s meet this week’s challenger.
Hi, I’m Fatima…I come from Iran, and I’m studying English at university of… in London. I’m planning to stay here for two or three years. I want to study genetics or marine biology.
- Now we have a little challenge for you. You’re going to hear two people talking. Which person lives in London now? Have a listen:
- Where do you call home?
Man: I haven’t experienced many cities in my life. I’ve lived in London for 5 years and although I only moved to Glasgow two years ago, it feels like home already to me. I suppose it’s because the people are so friendly.
Woman: Well, I moved here in 2001 so I’ve lived here for 6 years and London really feels like home to me now.
Which of those two people lives in London now? The first person or the second person?
Fatima: The second person.
The second person, ok. Listen again. Both of them use the verb ‘to live’. The first person we heard said “I’ve lived in London”. What does the second person say? Just have a listen:
- I’ve lived here for 6 years.
Fatima: I’ve lived here for six years.
- ‘I’ve lived here for six years.’ And do you know what that structure is? ‘I have lived’, ‘I’ve lived here’, do you know what we call that grammatical structure? It’s not important, I’m just wondering if you do.
Fatima: No.
We call that the present perfect, the present perfect. And now over to our grammar expert Nuala who is going to tell us a little bit about this grammar topic, the present perfect.
Nuala’s Grammar Explanation
Present Perfect
Nuala: Elena used the present perfect ‘I’ve lived’. We use the present perfect when we want to talk about a period of time that starts in the past and continues until now. If the activity is completed or finished or we mentioned the exact time when something happened, we use the past simple.
Listen to Finn: ‘I’ve lived in London for 20 years.”
We use the present perfect to talk about an action that began in the past and is still continuing now, sometimes called “the unfinished past”.
- I haven’t experienced many cities in my life.
He hasn’t experienced many cities in his life. The period of time we’re talking about is his life which hasn’t finished yet.
- I’ve lived here for six years.
‘She’s lived here for six years’ means she came to London six years ago and she’s still here now.
So, to recap then: We use the present perfect to talk about an action or state that began in the past and still continues now. That’s all for me. Good luck with your grammar challenge!
Grammar Challenge
- Ok, so that’s the present perfect. Are you ready for your present perfect grammar challenge?
Fatima: Yes I’m ready.
- Ok, we’re going to talk a little bit about the actor Tom Cruise. With the prompts that I’ll give you, you have to make a true sentence about Tom. Ok here is the first one:
1. He – (honk) – acting in films – in 1981 – begin
Fatima: He began acting in films in 1991.
- 1981.
Fatima: 1981.
- Ok well done. Ok. That was the simple past.
2. He – (honk) – more than 30 movies – star
Fatima: He stars…he stars…I don’t know.
- Do you think it is present perfect or past simple?
Fatima: Past simple, I think.
- Is he making movies now?
Fatima: Still.
- So he’s still making movies. He can’t star in some more movies.
Fatima: He has starred in more than 30 movies.
- Ok well done.
3. He – (honk) – three golden globe awards – win
Fatima: He has won three golden globe awards.
- Excellent.
4. He – (honk) – in the first mission impossible film in 1996 – and use the verb ‘act’
Fatima: He acted in the first mission impossible film in 1996.
- Exactly, that. It’s simple past because we heard 1996, it’s in the past, it’s finished, it’s simple past.
5. He – three times – be married
Fatima: He married three times?
- If he was dead you could say that but he’s still alive so maybe you could…
Fatima: He’s been married three times.
- Excellent. Well done. Grammar Challenge from http://www.bbclearningenglish.com/
That completes your Grammar Challenge. Well done.
http://www.bbclearningenglish.com/
Extra information
The present perfect is essentially a present tense. Although it refers to the past , it’s the effect on the present that we’re highlighting when we use the present perfect.
He hasn’t experienced many cities in her life (his life up until now).
She’s lived in London for 6 years = She came to London 6 years ago (and she’s still here now).
Thursday, March 12, 2009
Will & going to
BBC Learning English Grammar Challenge
Will & going to
This is a download from the BBC. For more information go to www.bbcworldservice.com/podcasts
Welcome to Grammar Challenge from http://www.bbclearningenglish.com/. Let’s meet this week’s challenger:
Noppawan: My name is Noppawan, I come from Thailand, I came to London because I would like to study English for my Master degree and for my job in Thailand.
C: Well, hello Noppawan, thank you very much for helping us out with Grammar Challenge today. The first thing I want you to do is listen to this short conversation, you’ll hear a man and a woman. Is the man going to bed now or later?
Man: Hummm, I’m tired Mary. I think I’ll go up to bed now.
Woman: Ok dear. I’m just going to finish reading this chapter and then I’ll come right up.
Man: Ok. See you in a bit.
Woman: Ok dear. I’m just going to finish reading this chapter and then I’ll come right up.
Man: Ok. See you in a bit.
Nappowan: He’s going to bed now.
C: Exactly, he’s going to bed now. I want you to listen to a small part of that conversation again.
And this time, can you tell me how many different ways do the people use to talk about their future plans?
Man: I think I’ll go up to bed now.
Woman: I’m just going to finish reading this chapter.
Woman: I’m just going to finish reading this chapter.
Callum: So how many different ways do people talk about the future?
Nappowan: Two ways.
Callum: Ok. What are the two ways?
Nappowan: I’ll go to bed now.
Callum Ok, will.
Nappowan: I’m going to read this chapter.
C: Ok, exactly yes, we’ve heard 'will' and 'going to', exactly. And to tell us a little bit more about 'will' and 'going to' or future plans and decisions, here is Nuala.
Nuala: Today we’re looking at and contrasting two ways of talking about future plans, using 'going to' and 'will'. In an earlier program we saw that 'going to' can be used to talk about your intentions or decisions for the future. Listen:
- I’m going to get a new car.
- I’m going to visit my mother.
- I’m going to study medicine at university.
- I’m going to get a new car.
- I’m going to visit my mother.
- I’m going to study medicine at university.
'Will', on the other hand, can be used to talk about future decisions made at the moment of speaking, for things that aren’t planned. Listen:
Diarmuid: I’ll go up to bed now.
So in this example, the speaker hasn’t planned to go to bed early but because he suddenly feels tired, he decides to go to bed. Mary, on the other hand, has planned to finish part of her book so says:
Mary: I’m just going to finish reading this chapter.
'Will' is a modal form and doesn’t change whichever the subject and is followed by the infinitive
without 'to'. In English we tend to contract 'will' (I will, I’ll, you will, you’ll and so on). Listen:
Diarmuid: I’ll go up to bed now.
Mary: …then I’ll come right up.
Mary: …then I’ll come right up.
So to recap then: We can use 'going to' to talk about intentions or decisions for the future. And we can use 'will' to talk about decisions made at the moment of speaking. That’s all from me. Good luck with your Grammar Challenge:
Callum: Ok so that was Nula telling us about going to and will for future plans. Now we come to our challenge. We’re going to have a short conversation and I’ll start by telling you something and you’ll have to react maybe by telling me a plan or maybe something spontaneous. And if it’s spontaneous if it’s something that just comes to your mind, you’ll use…
Nappowan: will.
Callum: Will, ok. And if it’s something that you’ve planned?
Nappowan: It’s 'going to'.
C: So we start with an example and I might say to you…
C: Oh! Are you going to the shops? We don’t have any milk you know…
N: Yes, I’m going to the supermarket and I’ll buy some milk.
C: Good! Well done! You’re going to the supermarket because it’s already your plan and you’ll buy some milk. Excellent! That’s the right answer.
C: Ohhh…This bag is really heavy!
N: I’ll carry it…for you. I’ll carry it for you.
C: Oh, excellent. Thank you very much, yes. I’ll carry it for you. 'Will', perfect.
C: I’d love a coffee but I haven’t got any money.
N: It’s ok, I’m… going to pay for you.
C: Oh you’re going to pay for me! Ah, did you already plan to pay for me?
N: No…Ah maybe I’ll…I’ll pay for you.
C: I’ll pay for you, excellent. So it wasn’t a plan.
- Ding dong.
C: There’s someone at the door.
N: I’ll get it.
C: Excellent! I’ll get it. You’ve just made that decision.
C: Oh dear! This kitchen is a real mess! I don’t want to tidy at all.
N: Don’t worry. I’m going to clean soon.
C: Oh, excellent. You’re going to clean soon so is that a plan you had before? Or is it a plan you’ve just made?
N: A plan I had before.
C: Excellent, this is why you use 'going to'. Fantastic. Thank you very much. You’ve successfully finished your Grammar Challenge! Well done!
The Fed Didn't Cause the Housing Bubble
From The Wall Street Journal
WSJ.com
By ALAN GREENSPAN
We are in the midst of a global crisis that will unquestionably rank as the most virulent since the 1930s. It will eventually subside and pass into history. But how the interacting and reinforcing causes and effects of this severe contraction are interpreted will shape the reconfiguration of our currently disabled global financial system.
There are at least two broad and competing explanations of the origins of this crisis. The first is that the "easy money" policies of the Federal Reserve produced the U.S. housing bubble that is at the core of today's financial mess.
The second, and far more credible, explanation agrees that it was indeed lower interest rates that spawned the speculative euphoria. However, the interest rate that mattered was not the federal-funds rate, but the rate on long-term, fixed-rate mortgages. Between 2002 and 2005, home mortgage rates led U.S. home price change by 11 months. This correlation between home prices and mortgage rates was highly significant, and a far better indicator of rising home prices than the fed-funds rate.
This should not come as a surprise. After all, the prices of long-lived assets have always been determined by discounting the flow of income (or imputed services) by interest rates of the same maturities as the life of the asset. No one, to my knowledge, employs overnight interest rates -- such as the fed-funds rate -- to determine the capitalization rate of real estate, whether it be an office building or a single-family residence.
The Federal Reserve became acutely aware of the disconnect between monetary policy and mortgage rates when the latter failed to respond as expected to the Fed tightening in mid-2004. Moreover, the data show that home mortgage rates had become gradually decoupled from monetary policy even earlier -- in the wake of the emergence, beginning around the turn of this century, of a well arbitraged global market for long-term debt instruments.
U.S. mortgage rates' linkage to short-term U.S. rates had been close for decades. Between 1971 and 2002, the fed-funds rate and the mortgage rate moved in lockstep. The correlation between them was a tight 0.85. Between 2002 and 2005, however, the correlation diminished to insignificance.
As I noted on this page in December 2007, the presumptive cause of the world-wide decline in long-term rates was the tectonic shift in the early 1990s by much of the developing world from heavy emphasis on central planning to increasingly dynamic, export-led market competition. The result was a surge in growth in China and a large number of other emerging market economies that led to an excess of global intended savings relative to intended capital investment. That ex ante excess of savings propelled global long-term interest rates progressively lower between early 2000 and 2005.
That decline in long-term interest rates across a wide spectrum of countries statistically explains, and is the most likely major cause of, real-estate capitalization rates that declined and converged across the globe, resulting in the global housing price bubble. (The U.S. price bubble was at, or below, the median according to the International Monetary Fund.) By 2006, long-term interest rates and the home mortgage rates driven by them, for all developed and the main developing economies, had declined to single digits -- I believe for the first time ever. I would have thought that the weight of such evidence would lead to wide support for this as a global explanation of the current crisis.
However, starting in mid-2007, history began to be rewritten, in large part by my good friend and former colleague, Stanford University Professor John Taylor, with whom I have rarely disagreed. Yet writing in these pages last month, Mr. Taylor unequivocally claimed that had the Federal Reserve from 2003-2005 kept short-term interest rates at the levels implied by his "Taylor Rule," "it would have prevented this housing boom and bust. "This notion has been cited and repeated so often that it has taken on the aura of conventional wisdom.
Aside from the inappropriate use of short-term rates to explain the value of long-term assets, his statistical indictment of Federal Reserve policy in the period 2003-2005 fails to address the aforementioned extraordinary structural developments in the global economy. His statistical analysis carries empirical relationships of earlier decades into the most recent period where they no longer apply.
Moreover, while I believe the "Taylor Rule" is a useful first approximation to the path of monetary policy, its parameters and predictions derive from model structures that have been consistently unable to anticipate the onset of recessions or financial crises. Counterfactuals from such flawed structures cannot form the sole basis for successful policy analysis or advice, with or without the benefit of hindsight.
Given the decoupling of monetary policy from long-term mortgage rates, accelerating the path of monetary tightening that the Fed pursued in 2004-2005 could not have "prevented" the housing bubble. All things considered, I personally prefer Milton Friedman's performance appraisal of the Federal Reserve. In evaluating the period of 1987 to 2005, he wrote on this page in early 2006: "There is no other period of comparable length in which the Federal Reserve System has performed so well. It is more than a difference of degree; it approaches a difference of kind."
How much does it matter whether the bubble was caused by inappropriate monetary policy, over which policy makers have control, or broader global forces over which their control is limited? A great deal.
If it is monetary policy that is at fault, then that can be corrected in the future, at least in principle. If, however, we are dealing with global forces beyond the control of domestic monetary policy makers, as I strongly suspect is the case, then we are facing a broader issue.
Global market competition and integration in goods, services and finance have brought unprecedented gains in material well being. But the growth path of highly competitive markets is cyclical. And on rare occasions it can break down, with consequences such as those we are currently experiencing. It is now very clear that the levels of complexity to which market practitioners at the height of their euphoria tried to push risk-management techniques and products were too much for even the most sophisticated market players to handle properly and prudently.
However, the appropriate policy response is not to bridle financial intermediation with heavy regulation. That would stifle important advances in finance that enhance standards of living. Remember, prior to the crisis, the U.S. economy exhibited an impressive degree of productivity advance. To achieve that with a modest level of combined domestic and borrowed foreign savings (our current account deficit) was a measure of our financial system's precrisis success. The solutions for the financial-market failures revealed by the crisis are higher capital requirements and a wider prosecution of fraud -- not increased micromanagement by government entities.
Any new regulations should improve the ability of financial institutions to effectively direct a nation's savings into the most productive capital investments. Much regulation fails that test, and is often costly and counterproductive. Adequate capital and collateral requirements can address the weaknesses that the crisis has unearthed. Such requirements will not be overly intrusive, and thus will not interfere unduly in private-sector business decisions.
If we are to retain a dynamic world economy capable of producing prosperity and future sustainable growth, we cannot rely on governments to intermediate saving and investment flows. Our challenge in the months ahead will be to install a regulatory regime that will ensure responsible risk management on the part of financial institutions, while encouraging them to continue taking the risks necessary and inherent in any successful market economy.
Mr. Greenspan, former chairman of the Federal Reserve, is president of Greenspan Associates LLC and author of "The Age of Turbulence: Adventures in a New World" (Penguin, 2007).
WSJ.com
By ALAN GREENSPAN
We are in the midst of a global crisis that will unquestionably rank as the most virulent since the 1930s. It will eventually subside and pass into history. But how the interacting and reinforcing causes and effects of this severe contraction are interpreted will shape the reconfiguration of our currently disabled global financial system.
There are at least two broad and competing explanations of the origins of this crisis. The first is that the "easy money" policies of the Federal Reserve produced the U.S. housing bubble that is at the core of today's financial mess.
The second, and far more credible, explanation agrees that it was indeed lower interest rates that spawned the speculative euphoria. However, the interest rate that mattered was not the federal-funds rate, but the rate on long-term, fixed-rate mortgages. Between 2002 and 2005, home mortgage rates led U.S. home price change by 11 months. This correlation between home prices and mortgage rates was highly significant, and a far better indicator of rising home prices than the fed-funds rate.
This should not come as a surprise. After all, the prices of long-lived assets have always been determined by discounting the flow of income (or imputed services) by interest rates of the same maturities as the life of the asset. No one, to my knowledge, employs overnight interest rates -- such as the fed-funds rate -- to determine the capitalization rate of real estate, whether it be an office building or a single-family residence.
The Federal Reserve became acutely aware of the disconnect between monetary policy and mortgage rates when the latter failed to respond as expected to the Fed tightening in mid-2004. Moreover, the data show that home mortgage rates had become gradually decoupled from monetary policy even earlier -- in the wake of the emergence, beginning around the turn of this century, of a well arbitraged global market for long-term debt instruments.
U.S. mortgage rates' linkage to short-term U.S. rates had been close for decades. Between 1971 and 2002, the fed-funds rate and the mortgage rate moved in lockstep. The correlation between them was a tight 0.85. Between 2002 and 2005, however, the correlation diminished to insignificance.
As I noted on this page in December 2007, the presumptive cause of the world-wide decline in long-term rates was the tectonic shift in the early 1990s by much of the developing world from heavy emphasis on central planning to increasingly dynamic, export-led market competition. The result was a surge in growth in China and a large number of other emerging market economies that led to an excess of global intended savings relative to intended capital investment. That ex ante excess of savings propelled global long-term interest rates progressively lower between early 2000 and 2005.
That decline in long-term interest rates across a wide spectrum of countries statistically explains, and is the most likely major cause of, real-estate capitalization rates that declined and converged across the globe, resulting in the global housing price bubble. (The U.S. price bubble was at, or below, the median according to the International Monetary Fund.) By 2006, long-term interest rates and the home mortgage rates driven by them, for all developed and the main developing economies, had declined to single digits -- I believe for the first time ever. I would have thought that the weight of such evidence would lead to wide support for this as a global explanation of the current crisis.
However, starting in mid-2007, history began to be rewritten, in large part by my good friend and former colleague, Stanford University Professor John Taylor, with whom I have rarely disagreed. Yet writing in these pages last month, Mr. Taylor unequivocally claimed that had the Federal Reserve from 2003-2005 kept short-term interest rates at the levels implied by his "Taylor Rule," "it would have prevented this housing boom and bust. "This notion has been cited and repeated so often that it has taken on the aura of conventional wisdom.
Aside from the inappropriate use of short-term rates to explain the value of long-term assets, his statistical indictment of Federal Reserve policy in the period 2003-2005 fails to address the aforementioned extraordinary structural developments in the global economy. His statistical analysis carries empirical relationships of earlier decades into the most recent period where they no longer apply.
Moreover, while I believe the "Taylor Rule" is a useful first approximation to the path of monetary policy, its parameters and predictions derive from model structures that have been consistently unable to anticipate the onset of recessions or financial crises. Counterfactuals from such flawed structures cannot form the sole basis for successful policy analysis or advice, with or without the benefit of hindsight.
Given the decoupling of monetary policy from long-term mortgage rates, accelerating the path of monetary tightening that the Fed pursued in 2004-2005 could not have "prevented" the housing bubble. All things considered, I personally prefer Milton Friedman's performance appraisal of the Federal Reserve. In evaluating the period of 1987 to 2005, he wrote on this page in early 2006: "There is no other period of comparable length in which the Federal Reserve System has performed so well. It is more than a difference of degree; it approaches a difference of kind."
How much does it matter whether the bubble was caused by inappropriate monetary policy, over which policy makers have control, or broader global forces over which their control is limited? A great deal.
If it is monetary policy that is at fault, then that can be corrected in the future, at least in principle. If, however, we are dealing with global forces beyond the control of domestic monetary policy makers, as I strongly suspect is the case, then we are facing a broader issue.
Global market competition and integration in goods, services and finance have brought unprecedented gains in material well being. But the growth path of highly competitive markets is cyclical. And on rare occasions it can break down, with consequences such as those we are currently experiencing. It is now very clear that the levels of complexity to which market practitioners at the height of their euphoria tried to push risk-management techniques and products were too much for even the most sophisticated market players to handle properly and prudently.
However, the appropriate policy response is not to bridle financial intermediation with heavy regulation. That would stifle important advances in finance that enhance standards of living. Remember, prior to the crisis, the U.S. economy exhibited an impressive degree of productivity advance. To achieve that with a modest level of combined domestic and borrowed foreign savings (our current account deficit) was a measure of our financial system's precrisis success. The solutions for the financial-market failures revealed by the crisis are higher capital requirements and a wider prosecution of fraud -- not increased micromanagement by government entities.
Any new regulations should improve the ability of financial institutions to effectively direct a nation's savings into the most productive capital investments. Much regulation fails that test, and is often costly and counterproductive. Adequate capital and collateral requirements can address the weaknesses that the crisis has unearthed. Such requirements will not be overly intrusive, and thus will not interfere unduly in private-sector business decisions.
If we are to retain a dynamic world economy capable of producing prosperity and future sustainable growth, we cannot rely on governments to intermediate saving and investment flows. Our challenge in the months ahead will be to install a regulatory regime that will ensure responsible risk management on the part of financial institutions, while encouraging them to continue taking the risks necessary and inherent in any successful market economy.
Mr. Greenspan, former chairman of the Federal Reserve, is president of Greenspan Associates LLC and author of "The Age of Turbulence: Adventures in a New World" (Penguin, 2007).
McDonald's Seeks Way to Keep Sizzling
From The Wall Street JournalWSJ.com
By JANET ADAMY
OAK BROOK, Ill. -- McDonald's Corp. has been one of the world's most successful big companies during this recession. On Monday, the fast-food giant posted February sales results that most chains would envy.
But the worsening global economy has McDonald's preparing for a more difficult year. The strengthening U.S. dollar is knocking the wind out of McDonald's profit-generating power. While Americans are flocking to McDonald's as a cheap alternative to sit-down meals, that's not the case in some parts of Europe and Asia.
A McDonald's outlet in Shenyang, in northeast China's Liaoning province last month. Some China locations recently cut certain combo meal prices.
But the worsening global economy has McDonald's preparing for a more difficult year. The strengthening U.S. dollar is knocking the wind out of McDonald's profit-generating power. While Americans are flocking to McDonald's as a cheap alternative to sit-down meals, that's not the case in some parts of Europe and Asia.
A McDonald's outlet in Shenyang, in northeast China's Liaoning province last month. Some China locations recently cut certain combo meal prices.
How McDonald's tackles these challenges falls to Ralph Alvarez, a Cuban-born former accountant who is McDonald's president and chief operating officer. Mr. Alvarez, 53 years old, has helped the Golden Arches extend a six-year success streak with his focus on improving restaurant operations, adjusting prices and keeping down costs. He is widely expected to succeed Chief Executive Jim Skinner once the 64-year-old retires.
Mr. Alvarez is pruning gas-guzzling cars from the company fleet, pressing media buyers to negotiate lower advertising rates and putting the brakes on building new outlets on street corners where nearby development shows signs of weakness. At the same time, he's overseeing big investments in the most promising aspects of McDonald's business -- coffee drinks that compete with Starbucks and improved drive-through windows that increase sales and efficiency. To check on operations, he disguises himself in a baseball cap and sunglasses and visits McDonald's outlets unannounced.
In February, McDonald's same-store sales world-wide increased 5.4%, after stripping out a calendar shift from last year's leap year. By that measure, U.S. same-store sales rose 6.8%, while sales in Europe increased 4% and rose 4.1% in the region that includes Asia Pacific, the Middle East and Africa.
Strong U.K. sales were partially offset by Germany, while gains in Australia and Japan were somewhat offset by China. The company said Monday that a significant decline in currencies in Eastern Europe will hurt first-quarter results. In places like Russia, such weakness is making it more expensive to import ingredients. About two-thirds of McDonald's revenues come from outside the U.S.
McDonald's Alvarez
Journal reporter Janet Adamy sat down with Ralph Alvarez, McDonald's president and chief operating officer, to talk about the company's strategy during a recession and more. Read edited excerpts from the interview.
While McDonald's was one of only two Dow Jones Industrial Average stocks that ended 2008 with a gain (the other was Wal-Mart Stores Inc.), its shares have crept downward this year. Shares of McDonald's rose 20 cents, or 0.4%, to close at $52.32 in 4 p.m. trading Monday. Although cheap prices help draw guests in tough times, Mr. Alvarez insists the economic downturn hasn't been a boon for the company.
"It's such a misnomer that we're doing well because of that," he said in an interview at his office here last month.
Mr. Alvarez's high profile at McDonald's is partly the result of a shift in the way the company thinks about succession planning. Earlier this decade, McDonald's lost two chief executives when one died of an apparent heart attack and the other stepped down to fight cancer and died shortly after. Since then, managers at all levels have made grooming their successors a top priority, with McDonald's directors devoting one board meeting each year to succession planning.
Mr. Skinner says he has no plans to retire in the near future, and Mr. Alvarez downplays suggestions that he's the top candidate to succeed him. "There's a bunch of us that could do that job" once Mr. Skinner retires, Mr. Alvarez says. Franchisees, analysts and other people close to the company agree Mr. Alvarez appears the mostly likely successor.
McDonald's has been on a roll since 2003, when, to get out of a slump, it halted rapid expansion and instead focused on improving the food, service, atmosphere and marketing at its existing outlets. The result has been a broader menu that features items ranging from salads topped with poblano peppers to a Southern-style chicken biscuit served at breakfast, and restaurants adorned with leather seats and flat-screen television sets. McDonald's 32,000 outlets -- 14,000 of which are in the U.S. -- now feed 58 million customers a day, or two million more than a year ago.
As the global economy worsens, executives are trying to prepare for what Mr. Alvarez calls the "what ifs" that come with an uncertain environment. After several years of developing higher-priced products, such as specialty salads, the company is putting more emphasis on creating and marketing lower-priced items, and it's implementing computerized systems in more outlets that allow restaurants to adjust prices based on customer demand. In China, some restaurants recently cut the price of certain combo meals at lunch by as much as one-third.
Behind the effort is an increased focus on examining reams of customer data measuring everything from whether customers are trading down to smaller value meals or dropping Cokes from their orders to exactly how much they're willing to pay for a Big Mac. "I love numbers," Mr. Alvarez says. "I think data used well really tells a story."
Raul Alvarez, as he was named at birth, was born in Havana and left with his family at age 5 after Fidel Castro took power. He grew up in Miami wanting to be a physical-education teacher. An uncle encouraged him to get an accounting degree, and after working for the firm now known as Deloitte, he landed a job as a budget analyst for Miami-based Burger King.
McDonald's President Ralph Alvarez
In the late 1980s, Mr. Alvarez twice tried to get hired at McDonald's, "but I couldn't get in the door," he says, since the company mostly promotes from within. He went on to work for rival Wendy's International Inc.
In 1994, McDonald's hired and trained him for a post as a regional manager, partly, he says, because the company wanted more Hispanics in management jobs. While it takes most McDonald's managers decades to climb through the ranks, Mr. Alvarez ascended to the No. 2 spot by 2006. Associates cite his competitive nature and focus on tangible results as reasons he's excelled.
By last year, soaring commodity costs were putting intense pressure on McDonald's. Restaurant franchisees complained that the high cost of beef, cheese, buns and other ingredients, combined with a rising minimum wage and high energy costs, had flattened their profits. Some owners balked at making expensive investments to expand their beverage offerings to include lattes, smoothies and bottled drinks.
To find solutions to problems like these, Mr. Alvarez spends most of his time traveling to McDonald's outlets in 118 countries, sometimes staying at the homes of executives or franchisees. The night before his official meetings, he slips on a baseball cap and sunglasses so he can visit McDonald's restaurants incognito to see whether service is fast enough in the drive-through window and employees are being friendly, says Tom Moroch, owner of an advertising agency that creates campaigns for McDonald's.
"He's really the eyes and ears for me around the world," says Mr. Skinner, who is also the company's vice chairman. Unlike Mr. Skinner, a caustic Iowa native who sometimes bristles in the limelight, Mr. Alvarez appears more at ease in front of large groups of workers and is known for having a warmer personality.
"When Jim became the CEO, part of his style was to get good people in the job and give them room to run," McDonald's Chairman Andrew McKenna says.
Despite the high commodity costs, McDonald's posted strong profits last year.
Over the summer, Mr. Alvarez met with each department at headquarters and went through their spending seeking to trim costs. He told workers to cut travel and instead hold meetings at the company's Hamburger University in suburban Chicago. Employees who get company cars could no longer select gas-guzzling vehicles, and those that already had them must pay a higher personal-usage fee.
Toward the fall, when McDonald's began negotiations for the following year's TV advertising spots, Mr. Alvarez heard that networks were cutting deals with auto makers for lower rates because the car companies faced dire straits. "The hair on my back went up right away," he says. Mr. Alvarez says he pressed the company's media buyers to seek better rates. "We should not allow somebody else to get a competitive advantage," he says, adding that McDonald's was successful in getting better deals.
By October, Mr. Alvarez and 30 other company leaders had finalized a three-year strategic plan. But as the global financial crisis spread, the group reconvened in December.
Mr. Alvarez is pruning gas-guzzling cars from the company fleet, pressing media buyers to negotiate lower advertising rates and putting the brakes on building new outlets on street corners where nearby development shows signs of weakness. At the same time, he's overseeing big investments in the most promising aspects of McDonald's business -- coffee drinks that compete with Starbucks and improved drive-through windows that increase sales and efficiency. To check on operations, he disguises himself in a baseball cap and sunglasses and visits McDonald's outlets unannounced.
In February, McDonald's same-store sales world-wide increased 5.4%, after stripping out a calendar shift from last year's leap year. By that measure, U.S. same-store sales rose 6.8%, while sales in Europe increased 4% and rose 4.1% in the region that includes Asia Pacific, the Middle East and Africa.
Strong U.K. sales were partially offset by Germany, while gains in Australia and Japan were somewhat offset by China. The company said Monday that a significant decline in currencies in Eastern Europe will hurt first-quarter results. In places like Russia, such weakness is making it more expensive to import ingredients. About two-thirds of McDonald's revenues come from outside the U.S.
McDonald's Alvarez
Journal reporter Janet Adamy sat down with Ralph Alvarez, McDonald's president and chief operating officer, to talk about the company's strategy during a recession and more. Read edited excerpts from the interview.
While McDonald's was one of only two Dow Jones Industrial Average stocks that ended 2008 with a gain (the other was Wal-Mart Stores Inc.), its shares have crept downward this year. Shares of McDonald's rose 20 cents, or 0.4%, to close at $52.32 in 4 p.m. trading Monday. Although cheap prices help draw guests in tough times, Mr. Alvarez insists the economic downturn hasn't been a boon for the company.
"It's such a misnomer that we're doing well because of that," he said in an interview at his office here last month.
Mr. Alvarez's high profile at McDonald's is partly the result of a shift in the way the company thinks about succession planning. Earlier this decade, McDonald's lost two chief executives when one died of an apparent heart attack and the other stepped down to fight cancer and died shortly after. Since then, managers at all levels have made grooming their successors a top priority, with McDonald's directors devoting one board meeting each year to succession planning.
Mr. Skinner says he has no plans to retire in the near future, and Mr. Alvarez downplays suggestions that he's the top candidate to succeed him. "There's a bunch of us that could do that job" once Mr. Skinner retires, Mr. Alvarez says. Franchisees, analysts and other people close to the company agree Mr. Alvarez appears the mostly likely successor.
McDonald's has been on a roll since 2003, when, to get out of a slump, it halted rapid expansion and instead focused on improving the food, service, atmosphere and marketing at its existing outlets. The result has been a broader menu that features items ranging from salads topped with poblano peppers to a Southern-style chicken biscuit served at breakfast, and restaurants adorned with leather seats and flat-screen television sets. McDonald's 32,000 outlets -- 14,000 of which are in the U.S. -- now feed 58 million customers a day, or two million more than a year ago.
As the global economy worsens, executives are trying to prepare for what Mr. Alvarez calls the "what ifs" that come with an uncertain environment. After several years of developing higher-priced products, such as specialty salads, the company is putting more emphasis on creating and marketing lower-priced items, and it's implementing computerized systems in more outlets that allow restaurants to adjust prices based on customer demand. In China, some restaurants recently cut the price of certain combo meals at lunch by as much as one-third.
Behind the effort is an increased focus on examining reams of customer data measuring everything from whether customers are trading down to smaller value meals or dropping Cokes from their orders to exactly how much they're willing to pay for a Big Mac. "I love numbers," Mr. Alvarez says. "I think data used well really tells a story."
Raul Alvarez, as he was named at birth, was born in Havana and left with his family at age 5 after Fidel Castro took power. He grew up in Miami wanting to be a physical-education teacher. An uncle encouraged him to get an accounting degree, and after working for the firm now known as Deloitte, he landed a job as a budget analyst for Miami-based Burger King.
McDonald's President Ralph Alvarez
In the late 1980s, Mr. Alvarez twice tried to get hired at McDonald's, "but I couldn't get in the door," he says, since the company mostly promotes from within. He went on to work for rival Wendy's International Inc.
In 1994, McDonald's hired and trained him for a post as a regional manager, partly, he says, because the company wanted more Hispanics in management jobs. While it takes most McDonald's managers decades to climb through the ranks, Mr. Alvarez ascended to the No. 2 spot by 2006. Associates cite his competitive nature and focus on tangible results as reasons he's excelled.
By last year, soaring commodity costs were putting intense pressure on McDonald's. Restaurant franchisees complained that the high cost of beef, cheese, buns and other ingredients, combined with a rising minimum wage and high energy costs, had flattened their profits. Some owners balked at making expensive investments to expand their beverage offerings to include lattes, smoothies and bottled drinks.
To find solutions to problems like these, Mr. Alvarez spends most of his time traveling to McDonald's outlets in 118 countries, sometimes staying at the homes of executives or franchisees. The night before his official meetings, he slips on a baseball cap and sunglasses so he can visit McDonald's restaurants incognito to see whether service is fast enough in the drive-through window and employees are being friendly, says Tom Moroch, owner of an advertising agency that creates campaigns for McDonald's.
"He's really the eyes and ears for me around the world," says Mr. Skinner, who is also the company's vice chairman. Unlike Mr. Skinner, a caustic Iowa native who sometimes bristles in the limelight, Mr. Alvarez appears more at ease in front of large groups of workers and is known for having a warmer personality.
"When Jim became the CEO, part of his style was to get good people in the job and give them room to run," McDonald's Chairman Andrew McKenna says.
Despite the high commodity costs, McDonald's posted strong profits last year.
Over the summer, Mr. Alvarez met with each department at headquarters and went through their spending seeking to trim costs. He told workers to cut travel and instead hold meetings at the company's Hamburger University in suburban Chicago. Employees who get company cars could no longer select gas-guzzling vehicles, and those that already had them must pay a higher personal-usage fee.
Toward the fall, when McDonald's began negotiations for the following year's TV advertising spots, Mr. Alvarez heard that networks were cutting deals with auto makers for lower rates because the car companies faced dire straits. "The hair on my back went up right away," he says. Mr. Alvarez says he pressed the company's media buyers to seek better rates. "We should not allow somebody else to get a competitive advantage," he says, adding that McDonald's was successful in getting better deals.
By October, Mr. Alvarez and 30 other company leaders had finalized a three-year strategic plan. But as the global financial crisis spread, the group reconvened in December.
Managers decided they must make sure no restaurants shrank the size of products in order to cut costs. They looked more closely at the markets near the 1,000 outlets McDonald's plans to build this year and decided not to go through with some of them if, for instance, a nearby shopping center had fallen through.
By the start of this year, Mr. Alvarez was pressing managers across the world to more closely monitor labor, food and utility costs. One of his top concerns is that stores will reduce staffing so much that they will end up being understaffed for peak periods. As monthly financial reports came out, Mr. Alvarez would sometimes rise at 3 a.m. for sessions where he studied the numbers and reviewed them with managers world-wide.
"It's a feeling that self confidence is our worst enemy," says Denis Hennequin, president of McDonald's Europe.
In the U.K., Mr. Alvarez directed management to examine changes in consumer buying patterns at McDonald's, customer traffic for competitors and general economic data such as projected unemployment rates. Instead of looking at the data twice a year, as U.K. managers had been doing, they're now examining it every two weeks. Taking their cues from the data, McDonald's began running more advertisements for its Little Tasters menu, which includes a small burger on a ciabatta bun that sells for £1.49, or about $2.
Meanwhile, Mr. Alvarez is pushing more restaurants to implement systems that allow each location to price items more in line with demand. During previous periods of inflation, Mr. Alvarez says, restaurants simply raised the price of large sandwiches by 10 cents and the price of small sandwiches, french fries and drinks by five cents. Now, one restaurant may boost the price of an item by three cents while another only adds a penny.
Don Armstrong, a franchisee who owns 14 outlets in Oregon, says he's more careful about raising prices at outlets in economically depressed areas than at ones in more affluent areas. "It doesn't do you any good to raise prices if you lose customers," says Mr. Armstrong, chairman of a council that represents U.S. franchisees.
McDonald's executives say that promoting lower-priced items and products perceived as a good value will be a top priority this year, and restaurants may have to settle for lower profit margins. But McDonald's franchisees, who operate 80% of the company's outlets, say that's getting more difficult because of rising costs and mandates from the company to buy equipment.
In a meeting with McDonald's management last month, franchisees complained their cash flow was only slightly positive last year -- a disappointment given the company's strong sales. "It's not a sustainable model," says franchisee Reggie Webb.
McDonald's executives say they're adding features that will increase sales. Mr. Alvarez showed off a self-service kiosk where customers can place orders electronically. He recently watched customers use kiosks at a McDonald's in Tours, France.
Mr. Alvarez says a top complaint of French customers about McDonald's is that they feel pressured to order, which keeps some families from coming in. Ordering at a kiosk, he says, "allows them to either control their kids or control their order."
Tuesday, March 3, 2009
by the way
You can use "by the way" when you want to introduce a new subject in the conversation or when you want to give more information about a subject.
- Is this one any good?
- This is the largest and, by the way, the most expensive one we have in stock.
- I'm a realtor. Is your house for sale?
- My house is not for sale, and, by the way, I am a realtor too.
- Oh, by the way, do you still have that hammer you borrowed from me?
- I'll check. I thought I gave it back.
- By the by, don't you owe me some money?
- Who, me?
- Ok I think we've discussed everything, by the way, what time is it?
- Yeah welcome to the company and by the way, my name is Julie.
- Is this one any good?
- This is the largest and, by the way, the most expensive one we have in stock.
- I'm a realtor. Is your house for sale?
- My house is not for sale, and, by the way, I am a realtor too.
- Oh, by the way, do you still have that hammer you borrowed from me?
- I'll check. I thought I gave it back.
- By the by, don't you owe me some money?
- Who, me?
- Ok I think we've discussed everything, by the way, what time is it?
- Yeah welcome to the company and by the way, my name is Julie.
Subscribe to:
Posts (Atom)