(CNN Student News) -- April 28, 2010
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CARL AZUZ, CNN STUDENT NEWS ANCHOR: How long can you sit on a plane without it taking off? The government has something to say about that subject. The story's coming up in just a few minutes. I'm Carl Azuz. CNN Student News starts right now!
AZUZ: First up, a hearing gets heated on Capitol Hill over one company's role in the financial crisis. Goldman Sachs is, essentially, a bank. And it's been one of the most successful companies on Wall Street for decades. Just like a lot of banks, it took a major hit from the recession and needed help from the government -- a bailout -- in order for it to stay in business. Goldman's been paying that money back.
Now, some lawmakers are questioning Goldman about whether it had a role in the recession. During a Senate hearing yesterday, some of those questions got pretty tough. One senator accused Goldman of serving itself instead of its clients. Company executives insist that they did nothing wrong. That is just part of the controversy surrounding Goldman Sachs right now. Christine Romans has more for us on who and what are involved. Christine?
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Carl, this case is about the big housing crash, big money and, of course, big politics. The government agency called the Securities and Exchange Commission has charged one of the most powerful banks on Wall Street, Goldman Sachs, with fraud. The case is complicated, so before we go any further, let's look at the main characters of this story. First, the SEC, or the Securities and Exchange Commission. It is a government agency in charge of regulating Wall Street and protecting investors. Then, there's that investment bank, Goldman Sachs, one of the most profitable and revered players on Wall Street. Goldman Sachs earns money by making its own investments and by helping clients, usually other companies or pension funds or even governments, putting together their own deals. And a third character in this story, billionaire investor John Paulson.
So what happened here? The SEC says that Goldman Sachs misled its clients by selling them an investment product comprised of very bad mortgages. It allegedly didn't tell the clients that the product was put together by John Paulson, the billionaire, who hand-picked the mortgages and specifically wanted the product to go south. At the end, investors lost $1 billion and Paulson made $1 billion. Well, who cares? Well, Goldman Sachs is accused of misleading those clients, and that is something that the SEC says is a problem. And Goldman Sachs denies those charges, by the way. The company said in a statement, "The SEC's charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation." John Paulson also says that his role in the deal was "appropriate and conducted in good faith."
To make the story even more interesting and more complicated, the SEC is now in a little bit of hot water, too. Some Republicans have implied that the agency may have timed these charges against Goldman Sachs to help pass the financial reform legislation, a big issue on Capitol Hill these days, which all Republicans currently oppose. The Securities and Exchange Commission defends its impartiality. But investigation of the investigation is now underway. On Tuesday, executives from Goldman Sachs were on Capitol Hill to answer questions from lawmakers separately. Stay tuned for more news on this case. Carl?
AZUZ: Thank you, Christine. In that report, you heard Ms. Romans mention "financial reform legislation." This is something we've talked about before. Congress is looking at ways to make some changes on Wall Street to try to avoid another financial crisis. The Senate is debating how to move forward on that bill. In the meantime, if you want to learn a little bit more about it, head to the Spotlight section on our home page. You will find an FAQ about the financial reform bill, how it might work, what parts of it Democrats and Republicans agree on. It's all right there in the Spotlight section at CNNStudentNews.com.
Word to the Wise
TOMEKA JONES, CNN STUDENT NEWS: A Word to the Wise...
tarmac (noun) a road, especially an airport runway, that's paved with tar
AZUZ: A new rule about how long planes can sit on the tarmac with passengers on board is scheduled to go into effect tomorrow. How long is too long? According to the U.S. government, anything over three hours. Airlines that hold planes longer than that could face a fine of up to $27,000 per passenger. Transportation Secretary Ray LaHood says passengers who are on delayed flights that are stuck on the tarmac "have a right to know they will not be held aboard a plane indefinitely." A few years ago, there were several reports of planes waiting for takeoff for more than 10 hours. That's part of what led to this new rule. Airlines have said they'll do their best to meet the rule. The head of the Air Travelers Association saying it could lead to more inconvenience for customers. He argues airlines are more likely to cancel flights to avoid fines, and he says the rule puts a time deadline on safety-related activities.
U.S. Auto Makers
AZUZ: Switching gears from planes to cars. The recession hit U.S. car companies pretty hard, but things seem to be getting a little bit better. First, Ford. So far this year, the company has made over $2 billion. To compare, by this time last year, Ford had lost almost a billion and a half. The only part of the world where Ford made a profit last year was in South America. Now, it's making money in every region around the globe. But the company says keeping this pace might be hard, because the cost of the materials that Ford uses to make its vehicles is going up.
Over at General Motors, plans are underway to upgrade five of the company's auto plants. The goal would be for these locations to build what GM calls a "new generation" of fuel-efficient engines. And that could lead to new jobs; about 1,600 of them, according to GM. General Motors has cut about 34,000 jobs from its work force since the end of 2008.
MATT CHERRY, CNN STUDENT NEWS: Today's Shoutout goes out to Mr. Levang's global studies class at Scott Highlands Middle School in Apple Valley, Minnesota! "Varsity" is a shortened version of what word? You know how to play it! Is it: A) Universal, B) Intravarsity, C) Verisimilitude or D) University? Three seconds on the clock -- GO! Varsity comes from university. That's your answer and that's your Shoutout!
AZUZ: Some of the varsity athletes at East Union High in Manteca, California might have known that. Just like at most schools, if you want to stay on the team, you have to make the grade. But East Union has a unique and very public way of making sure students meet standards. Tim Daly of affiliate KXTV breaks down the situation.
TIM DALY, KXTV REPORTER: It's the first thing you see on the school's website: the grade point averages of East Union's athletic teams. At the top is volleyball at 3.33; at the bottom, men's soccer at 2.42. All of them are expected to work in class as hard as they do on the field or court.
JACKIE KETNER, EAST UNION SENIOR: It's a cut-and-dry policy: you don't have the grades, you don't play. If sports are really important to you, you're going to have your grades up. Really, to do anything at East Union you have to have your grades up, so there is an incentive to keep your grades up, which I think is good.
DALY: It's not just the website. Posters all around East Union show athletes with an academic theme. Tyler Bylow, on the left, says the school's approach has athletes pushing other athletes.
TYLER BYLOW, EAST UNION SENIOR: If you have a teammate in class, and you see him, you'll ask him, "What did you get on that test? Did you turn your homework in?" Stuff like that. You remind him, "You need to get that stuff turned in, because we need you on the team."
DALY: East Union began putting team GPAs on the school's website last year. Now, very few teams lose players who let their GPAs drop below 2.0.
JOHN ALBA, EAST UNION PRINCIPAL: The freshmen see seniors, and the seniors tell them you don't play here unless your grades are up, and so it becomes a culture.
ERIC SIMONI, EAST UNION ATHLETIC DIRECTOR: There's a stigma on athletes in today's society that hey, it's okay to slide by and not take care of business in the classroom. I don't operate that way, and I think on this campus kids understand the fact that they're not going to operate that way either.
DALY: But it's not just the students being pressured to keep their grades up. Their coaches are being evaluated, as well, on how many of their players remain eligible. Stay eligible, they might just end up on a poster.
Before We Go
AZUZ: All right. Before we go, you might've heard of the domino effect. One Texas school is putting it in action. You may think we're showing this video just because it's a huge domino display. And in part, you're right: It is; 27,000 dominoes were involved. But the real story about this is what those dominoes represent. Dollars; one dollar for each domino. Over the past month, students at the school raised money to help out a school in Haiti that they'd partnered with a couple years back. So, you follow the effect: The students raise money, the money goes to Haiti, and helps rebuild a school that was damaged in January's earthquake.
AZUZ: And all the dominoes fall into place. Plus, this story was a great lesson that small efforts can add up to make a big difference. We hope the rest of your day is fantastic! For CNN Student News, I'm Carl Azuz.