Too Big to Fail Essay Example
1. (Up to about 25:00) Why did Henry Paulson have to call all the CEOs to make a private sector deal? What deal? Why did Henry Paulson think that the private sector solution was necessary? Explain from the point of the idea of "Moral Hazard".
The taxpayers would not be willing to go for another bailout therefore trying to fix this issue with a private sector deal seemed a better fit for this situation. The deal would assemble all the major banks CEOs in a room and they would have to find a solution together on how they could rescue Lehman Brothers, Paulson was not going to bail them with government money because he said they always make the same mistakes and never learn they get greedy and therefore they should see this as a warning that the government will not always be there to rescue if you mess up continuously. Paulson and government acted as advisors and not safety nets and he wanted to make sure they understood.
2. (Up to about 43:00) Why did the Lehman Brothers sell not work out? (up to about 48:00) Why did Paulson want Lehman Brothers to file Bankruptcy before markets opened?
The deal did not work because the British had to wait at least until 30 day to have the consent of the shareholders on this deal and in general they were not comfortable with this deal even if the other American banks offered to finance the toxic assets. They had to file for bankruptcy because if they didn’t the market would of been dragged down even further and Merrill Lynch would be dead too.
3. (From about 53:00) Why did the markets in Europe and the USA still panic after Leman Brothers' fall?
Because the fall of AIG which is the largest insurance company in the world and operating all over the world, they also had all the major banks from all over the world investing in their CDOs, therefore is AIG goes down everyone all over Europe and USA will panic.
4. (From about 53:00) How does the real economy
The taxpayers would not be willing to go for another bailout therefore trying to fix this issue with a private sector deal seemed a better fit for this situation. The deal would assemble all the major banks CEOs in a room and they would have to find a solution together on how they could rescue Lehman Brothers, Paulson was not going to bail them with government money because he said they always make the same mistakes and never learn they get greedy and therefore they should see this as a warning that the government will not always be there to rescue if you mess up continuously. Paulson and government acted as advisors and not safety nets and he wanted to make sure they understood.
2. (Up to about 43:00) Why did the Lehman Brothers sell not work out? (up to about 48:00) Why did Paulson want Lehman Brothers to file Bankruptcy before markets opened?
The deal did not work because the British had to wait at least until 30 day to have the consent of the shareholders on this deal and in general they were not comfortable with this deal even if the other American banks offered to finance the toxic assets. They had to file for bankruptcy because if they didn’t the market would of been dragged down even further and Merrill Lynch would be dead too.
3. (From about 53:00) Why did the markets in Europe and the USA still panic after Leman Brothers' fall?
Because the fall of AIG which is the largest insurance company in the world and operating all over the world, they also had all the major banks from all over the world investing in their CDOs, therefore is AIG goes down everyone all over Europe and USA will panic.
4. (From about 53:00) How does the real economy