Bear Stearns out of business

What happened to make Bear Stearns go out of business?

What are credit default swaps? What role did they play in the meltdown?

What is the Federal Reserve and what role did it play when Bear Stearns was in financial trouble?

What is the Treasury Department and what role did it play when Bear Stearns was in financial trouble?

What is systemic risk? What role did it play in the meltdown?

What is moral hazard? What role did it play in the meltdown?

Free-market capitalism dictates that markets create efficient solutions and businesses that fail should be left to fail. Treasury Secretary Paulson was concerned about “moral hazard” after helping Bear Stearns. What did this mean and why was he concerned?

The film follows people who took out mortgages they couldn’t afford in the hopes that their home values would increase and they would become rich. Were banks incentivized to give these people mortgages? How so?

Should there be laws to restrict the value of houses people buy and the amount of leverage used to buy the house? What is the problem with having such laws in a free market?

Secretary Paulson decided not to guarantee a government loan for Lehman Brothers as he had for Bear Stearns with the JPMorgan takeover. What happened as a result of that decision?

Why did the government give AIG a loan of $85 billion after refusing to loan money for the Lehman Brothers acquisition?

What are subprime mortgages and why were they referred to as toxic assets? What are capital injections? Why were they needed for these toxic assets?

The last scene in the film shows the leaders of the largest banks being told by Henry Paulson that they would have to accept government capital injections. What was the rationale for that decision?

What was the issue with Fannie Mae and Freddie Mac? Why did the government take them over? Did Fannie and Freddie controversy to the Crises or were they a victim of the crises?

 

 

 

 

Sample Solution

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