A Colossal Failure of Common Sense

In Frontline’s The Meltdown, the causes of the stock market crash of 2008 came into discussion. The topics regarding Bear Stearns, the Lehman Brothers’ and their collapse, and the huge bailout made in results to the market crash. There were great points being made on the mistakes Henry Paulson and Ben Bernanke did not view from their perspective, which in turns were the problems that made up the crash.

The collapse of Lehman Brothers, a sprawling global bank, in September 2008 almost brought down the world’s financial system. Considered by many economists to have been the worst financial crisis since the Great depression of the 1930s. Economist Peter Morici coined the term the “The Great Recession” to describe the period. While the causes are still being debated, many ramifications are clear and include the failure of major corporations, large declines in asset values (some estimates put the drop in the trillions of dollars range), substantial government intervention across the globe, and a significant decline in economic activity. Both regulatory and market based solutions have been proposed or executed to attempt to combat the causes and effects of the crisis.

The banking crisis of the late 2000s, often called the Great Recession, is labelled by many economists as the worst financial crisis since the Great Depression. Its effect on the markets around the world can still be felt. Many countries suffered a drop in GDP, small or even negative growth, bankrupting businesses and rise in unemployment. The welfare cost that society had to paid lead to an obvious question: ‘Who’s to blame?’ The fingers are pointed to the United States of America, as it is obvious that this is where the crisis began, but who exactly is responsible? Many people believe that the banks are the only ones that are guilty, but this is just not true. The crisis was really a systematic failure, in which many problems in the

On Monday, March 10, the rumour started: Bear Stearns was having liquidity problems. In fact, the maverick investment bank had around $18 billion in cash reserves. But soon the speculation created its own reality, and the race was on to keep Bear’s crisis from destroying Wall Street. In what the economists called a “credit crisis,” the big banks were so spooked they had all but stopped lending money, a nervous Fed, in what some believe was the greatest financial scandal in

Too Big to Fail by Andrew Ross Sorkin is a book documenting the events of the financial crisis of 2008, from the perspective of various Wall Street executives and government officials. The 550-page novel is the product of hundreds of hours of research and interviews with people familiar with the situation. It attempts to be an authoritative as well as extremely detailed account of the events making up the financial crisis. The novel begins in the aftermath of the collapse of the investment firm Bear Stearns, and its subsequent sale to JP Morgan Chase for an astonishingly low price. This low price was subsidized by the Federal Reserve Bank of New York, in order to make it more palatable for the Bear Stearns board. It asserts that the deal was

John Galbraith’s book, “The Great Crash, 1929”, examines the history of the lead-up to the Wall Street Crash of 1929. It argues that market stability and corporate interests are fundamentally at odds. “Economics, like physics, has a fundamental canon: you cannot make money out of nothing” (Galbraith, The Great Crash 1929). To best understand the history of financial bubbles, Galbraith chronicles the times that people overlooked that fact. He focuses on the primary causes of The Great Crash, those being: the bad corporate structure, the bad banking structure, the ambiguous state of the foreign balance and lastly, the poor state of economic knowledge.

“Experience, according to the proverbial wisdom, is a great teacher, also we should learn from our mistakes, Or, if you prefer, good judgment comes from experience, and experience comes from bad judgment” (Greenberg, Alan). A firm understanding of the events that lead up to the financial crisis of 2008 is an essential learning lesson to all Americans, the recession experienced in the United States was felt globally. The collapsed of Bear Stearns was the beginning of a financial disaster that would take years to offset. The fall of Bear Stearns was so important to the financial history of the American economy, Professors at Harvard University developed a case study and in 2009 and began to teach the case study jointly to first year finance and corporate leadership

The intention of this essay is to provide an in depth and critical analysis of the financial crisis that took place between 2007-2009, in particular focusing on some key issues raised by the Foote, Gerardi and Willen paper ‘Why did so many people make so many Ex Post bad decisions?’ Whilst there were many contributing factors, it is clear that a specific few played a particularly dominant role, primarily the ‘Bubble Theory’, irresponsible regulation, toxic CDO’s and $62 trillion of CDS’s.

A firm understanding of the events that led up to the financial crisis of 2008 is an essential learning lesson to all Americans, the recession experienced in the United States was felt globally. The collapsed of Bear Stearns was the beginning of a financial disaster that would take years to offset. The fall of Bear Stearns was so important to the financial history of the American economy, Professors at Harvard University developed a case study and in 2009 and began to teach the case study jointly to first year finance and corporate leadership classes. In the ‘Rise and Fall of Bear Stearns’ by Alan Greenberg he states “A very high proportion of Bear Stearns’ personnel had invested the bulk of their life savings in Bear Stearns stock. Liquidation would render the stock worthless and put more than 14,000 people on the street.” Ultimately, he collapsed did not only affect the public and stakeholder’s but even the very people who aided in this crisis. The effects were absolutely

HFM’s experience as a hedge fund manager gives value into this information and the authority to describe what started the crisis. The advantage that follows from the source regarding this idea is that it recorded information that described the creation of the mortgage bubble in the financial market, and the damage dealt to the financial system when the mortgage market crashed from a finance expert. The disadvantage is that the subprime market might not be the only reason of the misallocation of resources, given the fact that HFM’s hedge fund was involved in the subprime market which might have formed a biased opinion on that matter (18-19). The nature of the source does not complicate the idea of the cause of the crisis, although concluding that the subprime market was the main cause could complicate the subject. This clearly shows that the idea of the misallocation of resources within the book had negatively impacted the financial system that built the momentum of the economic decline.

Most people, when asked, would easily refer to the Great Depression as the most significant financial crisis to hit the U.S. economy. Even though in 2008, a financial crisis occurred that spread from the U.S. to capital markets and countries around the world. The lack of knowledge about this catastrophe is mainly due to the fact that there is no clear cause behind the crisis. The blame has been placed on many different causes, but there is no clear consensus on one definite reason for everyone to point their fingers. Many books have been written with different perspectives of the financial crisis of 2008, the purpose of this assignment was to choose one and summarize its view of the crisis. I chose to read and evaluate The Big Short: Inside the Doomsday Machine written by financial journalist Michael Lewis.

At the height of the 2008 financial crisis, Mr. Lawrence G. McDonald wrote a book on the fall of Lehman Brothers, entitled "A Colossal Failure of Common Sense." This book is a risk manager 's guide to the right and wrong moves on Wall St., and explains why investors must stay ahead of policies coming out

As evidenced by the plethora of explanations concerning it, the 2007-08 financial crisis that originated in the United-States is highly complex. The literature presents various causes, most of which can be placed on either side of a debate between government intervention and laissez-faire of market mechanisms. On one side, it is argued that financial actors are responsible for the crisis as a result of their use and distribution of complex and risky financial products, and their irresponsible lending. On the other side, the arguments centre on policy failures, or unintended consequences of government initiatives, as interventions into economic mechanisms. Some explanations see both financial markets and policy at the origin of the crisis, and some elements are common to all of these interpretations. Through these varying explanations, we may find certain facts about the time leading up to the crisis, explaining its nature and steps.

Just after ten years of Asian financial crisis, another major financial crisis now concern for all developed and some developing countries is “Global Financial Crisis 2008.” It is beginning with the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and spread like a flood. At first U.S banking sector fall in a great liquidity crisis and simultaneously around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. (Global issue)

According to many experts, this was one of the most severe financial crises in our history since 1930. This crisis was so complex that was known throughout the world under many names, such as “the Great Recession”, “the financial crash of 2008”, “the Trouble Asset Relief Program bailout”, and “the Great Panic” (Biegelman & Bartow, 2012). Whatever its name, this crisis undoubtedly disorder the world of finance dramatically. This financial chaos, now turned into a recession, had the misfortune to expand and affect many organizations around the planet. Everyone was affected in some way or another; it was like a domino effect that apparently nobody saw it coming, and could not be stopped in time. Unfortunately many people lost their jobs due to the meltdown; million of people were subject to wage cuts, and many companies had to go out of business, because they just not endure the tremendous pressure on its shoulders.