Econ

1239 WordsMar 6, 20145 Pages
Questions based on “Too Big to Fail” movie Watch the movie and answer the following questions briefly. Upload your answers on Moodle using the Link “Submit Assignment on Too Big to Fail here” 1. When Lehman brothers was in trouble, Henry Paulson called the other banks’ CEOs on a meeting to find a solution to Lehman Brothers’s problem? Why did Henry Paulson think that a private sector solution, instead of government bailout, was needed? 2. (Up to about 43:00 of the movie) Why did the Lehman Brothers sell not work out? Why did Paulson want Lehman Brothers to file Bankruptcy before markets opened? 3. Why did the markets in Europe and the USA still panic after Leman Brother’s bankruptcy? 4. (From about 53:00) How does the real…show more content…
CDSs were side bets on whether home borrowers would default. CDSs are one of a type of financial instrument known as derivatives, because their value is “derived” from the value of the underlying asset (in this case, home mortgage loans). Financial institutions used CDSs to place trillions of dollars of bets. The movie Inside Job clearly explains and illuminates this daisy chain of risk. Links that might be somewhat related to the movie, and the questions: A recent interview of Alan Greenspan (watch from the 6:00th minute) http://www.youtube.com/watch?v=AWM0l8_F_X0 About CDOs: https://www.khanacademy.org/economics-finance-domain/core-finance/derivative- securities/CDO-tutorial/v/collateralized-debt-obligation-overview What is the total cost of TARP program? http://www.cbo.gov/publication/43663 4 Answer the following questions as precisely as you can. Please try to be brief and to the point whenever possible. Question 1: Do you think events would have unfolded differently if the U.S. banks that made subprime loans had kept them instead of selling them to the Wall Street companies? Explain briefly Question 2: Are all CDOs risky at all times? How/why are the top tranches of CDOs relatively safe even though they are created from sub-prime loans? Question 3: Alan Greenspan appears throughout Inside Job. The film describes how

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