"Too Big to Fail" Video Assignment Questions
Why was AIG in so much financial trouble?
AIG invested tens of billions in credit default swaps and insured a lot of failing banks
What was the significance of the conversation Secretary Paulson had with the Chinese Finance Minister at the Bejing Olympics?
- Chinese have a lot of money invested and Russia is telling them to pull their money out. This could make the US economy crash - China could agree to Russia's "Plan" to unload all US bonds (destroying US economy)
Why did negotiations between Lehman and the Koreans break down?
- Lehman Brothers CEO came in late and tried to backpedal the deal - Dick Fuld was scared they would lose too much money if they sold a significant amount of the company to the Koreans
Why did the proposed deal to have Barclay's Bank buy Lehman Brothers fall apart? What was the objection the British had to the deal?
- The proposed deal to have Barclay's Bank buy Lehman Brothers fall apart because sinceBarclay's Bank was one of Britain's largest banks, they weren't able to secure a guarantee from the U.S. government to cover the loss of Lehman and for Lehman's trading positions - The British had a UK Listing rules which would require Barclay to ask shareholders for the approval of the deal and timing was the concern to make the deal since it would require multiple days. Britain's financial regulator release details that Barclay never proposed a deal and never ask to waive shareholders' right to approve the deal, instead the concern of capital, liquidity, and guarantee emerges
The treasury secretary ( Paulson) and chairman of the federal reserve board (Bernanke) , go to congress to ask for $700 billion in T.A.R.P. funds. What do they indicate they will use the money for?
Troubled Asset Relief Program
Lehman Brothers and Bank of America (B of A) were hoping to receive the same treatment form the Treasury Department as Bear Stearns and JP Morgan Chase had received. What had the Treasury Dept. done for "bear" and Jp Morgan?
bailed them out when they were failing, they weren't bailing out Lehman Brothers and B of A
When Paulson, etc, meet with the big banks near the end, they offering them a lot of money. What are the banks supposed to do with the money from the government, and what happens?
loan the money out, they don't loan it
What is meant by the statement "the economy runs on credit?"
most people use credit (loans or borrowed money) to purchase things they wouldn't with real money
Why didn't the Chairman of the SEC instruct/direct/order Lehman to file for bankruptcy?
the Lehman Brother's CEO refused to comply to government orders
How do big companies use the revolving credit lines they maintain with banks?
they only pay interest on what they borrowed from the bank
Why is the ability to secure "credit" so important o even the average person?
without good credit, you can't make big purchases because you need to get a loan to pay for the item