2008 Financial Crisis
Question 1
Hank Paulson played a critical role in the financial crisis of 2008. How did Mr. Paulson help create the environment that led up to the financial crisis? What mistakes did he make as Secretary of Treasury when he had to manage the financial crisis of 2008? Do you think Mr. Paulson acted as an unbiased Secretary of the Treasury or did his background at Goldman impact his thinking and his actions?
As Secretary of Treasury, Hank Paulson’s lax supervision let too many subprime mortgage bonds get into the market. The investment banks purchased this big short, which was like a time bomb. This was the environment, which Mr. Paulson created to lead up to the financial crisis. In March 2008, the Wall Street fifth investment bank, Bear Sterns, got trouble, as it set foot in subprime mortgage market and the real estate bubble began to burst. Because of the ability to figure out the problem, Bear Sterns was the first one to have the liquidity crisis so that the whole market panic. Fed reserve and DOF decided to let J.P. Morgan purchased Bear Sterns, and Fed Reserve paid more on the loss, which we call the government gave Wall Street the bailout. And then, as the collateral economy, the third and fourth investment banks, Lehman Brothers and Merrill Lynch, got trouble some days later. As government was facing serious pubic duties for the bailout last time, they decided not to help Lehman Brothers and Merrill Lynch and gave a hand to the other Wall Street financial companies to merge them to ride out this financial storm. Unfortunately, BOA was more interested in Merrill Lynch. Lehman Brothers had to seek the other company to get help. Barclays tried to merge Lehman Brothers, but British decided to give up this deal at the last critical moment so that Lehman Brothers had no choice to apply for bankruptcy before the stock market opened on Monday. However, I think Hank Paulson’s mistake was that he didn’t advance the internal forces of the government to solve
Hank Paulson played a critical role in the financial crisis of 2008. How did Mr. Paulson help create the environment that led up to the financial crisis? What mistakes did he make as Secretary of Treasury when he had to manage the financial crisis of 2008? Do you think Mr. Paulson acted as an unbiased Secretary of the Treasury or did his background at Goldman impact his thinking and his actions?
As Secretary of Treasury, Hank Paulson’s lax supervision let too many subprime mortgage bonds get into the market. The investment banks purchased this big short, which was like a time bomb. This was the environment, which Mr. Paulson created to lead up to the financial crisis. In March 2008, the Wall Street fifth investment bank, Bear Sterns, got trouble, as it set foot in subprime mortgage market and the real estate bubble began to burst. Because of the ability to figure out the problem, Bear Sterns was the first one to have the liquidity crisis so that the whole market panic. Fed reserve and DOF decided to let J.P. Morgan purchased Bear Sterns, and Fed Reserve paid more on the loss, which we call the government gave Wall Street the bailout. And then, as the collateral economy, the third and fourth investment banks, Lehman Brothers and Merrill Lynch, got trouble some days later. As government was facing serious pubic duties for the bailout last time, they decided not to help Lehman Brothers and Merrill Lynch and gave a hand to the other Wall Street financial companies to merge them to ride out this financial storm. Unfortunately, BOA was more interested in Merrill Lynch. Lehman Brothers had to seek the other company to get help. Barclays tried to merge Lehman Brothers, but British decided to give up this deal at the last critical moment so that Lehman Brothers had no choice to apply for bankruptcy before the stock market opened on Monday. However, I think Hank Paulson’s mistake was that he didn’t advance the internal forces of the government to solve