Too Big to Fail
Too Big to Fail
A Film by Curtis Hanson
Too Big to Fail is the idea that a business has become so large and ingrained in the economy that a government will provide assistance to prevent its failure. "Too big to fail" describes the belief that if an enormous company fails, it will have a disastrous ripple effect throughout the economy. Read more: http://www.investopedia.com/terms/t/too-big-to-fail.asp#ixzz2GLsRVMT1
a) The movie was able to capture the events, decisions and strategies made both by the government and the private financial institutions during the US Financial Crisis. Which concept discussed in class was emphasized or demonstrated during the height of the financial crisis. Explain your answer.
– The financial crisis that is discussed in the film “Too Big to Fail” is the effect of market and regulatory failure. The market failure took place for the reason that shareholders were not able to protect their own interests and neglected the fundamental measures needed to be done. In companies that reinforced excessive risk taking, compensation structures which show the framework of relatinships between the firm and its independent agents, and among the agents themselves, on the basis of which commissions are computed and along which they are passed on, were constituted. Even when lending regulations had become rigid, banks deliberately bought mortgages. Meanwhile, thousands of officials who were expected to do their jobs and watch the stocks and funds, failed to protect large establishments. Even with the warnings conferred to them about the crisis close at hand, they chose to disregard it, keeping in mind that the market could modulate itself. To prepare for future disturbances like this, finding for a method that will make market incentives benefitial is necessary. Making such system will take time and effort but it is understandably essential so that the well-paid officials who are highly-fit for the job have use when they are called for.
A Film by Curtis Hanson
Too Big to Fail is the idea that a business has become so large and ingrained in the economy that a government will provide assistance to prevent its failure. "Too big to fail" describes the belief that if an enormous company fails, it will have a disastrous ripple effect throughout the economy. Read more: http://www.investopedia.com/terms/t/too-big-to-fail.asp#ixzz2GLsRVMT1
a) The movie was able to capture the events, decisions and strategies made both by the government and the private financial institutions during the US Financial Crisis. Which concept discussed in class was emphasized or demonstrated during the height of the financial crisis. Explain your answer.
– The financial crisis that is discussed in the film “Too Big to Fail” is the effect of market and regulatory failure. The market failure took place for the reason that shareholders were not able to protect their own interests and neglected the fundamental measures needed to be done. In companies that reinforced excessive risk taking, compensation structures which show the framework of relatinships between the firm and its independent agents, and among the agents themselves, on the basis of which commissions are computed and along which they are passed on, were constituted. Even when lending regulations had become rigid, banks deliberately bought mortgages. Meanwhile, thousands of officials who were expected to do their jobs and watch the stocks and funds, failed to protect large establishments. Even with the warnings conferred to them about the crisis close at hand, they chose to disregard it, keeping in mind that the market could modulate itself. To prepare for future disturbances like this, finding for a method that will make market incentives benefitial is necessary. Making such system will take time and effort but it is understandably essential so that the well-paid officials who are highly-fit for the job have use when they are called for.