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Too Big To Fail Essay

722 words - 3 pages

“Too big to fail” retells the true events taken place during the financial crisis of 2008. It centers its focus on Henry Paulson’s (Secretary of Treasury) attempts to contain the economic issues that arose in the period of August - October of that year. CEO of Lehman Brothers, Dick Fuld, tries to obtain external investment as their stocks began failing drastically. However, investors were doubtful to consider purchasing Lehman due to its exposure to toxic housing assets. Paulson works towards trying to convince CEO’s from major banks to buy Lehman stocks discretely since the Treasury was “opposed” to offering any kind of bail out as occurred to Bear Sterns. Lehman expressed to have been ...view middle of the document...

This lead Paulson to realize that the financial crisis had spread to Main Street. Bernanke and Paulson lobbied Congress, as Bernanke emphasized that a lack of credit helped make the 1929 stock crash into the Great Depression, and that if Congress failed to act the fallout would be far worse. As republican candidate, John McCain, suspended his presidential campaign to join the negotiations, the legislation turned into complete chaos. After a wave of panic, the legislation was passed on its second attempt and the Emergency Economic Stabilization Act of 2008 is finally signed into law.
Paulson realizes that the only way to get credit circulating again is through capital injection, so he decides to have a meeting with CEO's of major banks to explain this. He obtained help from the chair of the Federal Deposit Insurance Corporation (FDIC), Sheila Blair, and advised for the cooperation of these banks and threatened them with an audit from the FDIC if they failed to do so. The CEO's had no other choice but to accept. Paulson explains that all present CEO's of major banks will be receiving a mandatory capital injection...

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