SWDFM-118.docx - Question 1 One of the biggest financial events in the world history since the great depression is financial crisis of 2008 The historic

SWDFM-118.docx - Question 1 One of the biggest financial...

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Question 1) One of the biggest financial events in the world history since the great depression is financial crisis of 2008. The historic collapse of the markets has made us become more cautious and has setup safe guard to prevent in the future. Post the realization that the asset backed mortgage is subprime, in a few months, the economic framework of the American financial system was never the same, many of the big players at that time tried to settle on anything they could get in terms of financial support to survive because the assets on which they laid the foundation of their business lost almost all its value. There were many parties involved in this disaster. One of the big actors involved that was realized the most damages on a financial level and goodwill wise, as a firm was Lehman Brothers, one of the top brokerage firms, that nose-dived itself into insolvency as they bought a lot of the bonds issued at the time for the mortgage of houses without knowing the actual quality of the loan as the subprime and prime loans were mixed together at the time by the investors so they could sell them off by bundling them together and selling huge quantities of them. The origin of these bonds will be discussed in detail as I have had quite to learn about the nature and origin of these bonds in various documentaries, articles and the movie “The Big Short” which is based on the events that led to the down fall of the international financial markets. Bear Stearns is another top actor involved this event another top actor in this mess, but fate wasn’t as cruel with as it was saved when the JP Morgan bank purchased it with guarantees by the government. The third player was AIG, the world's largest insurance company, which also received government assistance. The other party I consider is important enough to discuss in order to truly reflect on the events in the book as the question asks me would require me to talk about home lending companies Fannie Mae and Freddie Mac which again were taken over by the government. While all these firms met their financial turnabouts good or bad the two top brokerages, Goldman Sachs and Morgan Stanley amended their organization to become bank holding companies so they could borrow money from the Federal Reserve. Then there was the famous TARP program that was investing the money from public in to various financial organizations that needed financial support. Now my understanding after reading various reports and summaries of the book is that Sorkin’s tried to bring us with a behind the scenes perspective to the story and really connect these seemingly individual companies in way that makes sense to a wider audience. He had ties with all of these players in one way or another and that’s what makes his book very relatable on a human level and you get an idea as to why would someone do something that they should or shouldn’t have. The surge in expectations of profit was fueled by these swaps that guaranteed that mortgage
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  • Spring '20
  • Government, Federal Reserve System, Fractional-reserve banking, AIG, Subprime mortgage crisis

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