Its failure frozen the credit market led the whole

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Brothers was the cause of the crisis. Its failure frozen the credit market, led the whole world to an crisis, and the AIG failure was because that they bid on Lehman never going to fail. And that’s the reason, background and the cause of the financial crisis of 2008. 2. Using the supply and demand graphs for both the bond market and the loanable funds market, show the effects of an increase in the expected return on bonds. 3. Go to the following edition of the PBS news show “Now” called “Credit and Credibility”; Increase in the expected return on bond SB DB’ DB B B’ P’ P LSF LFS’ LFD i’ i LF LF’ Bond Market Loanable Funds Market
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http://www.pbs.org/now/shows/446/index.html After watching the show, briefly answer the following questions: a. What are the major rating agencies? Moody’s, Standard & Poor’s, Fitch b. What role did they play in the recent financial crisis? They rated the CDOs and other financial products created by the investment banks, the banks pay the rating agencies money in exchange of high rating of their financial product. So lots of investor believed the rating agencies and bought lots of financial products that were bad loans, mortgages and predatory loans. c. How were moral hazard and adverse selection involved in propagating the crisis? Moral hazard wasn’t widely involved, but the adverse selection were highly involved. The rating agencies should give these financial products fair and objective opinions. Instead, it went against the interests of the investors, but the
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