Please respond to the discussion below.
5 sentences or more.
Hello Class and Professor,
Just finished watching the Frontline episode talking about what had happened to the markets and I am at a loss for words. I will do my best to describe what I believe happened.
1) The impact of the near failure of Bear Stearns was a cascade effect. It started with a rumor that they didn’t have enough money to pay for the debts they held. This in turn caused investors to pull out of investing in the company, which made other investors nervous and they pulled their money out as well. The complete failure of Lehman Brothers was the catalyst of the Financial crisis because of how intertwined they were in Wall Street. They held pieces to so many different securities that when they became bankrupt sent the market in a downward spiral.
2)The actions of the Federal Reserve and the Treasury Department was to inject capital into Bear Stearns and other failing companies with the exception of Lehman Brothers. Personally I believe the head of the Treasury Department held a personal grudge against them in some form because he had been the CEO of Lehman prior. The impacts of these decisions were meant to stabilize the economy but backfired when investors saw the move as one of desperation. Which caused the markets to crash.
3) Since taking the class I have been watching the news more carefully and trying to pay more attention to the what condition our economy is in and the topic that keeps coming up is student loans. Now for me and many others, not paying back what you borrow is not negotiable. I have a very hard time with that concept of not paying back what is borrowed. However, life happens and those that have borrowed sometimes truly can not pay back what they took out and must default. Now this is where I get confused, if the student loans are federally backed isn’t it difficult or nearly impossible to default on them? I have been under the understanding that they will find a way to get their money back. Would love some feedback on this.
Source: Frontline pbs.org/video/1082087546