MovieChat Forums > Too Big to Fail (2011) Discussion > Question

Question

posted 13 years ago by jologonzales1989
1 reply | jump to latest

I'm not from the US so I'm not entirely familiar with the problem presented in the film. I am, however, curious. If the Federal Government had taken action by "bailing out" Lehman Brothers in the first place, could the problem had been stemmed? If so, why hadn't the Fed just done this? And why hadn't they checked if AIG had so much to lose if Lehman was let down? Also, why hadn't the Barclays deal gone according to plan? What did the British see as not being beneficial to their interests?

Thanks in advance for clearing this up.

[–] Redsfan001 (6012) a year ago

I doubt it.

The core of the issue was people being approved for mortgage loans that they didn't have the ability to pay. (A common example is a waitress and a truck driver with a combined salary of $75,000 being approved for $1,000,000 mortgage loan). They can't pay it in the long run and soon the bill comes due.

Banks had a new instrument that they believed in created by a math M.I.T. guy that in essence thought that they could spread risk by chopping and reselling the risky loans to other investors (a lake 5 miles long and only 3 feet deep was the analogy). The banks were making some serious cake with this new instrument, and some banks took the bait and others stayed away.

I can't answer your other two questions.