Critical Thinking Analysis of the 2008 Recession

Critical Thinking Analysis of the 2008 Recession

"Too Big To Fail" is a movie that was based on the financial crisis of 2008. The story begins with the housing market crashing and the fall of Bear Stearns, one of the five biggest investment banks of America, which was bailed out by the FED in the crisis. After, it was acquired by JP Morgan Chase for $2 a share. The movie focused on Lehman Brothers after Bear's collapse as it was considered to be the next target of this "domino-effect" failure of the whole financial system. Its' characteristic CEO, Richard Fuld, was vividly and carefully described and introduced as one of the main characters of the epic. The film documented Fuld and several important leaders of Lehman Brothers in meetings, email exchanges, conference calls, public announcements, private gatherings, deal negotiations, changes in its own staff to reveal a complete and thorough story of how each individual reacted and what he or she contributed to both the rise and fall of the fourth largest investment bank in Wall Street.

Even though Lehman was in big trouble with millions of dollars invested in "toxic assets," which are so complicated and "toxic" that no one can even put a number to the values, Lehman still denied to write down the values of those assets to provide more reliable information for the company's stakeholders as well as the government and firms who were considering buying them. In the end, no one was willing to take the risk of buying something that they did not even know how much it was worth. Even the government decided to stay away from the situation, letting the company file for bankruptcy after Lehman's effort to try to raise capital. Beyond this, when the company attempted to sell itself, the government still wanted no part in the matter. Like Bear Stearns, the fall of Lehman was just another consequence of the mess created by top people in powerful institutions inventing so many new financial tools to minimize investment risks. As a result, this brought the risk to a higher and even more unpredictable level. However, unlike Bear Stearns, the Fed this time decided not to save Lehman, to show the public that the government did not intend to interfere with the "free market" idea and prove that it was not going to become socialist by purchasing stocks. Unlike Bear Stearns, the government let Lehman fail.

The second main character of the story is Hank Paulson the secretary of the Treasury and former CEO of Colden Sachs that served during former president Bush government. If Fuld and other top executives' from Wall Street would have exposed another picture of how investment banks and Wall Street firms let their greed get out of control, then the Treasury and the Fed would have acted differently on attempting to