Link to documentary: http://www.pbsor/wgbh/pages/frontline/meltdown/view/ Questi

Question

Link to documentary: http://www.pbsor/wgbh/pages/frontline/meltdown/view/ Question 1: How does Charles Duhigg from The New York Tinmes define mortgage-rel Credit Default Swaps (CDS)? Question 2: How does Joe Nocera define moral hazard and why did Henry Paulson lower the offer made by JP Morgan to buy Bear's stock from $4 to $2 a share? Question 3: What are Freddie Mac and Fannie Mae and what happened on Sunday, Septe mber 7, 2008? Question 4: Why did Henry Paulson allow Lehman Brothers to fail? Question 5: How did the collapse of Lehman Brothers affect AIG? What was the US government reaction to AIG's situation? Question 6: In what way did Henry Paulson have to overcome his own ideology throughout the whole process?

Explanation / Answer

JOE NOCERA: Moral hazard poses the question: If you bail somebody out of a problem they themselves cause, what incentive will they have the next time to avoid making the same mistake?

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