INVESTMENT AND PORTFOLIO MANAGEMENT

MODULE 4

Watch: “Too Big to Fail”

Read: https://www.investopedia.com/articles/optioninvestor/10/derivatives-101.asp

https://www.investopedia.com/ask/answers/052715/how-big-derivatives-market.asp

Activities: Write a reaction paper with the following as guide questions:

1. Summarize the film in one sentence.

The film is about how Henry Paulson trying to save the Lehman Brother from

getting bankrupt after the fall of the economy, also the movie is based on the financial

crisis 2008 that occurred in the U.S.A.

2. Who do you think was the real hero/es of the film? Explain why.

Henry Paulson was the real hero in the movie. Paulson try the best that he can

do in saving the Lehman Brothers. As a result of the failure of the Lehman Brothers

merger with BoA, Henry Paulson convenes an emergency conference with all of the

Executives in order to save the Lehman Brothers. During the discussion, Henry Paulson

informed them that it was also their responsibility to save Lehman Brothers, prompting

Barclay Banks to participate in the acquisition of the inventory. However, Barclay's

British regulator did not accept the transaction, resulting in Henry Paulson ran out of

options and asked Lehman Brothers to go bankrupt. Knowing that the failure of Lehman

Brothers has forced other banks to file for bankruptcy, Timothy Geithner urged that the
 entire bank combine. After failing to consolidate all of the banks, Henry Paulson resorts

to the last option, which is to obtain a bailout from the congress.

3. Which do you think was the main reason for the economic collapse? Why?

JPMorgan Chase bought Bear Stearns and unexpectedly collapsed. Lehman

Brothers holds toxic assets which are investments that seem to be nearly impossible to

market at any price due to a fall in demand, and feel threatened by the fall of Bear

Stearns. Failure to look for investors may result to their fall which concern Henry

Paulson. As such, AIG was initially assumed to be too big to fail. A significant number of

mutual funds, pension funds, and hedge funds either invested in or were guaranteed by

AIG. Investment banks, in particular, that owned AIG-insured CDOs were at risk of

losing billions of dollars. The Treasury team quickly recognizes that if AIG follows in the

footsteps of Lehman Brothers, the entire financial sector will be driven into a deep end

catastrophe that could rival the Great Depression of 1929.

4. What is/are the main lesson/s to be taken from the film? Explain briefly.

The main lesson to be taken from the film is that, during a crisis everyone must

stay still and joined forces. If it’s not Henry Paulson who keeps on seeking aid to avoid

the fall of Lehman Brothers, the financial sector might experience its deep fall. The near-

absence of the boards of directors of the public businesses at the center of the

breakdown is one of the most revealing aspects of the film. We get a quick sight of

Lehman's board of directors, who are all but silent as they wait to be told what to do.