Too Big to Fail is an insightful depiction of the 2008 financial crisis without being a documentary. (The discussion starting at the 56 minute mark is probably the best, concise explanation of the financial crisis I have heard). You can rent it for $2.99 on YouTube. Throughout the movie we see the Treasury Department, the Federal Reserve, and Congress wrestling with how to handle the banking system's failures. There is tension between preventing the financial system from collapsing and bailing out banks suffering the consequences of their poor investment decisions. On an emotional level, this movie is helpful for providing a sense the chaos of this period when it seemed like the US economic system was about to fall off a cliff, which has become relatable again as we have watched policymakers wrestle with what should be done to address the covid-19 economic situation.

Read these questions, watch the movie, and then answer the questions. Turn your answers in as a PDF to this Canvas assignment. It can add 1 percentage point to your final course grade.

1. What did the Treasury Department do to help Bear Sterns? How did that complicate the options to help Lehman Brothers?
2. What ultimately happened to Lehman Brothers? Initially the response to this was positive. Why? Quickly the opinion turned negative and fearfulwhy?
3. What was the huge contagion concern with AIG? (Why were policy makers concerned that letting AIG fail would have very wide sweeping consequences?)
4. What is the Troubled Asset Relief Program (TARP) that policy makers were working on at the end of movie? This is an interesting program because it is basically at the intersection of fiscal and monetary policy. Explain the fiscal and monetary policy aspects of the TARP proposal.