Extra Credit 6: Money, Power and Wall Street Episode 2

            After watching episode one of Money, Power and Wall Street I immediately watched the second episode because I was very curious as to where the economy and the problems on Wall Street were going. I knew that the problems in our economy were getting worse as time went on these past couple of years but I never knew why.

Henry Paulson

            In the beginning of this episode Bear Stearns went bankrupt. This company was very big in mortgages because it often bundled and sold mortgages to other businesses throughout Wall Street. This caused a huge problem because if Bear Stearns went down, many other businesses would be greatly affected by it. Henry Paulson was Secretary of Treasury at the time and he had to decide what to do about this. In the end he decided that the government would use $30 billion to bail out Bear Stearns and sell it to JP Morgan. After the bailout of Bear Stearns, the government declared that it would not help out another company because of “moral hazard.”

            Shortly after this Lehman’s Brothers, the fourth largest investment bank in the world was breaking.  Once again Henry Paulson was at a crossroads with whether or not to bail out the company. This time however, he had close personal relationships with the CEO of Lehman’s Brother Dick Fuld. CEO Dick Fuld strongly believed that the government would help out if needed but to his surprise, the government did not bail them out. Henry Paulson believed that Americans would support their decision and be confident with the resilience of the American economy. On September 15^th 2008, Lehman Brothers filed for bankruptcy. After that, no banks wanted to lend to other banks and the decision that was made to not bail out Lehman Brothers added to the panic. However when AIG was collapsing the head leaders of our economy feared that there would be a full-scale worldwide depression. Paulson went back on his word and created a relief program that Congress passed. The relief program gave $700 billion to help the economy. At the end of the documentary it discussed that Paulson gave billions of dollars to the nations richest banks, even though some of them did not want the money because they had a lot of doubts.

            I found myself left with a lot of questions after watching this video. At one point, Senator McCain suspended his campaign and requested a meeting at the White House. When the meeting took place, McCain had no plan or strategy and Obama had a great plan considering he had inside information from Robert Wolf and Henry Paulson. I wonder if that had any effect on McCain’s campaign. I also wonder what happens in the next episode because it sounds like Obama has good ideas to help the economy however today our economy is still struggling. Why would Henry Paulson force billions of dollars into companies that did not want it? I feel like that is just going to come back and bite Paulson in the ass. Obama's economic policy ideas must have been very specific since he knew what exactly was causing the major problems.