UW-Madison ECON 102 - The Inside Job (4 pages)

Previewing page 1 of 4 page document View the full content.
View Full Document

The Inside Job

Previewing page 1 of actual document.

View the full content.
View Full Document
View Full Document

The Inside Job


The Inside Job Movie

Lecture number:
Lecture Note
University of Wisconsin, Madison
Econ 102 - Principles of Macroeconomics
Documents in this Packet

Unformatted text preview:

Econ 102 1st Edition Lecture 21 Outline of Last Lecture I General Info I The Great Recession II 14 4 Interest Rates and How they Change Investment Output GDP III 14 5 Monetary Policy Challenges for the Fed IV Film Glossary Outline of Current Lecture I The Inside Job Current Lecture I The Inside Job a Using derivatives i 50 trillion unregulated market ii Tried to regulate iii Larry Summers b Securitization Food Chain i the people who make the loan are no longer at risk of the person not paying ii Collateralized Debt Obligations CDO s 1 popular with retirement because of AAA rating best iii Rating Agencies paid to rate c Investment Banks These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute i banker makes more money when giving out supreme loans poor because of the high interest rates ii resulted in the biggest financial bubble in history 1 huge increase in housing prices a 1970 s and 1980 s small increases b effectively doubled in 2006 2007 2 led to hundreds of billions of dollars of profits a wasn t real income money created by the system b basically a global Ponzi Scheme iii Investment Bank Leverage 1 33 1 2 scary hight 3 Credit Default Swaps a unregulated i didn t have to keep specific amounts on reserve b worked like an insurance policy c paid quarterly premium d if goes bad would be paid to make up for loss i HOWEVER allowed many people to insure the same CDO ii House example 1 If 20 people are paying insurance on one house and it burns down the number of people with losses is huge big problem iv Has financial development made the work riskier Rajan 1 greater incentives to take risks that could destroy firms or the entire financial system 2 Make an extra 2 10 million a year by putting your institution at risk when you re not responsible for losses a Most took the bet b Lehman Brothers i CEO Richard Fuld ii 6 jets and a helicopter iii own elevator to bring him to

View Full Document

Access the best Study Guides, Lecture Notes and Practice Exams

Loading Unlocking...

Join to view The Inside Job and access 3M+ class-specific study document.

We will never post anything without your permission.
Don't have an account?
Sign Up

Join to view The Inside Job and access 3M+ class-specific study document.


By creating an account you agree to our Privacy Policy and Terms Of Use

Already a member?