Describe the collapse of the Lehman Brothers in 2008. Some institutional investors were concerned that Lehman Brothers might have been overstating its earnings in 2007 and early 2008. Explain why more complete and accurate disclosure by banks and other financial institutions may help to resolve financial problems.
During the credit crisis in the 2008 – 2009, banks were criticized for restricting their credit. Do you think banks should be allowed to restrict their credit during the credit crisis? Why or Why not?
Explain why the credit crisis caused concerns about systemic risk.
During the credit crisis, the government was attempting to prevent failures of banks. Explain why the moral hazard problem may have received so much attention during the credit crisis. Explain why regulators might argue that the assistance they provided to Bear Stearns was necessary.