Question

Too Big to Fail", has become a phrase associated with the banking industry and even gave rise to a film on the financial crisis of 2007-2009. Here are some questions you may discuss and comment on (See the links under Resources below for additional information):

Do you think that with all the regulations in place now, including the Dodd-Frank Act of 2010, and the recent changes to the act, we can avoid another major financial bail-out?

Can you identify the REAL "TOO BIG TO FAIL" institution that caused the very big problem?

Were the banks' problems caused by derivatives? Interest rate risk? Other factors?

Answer 1

Yes, the regulations are now in place to prevent a repeat of 2007 -09 crises.

The main institutions that caused the financial crises of 2007-2009 were Freddie Mac and Fannie Mae

The banks problems were caused by the sale of bad loans which were securitized and sold off to many big banking names like Lehman Bros. Since these securities were of default grade, when the customers you got the loans did not pay back, these securitized defaulted and the organizations like Lehman Brothers who bough these default grade securities from Freddie Mac and Fannie Mae suffered and that ultimately lead to the closure of Lehman Bros company.  

So basically this was due to the credit risk or default risk that case the problems