Frontline: Into the Meltdown Pt.2

1. Why did the federal government take over Fannie Mae and Freddie Mac?
to help keep the two companies from facing the same fate as Bear Stearns
2. Secretary Paulson decided not to garuntee a government loan for Lehman Brothers as he had for Bear Stearns with the JPMorgan takeeover. What happened as a result of that decision? Lehman Brothers went bankrupt. as a result of that the market began to crash
3. Why did the government give AIG a loan of $85 billion after refusing to loan money for the Lehman Brothers aquisition? AIG was the largest insurance company in America. Letting AIG fall would bring down the economy as a whole.
4. What is capital injection? financial support provided by the government

Frontline: Into the Meltdown Pt.1

1. What caused the housing market to drop in stock prices and loans?
variable rates and bad investments
2. What led to Bear Stearns' financial problem
bad investments
3. What deal did the Federal Reserve strike with Bear Stearns that temporarily saved the company? the government provided secure funding through JPMorgan to help save the company.
4. Why did Congressman Paulson believe that the Federal Reserve needs to let these Financial Institutions fail? He pictured a 1-2 thousand point drop in the DOW. He also believed that the uncertainty was to great. He thought that bailing out the companies , who caused their own problems by being greedy, were getting off easy, and that if the companies do survive , they wouldn't learn from their previous mistakes and would be looking for a bailout each time.