I personally find the debate between a moral hazard and “too big to fail” a very interesting debate. The idea of anything being too important to all of society to question, criticize and punish is virtually nonexistent to me, but I think it is interesting that I find myself (and hopefully similarly-minded people) tend to question this a bit when it comes to global economics and the financial stability of the US. The AIG case had quite an impact on me just because I had a hard time (even as the esteemed hero Captain Hindsight) to imagine that no one seriously questioned what was happening. I also find it intriguing and disturbing that Congress and Wall Street have such a love affair that it can’t be broken without dragging everyone else down with it. I think exploring this further would prove to be quite a paper topic.
In this case, I am debating between analyzing why Lehman Brothers were allowed to fall, or whether I should focus on a survivor like Bank of America/Merrill Lynch or another large firm. I thought that the analysis of why AIG, an insurance company, turned into more of an investment bank was very insightful, but I would like to focus more this time purely on the impact of traditional banking/financial firms. The relationship between the CEO’s during the financial crisis was also intriguing to me. Did personal vendettas influence the collapse of Lehman Brothers? Was that the right decision? Should we in fact ignore irresponsible behavior because going after such behaviors could ruin us? Or is that what ruined us in the first place? What are the true impacts of letting such organizations collapse? Is it as big or as meaningless as either side plays out? I think this could prove to be a good paper topic, even though this is just an initial idea, but other thoughts are welcome as well.