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Paulson Bailout

16 videos
In the fall of 2008, it became clear that a cascade of bank failures was happening because of shoddy loans and exotic securities (both which fueled a now popping housing bubble). In an attempt to avoid a depression, the Treasury Secretary (Hank Paulson) wanted to pour $1 Trillion into the same banks that had created the mess. This tutorial walks us through the beginnings of the mess and possible solutions. Historical note: it was created as the crisis was unfolding.

CNN: Understanding the crisis

VIDEO 14:36 minutes
Video of Sal on CNN on October 10th discussing the credit crisis and a potential solution to it.

Bailout 1: Liquidity vs. solvency

VIDEO 11:26 minutes
Review of balance sheets. Difference between illiquidity and insolvency.

Bailout 2: Book value

VIDEO 10:52 minutes
Hypothetical bank balance sheet. What book value means.

Bailout 3: Book value vs. market value

VIDEO 10:32 minutes
What it means when the market value of a stock is different from its book value.

Bailout 4: Mark-to-model vs. mark-to-market

VIDEO 11:24 minutes
Different ways of accounting for an asset. Mark-to-model vs. mark-to-market.

Bailout 5: Paying off the debt

VIDEO 10:51 minutes
How the bank can liquidate assets to pay off debt that comes due.

Bailout 6: Getting an equity infusion

VIDEO 12:02 minutes
The bank gets bailed out by an equity infusion from a sovereign wealth fund.

Bailout 7: Bank goes into bankruptcy

VIDEO 10:25 minutes
What happens when there is no equity infusion and the bank goes in to bankruptcy.

Bailout 8: Systemic risk

VIDEO 11:52 minutes
How the banks are connected. What happens when one bank fails.

Bailout 9: Paulson's plan

VIDEO 11:05 minutes
What Paulson wants to do and why I don't like it.

Bailout 10: Moral hazard

VIDEO 12:07 minutes
Alternate plans and moral hazard.

Bailout 11: Why these CDOs could be worth nothing

VIDEO 10:44 minutes
Why a CDO could be worth nothing even though they are "collateralized".

Bailout 12: Lone Star transaction

VIDEO 10:28 minutes
A real life example of a transaction involving CDOs.

Bailout 13: Does the bailout have a chance of working?

VIDEO 10:59 minutes
Can the bailout work?

Bailout 14: Possible solution

VIDEO 12:22 minutes
A solution that is MUCH fairer that has a MUCH better chance of working!

Bailout 15: More on the solution

VIDEO 10:09 minutes
More on the "Plutsky Plan".