I just watched this film after the exam, and I feel that it fits perfectly with the content of money and banking. In fact, it is not complicated. It is the solution of the US government to save the subprime mortgage crisis in 2008. I feel that this film is a real money and banking teaching film, which involves many aspects.
TOO BIG TO FALL actually involves many layers of meaning.
The purpose of the government
The first purpose of the government is to achieve social welfare and the goal of fairness and justice. In the process of achieving the goal, in order to avoid the emergence of monopoly and other situations, which will affect fairness, the government has limited intervention measures in many ways. The main and most direct one is that the government is not allowed to directly control the relevant banking industry, but can only be implemented through its own monetary policy and window guidance. But when the situation threatens the stability of the entire financial system, the government has to step in to quell the crisis. In the film, Lehman Bank and Anbang Insurance, as well as many other banks after that, have become so-called too-big-to-fail companies because of their huge share and many interests. Their existence not only represents their own , is more related to the stability of the entire financial system. When there is a risk of rapid depreciation and bankruptcy, the government must intervene. This is also the reason why the title is too big to fail.
2. Trust and Expectations
The existence of partial deposit reserve system and partial cash leakage is the basis for the operation of the entire banking system. However, what supports the operation of this system happens to belong to TRUST. The public believes that banks have the ability to make payments safely. It is necessary to hold part of the funds to meet the access needs of the people, so as to leverage less funds and create a huge credit system. However, when the public's trust and expectation on the safe operation of the bank disappears, a large number of people will choose to withdraw cash and sell currency assets, and the banking industry will face the problem of running, thus resulting in liquidity risk, and unable to complete all redemption, resulting in the bank collapse of the system.
3. Safety and Regulation
The economy is automatically cyclical. When the economy is prosperous, people and companies will actively participate in borrowing and borrowing, pushing up asset prices much higher than their value, and asset bubbles appear. This is due to human nature and cannot be changed. Bank supervision plays an important role. The most important thing in the supervision of commercial banks is the Basel Accord, but the three pillars of Basel 2 are still relatively under-considered, including counter-cyclical capital buffers, too-big-to-fail buffers, and macro-prudential management, all of which need to be enriched. . When the supervision itself is insufficient and commercial banks intend to relax the regulatory standards, the crisis is natural.
4. Physical and Financial
There is a scene in the movie where the CEO of GE calls HANK, which involves the relationship between the financial economy and the real economy. The foundation of the economy is the real economy, but the financial economy provides resources and channels for the growth of the real economy, and with the invention of various financial innovations and the relaxation of financial supervision, it begins to break away from the shackles of the real economy, and even begins to have a negative impact on the real economy. Counteraction, at this time, if the financial and economic crisis occurs, it will definitely affect the real economy for the first time, thereby affecting people's normal life. And this is precisely what the government does not want to see and will not accept.
V. Externality and Internality
The government implements monetary policy, originally adhering to the purpose of regulating the monetary policy, thereby affecting the economic system, and then affecting the welfare and living standards of the people. However, the externality and internality of monetary policy have become the focus of increasing attention. Does the government implement monetary policy because of its active goals, or does it passively implement monetary policy to meet the needs of the economic system to meet the needs of the healthy operation of the economic system?
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