Inside Job & Too Big to Fail AIG & Koc Holding C.GÖKHAN ÇELEN&FAHRİ YAVUZ

Outline 2008 financial crisis Inside Job Too Big to Fail AIG and Koç Group

2008 Financial Crisis the worst crisis since the Great Depression in 1929 breaking point of the change of financial markets deregulation of financial systems effect on all over the world

Inside Job 2010-made documentary film directed by Charles H. Ferguson Academy Award for Best Documentary Feature in 2010 extensive researches and interviews

Inside Job changes in the finance sector consequences of the crisis deregulation, usage of high-risky systems consequences of the crisis conflicts of interest in the finance industry pressure coming from financial sector on the political process

How we got there the Bubble the Crisis Accountability Where we are now Inside Job How we got there the Bubble the Crisis Accountability Where we are now

How we got there investment banks securitized insurance companies Lehman Brothers Morgan Stanley Merrill Lynch Goldman Sachs Bear Stearns securitized insurance companies MBIA AIG AMBAC financial conglomerates Citigroup JPMorgan Chase three rating agencies Standard & Poors (S&P) Fitch, Moody’s

Deregulation less discipline and more freedom ’the complete or partial elimination of regulation in a sector with the intent of improving economic performance’ Menard & Ghertman less discipline and more freedom more opportunity more profit more risk

Securitization Food Chain

Borrower Lender Subprime Mortgages high amount of home-loan with high credit rates Borrower Lender a chain of investors, investment banks, and AIG-the insurance company

Collateralized Debt Obligations (CDOs) Invesment banks; taking stocks and bonds based on mortgage debts Combination of mortgages with other loans and debts Collateralized Debt Obligations (CDOs) AAA or AA ratings from rating agencies

Was everyone sleeping? NO!

investment banks were insured by insurance agencies higher credits to more people

The Bubble extremely higher money compared to assets provided opportunity for everyone in the US extremely high home prices (the bubble) wealthier  extremely high profits

The Crisis decrease in home prices no precaution from the investment banks exponentially increasing debts of Wall Street investment banks

Collateralized debt obligations (CDOs) CDO market collapsed CDO and hundreds of billions dollars in loans high percentage of the debts could not be repaid by the borrowers to the lenders by lenders to the investors in the financial sector

No cash… liquidity problem  high amount of foreclosures and bankruptcies  increase in unemployment and so on

Big firms! Bear Stearns (R.I.P) AIG (survived) Freddie Mac and Fannie Mae (survived) Lehman Brothers (R.I.P) Merrill Lynch (survived)

Consequences… USA crisis  global crisis Many bank collapsed Unemployment rate tripled Layoffs in the US and in the European Union Even Iceland! 

Government ?

Accountability Accountability (fourth part of the movie): Executives of these supported financial companies, which ultimately caused crisis, did not suffer from the crisis financially or legally. Even though, most of managers or leaders of these firms were questioned about their possible relation to the crisis; they mostly rejected their responsibility of the crisis. On the contrary, most of them got huge amount of severance packages and bonuses from their firms. Most likely that money was funded by the US government itself to rescue the firms. On the other hand it is impossible to reject their strong correlation to the crisis. Top figures of such firms managed to protect their huge personal fortunes for example. That should be kept in mind.

Where we are now Influence of the financial collapse Wealth gap between everybody in public and the richest people among society Where we are now (fifth and last part of the movie): this part of this very detailed documentary on the late 2000s financial crisis is trying to point out how that crisis affected the today’s economic world. As known influence of the financial collapse of 2008 is continuing today. The gap in between the rich and the poor is getting bigger every day. The number of rich people is lessening so the rich people that is consisting less than 1 per cent of the world, has the XXX per cent of the wealth of the world.

New advisors for Obama: Feldstein, Tyson, and Summers* Geithner*: Treasury Secretary Bernanke*: Fed Chair *who contributed to the crisis

Nothing helped the European Union strict regulations about bank compensations thousands of workers were laid off lost of savings, and properties

Earth provides enough to satisfy every man's needs, but not every man's greed Gandhi

Too Big to Fail based on non-fiction book of Andrew Ross Sorkin TV drama film directed by Curtis Hanson written by Peter Gould Now let’s have a look at the second movie, which is not a documentary but a highly realistic TV drama based on the non-fiction book of Andrew Ross Sorkin on 2008 financial crisis; that is Too Big to Fail. It was firstly broadcasted on HBO in 2011. Curtis Hanson directed the movie and Peter Gould wrote it.

Henry Paulson telling about the financial meltdown like story from the United States Treasury Secretary Henry Paulson’s perspective the period of August 2008 to October 2008

Henry Paulson & Lehman Brothers appropriate solutions to rescue Lehman Brothers to protect financial economy of the United States

Merrill Lynch  property of Bank of America Lehman Brothers Barclays

AIG (American International Group) credit default swaps (CDS) Swap buyers business with lenders

too big to fail The number of AIG customers; bankrupt collapsed could not pay mortgage loans hundreds of billion dollars debt too big to fail

Too big to fail ??? (Of a financial organization or other business) so important to the economy of a country that a government or central bank must take measures to prevent it from ceasing to trade or going bankrupt: he caused a stir earlier this month when he said that no company was too big to fail. Oxford Dictionaries, 2014

!! Too big to imagine!! Beverly Hills Mansion

Buying toxic assets ??? Toxic asset Too long to wait…

Direct capital injection only possible option dynamic credit flow lending money out

77 % of all the US banking assets are hold solely by 10 financial institutions! fewer loans unemployment and loosing houses compensation that is made on Wall Street they have been declared that they are too big to fail markets were stabilized the global economic depression

After movies… &

Koc Holding … one of the biggest firms of Turkey active in number of sectors BAA3 rating from Moody’s BBB- from S&P only Turkish company in the list of Fortune Global 500 and what Koc Holding is for Turkey is what AIG is for the States

Koc Holding … leading positions in the many field

TURKEY….. in the middle of energy producing countries and energy-hungry countries developing country one of the major destinations of foreign investors

Koc Holding … is one of the leading companies that invest research and development one of the key actors that is contributing Turkey’s global position

Respectable Foreign Partners; Ford Motor Cooperation in the USA Ford Otosan Türk Traktör CNH in Italy

Koc Group … driving force of the Turkish economy 7% of the GDP of Turkey 10% of the total exports of Turkey the Istanbul Chamber of Industry; annual 500 Largest Industrial Companies; 5 out of top 10 companies belong to Koç Group the biggest company of Turkey

Istanbul Chamber of Industry the most creditable company of Turkey in 2011 and 2012

VS world’s economic power the USA developing country its one of the foremost companies developing country its biggest company

AIG (American International Group) leading international insurance company active in more than 130 countries more than 67,000 employees business relationship with; 90% of Fortune global 500, 96% of Fortune 1000, 98% of Fortune 500, and 40% of Forbes 400 Richest Americans

AIG (American International Group) has institutional and commercial customers one of the prominent, leading, and largest companies all over the world for example; AIG Property Casualty has more than 70 million consumer and commercial clients all over the world

Koc Group … 1st over 70 million customers within Turkey chaotic environment for ; defence finance shipping automotive energy sectors

Koc Group … 2nd Increase in number of unemployed people 90,000 workers of Koc holding half a million people psychological problematic not alternative job opportunities or social security

Koc Group … 3rd 10 %of the total exports of Turkey 7 % of the GDP of Turkey

Koc Group … 4th foreign partners and investors the reliability of Istanbul Chamber of Industry and Istanbul Chamber of Commerce foreign direct investments and collective strategies

Summary: AIG for the United States

Summary: Koç Group for Turkey

Thank you for listening… Questions / Comments