BIG ENOUGH TO FAIL: THE 2008 FINANCIAL CRISIS

Topic Summary

Sam Bankman-Fried’s FTX. Silicon Valley Bank. Silvergate. Signature. It was a super rough year to have an S in finance. With the added collapse of First Republic Bank, many were reminded of prior serious concerns about the stability of the financial system. Prior 2008, many U.S. banks issued mortgages too poorly qualified buyers with the understanding that if these buyers late proved unable to pay, they could simply sell the house whose values would only rise. 

Unfortunately, these banks failed to account for a simultaneous failure where a huge percentage of mortgages failed at the same time and the market was flooded with houses for sale, collapsing the price and thus exposing more failed mortgages. Depending on their exposure to these subprime mortgages, banks were at varying rates of strength and weakness throughout this crisis and banks who were not exposed saw extraordinary opportunities throughout the crisis. Legislators and regulators made major changes based on the effects of this banking crisis that continues to affect the banking industry till this day, thus making this moment in history one of the most relevant to modern finance.

Director’s Letter

Dear Delegates,

Welcome to the 2008 Financial Crisis! My name is Mariana, and I am a sophomore at Harvard College thinking of studying economics and statistics. I am very excited to meet all of you.  I was born and raised in Cali, Colombia, and, on campus, outside of Model UN and my classes, I am heavily involved with cultural affinity groups on campus like the Harvard Organisation for Latin America and the Colombian Student Society. I love to dance, cook, and play tennis. 

This will be my second time directing, having directed at HNMUN-Latin America in January!

Please reach out to me if you have any questions or concerns.

See you soon!

Mariana Ramirez Cabal

Director, Big Enough to Fail: the 2008 Financial Crisis

Crisis Director’s Letter

Dear Bankers, Regulators and Everyone In-Between,

Thank you for choosing, or being assigned, the 2008 financial crisis this year! I am remarkably glad to welcome you to my committee at the 70th session of Harvard National Model United Nations, the oldest, most prestigious conference of its kind. Today, we hope to explore your interest in finance and regulation and how they interact with society. In this committee, we will also reflect on how regulations are formed, both contemporarily and historically. 

This real 2008 financial crisis, in reality, was not too different from many crisis committees. Miscommunications, self-serving deals and rampant skirting of regulation fueled much of the crisis with a number of institutional moves driven not by a focus on long term success but an obsession with short term gains. Unfortunately, this came with real world costs for those who found themselves out of a home, a job or otherwise economically imperiled. Hopefully, in this committee, you will avoid many of their mistakes and avoid economic disaster. 

About myself, I am a Harvard College junior born in Buffalo, New York and am concentrating in History and Science: Medicine and Society with a secondary in Economics. Outside of class, I participate in multiple programs at Harvard’s International Relations Council which houses our model UN conferences (like this one), competitive travel team, world renowned magazine and other organizations relating to international affairs. I have traveled to a number of conferences with our travel team and am a program head for the Harvard Program for International Education which teaches international affairs topics to Boston area high school students. I am also a member of our radio station, Harvard Radio Broadcasting, known by its call sign WHRB. I was also a senior fellow with the Intercollegiate Civil Disagreement Partnership, at the Edmond and Lily Safra for Ethics here at Harvard, which aims to reduce political polarization in the United States by encouraging respectful but tough conversations. 

I personally believe that an understanding of history is the most useful tool for solving many of the problems the world faces. To quote Mexican billionaire Carlos Slim Helú, “with a good perspective on history, we can have a better understanding of the past and present, and thus a clear vision of the future."  In the coming decades, the world must face a number of serious, global problems: from climate change to economic inequity. These problems are large enough that no one entity will be able to solve them unilaterally. In my opinion, these problems cannot be solved solely by the public sector. It will take private investment, and some calculated risks, to build a better world for the future. The path to a better world is unlikely to be broad and easy but far more likely to be narrow and difficult, and found by few. But, as Jeff Bezos says, “given a 10% chance of a 100 times payoff, you should take that bet every time.” I hope the experience of this committee convinces you that risks are often worth taking, as long as you know when to cut your losses. 

I’m excited to join y’all as crisis director and, like you, am just counting down the days till conference.

Sincerely,

Chukwudi Ilozue

Crisis Director, Big Enough to Fail: the 2008 Financial Crisis