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Set in January 2009, this case summarizes the events surrounding the financial crisis of 2008 as well as leading theories of its origin. Treasury Secretary Henry Paulson must brief the incoming Obama administration on what initiatives have been taken to fight the financial crisis and on what remains to be done. This is an exercise in self-evaluation: What should he say? The case highlights eight notable departures (or "pivots") in public policy. It has been taught successfully in Darden online and in-person classes.
The objectives of this case are to: •Review various causes of the crisis of 2008, the complexity of this event, and the dynamic process by which the crisis unfolded. Diagnosis should precede prescription; thus, a review of causes and evolution should inform policymaking. •Assess the crisis responses in 2008, especially the notable policy pivots during the crisis. This entails evaluating the tradeoffs among goals of rescue, reform, relief, and recovery. Leaders used various instruments of response to the crisis (monetary, regulatory, and fiscal): Were these effective? •Reflect on lessons for leadership during a crisis, especially the challenges of mobilizing collective action when interests are diverse, institutions are inflexible, and information is incomplete. •Exercise economic concepts such as moral hazard, strategic coordination, risk tolerance, information asymmetry, complexity, connectedness, and contagion.