America's Bankrupt Banks (Inside the Meltdown)

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America's Bankrupt Banks (Inside the Meltdown)On Thursday, Sept. 18, 2008, the astonished leadership of the U.S. Congress was told in a private session by the chairman of the Federal Reserve that the American economy was in grave danger of a complete meltdown within a matter of days. There was literally a pause in that room where the oxygen left, says Sen. Christopher Dodd (D-Conn.)

As the housing bubble burst and trillions of dollars' worth of toxic mortgages began to go bad in 2007, fear spread through the massive firms that form the heart of Wall Street. By the spring of 2008, burdened by billions of dollars of bad mortgages, the investment bank Bear Stearns was the subject of rumors that it would soon fail.

Rumors are such that they can just plain put you out of business, Bear Stearns' former CEO Alan Ace Greenberg tells FRONTLINE.

The company's stock had dropped from $171 to $57 a share, and it was hours from declaring bankruptcy. Federal Reserve Chairman Ben Bernanke acted. It was clear that this had to be contained. There was no doubt in his mind, says Bernanke's colleague, economist Mark Gertler.

Bernanke, a former economics professor from Princeton, specialized in studying the Great Depression. He more than anybody else appreciated what would happen if it got out of control, Gertler explains.

To stabilize the markets, Bernanke engineered a shotgun marriage between Bear Sterns and the commercial bank JPMorgan, with a promise that the federal government would use $30 billion to cover Bear Stearns' questionable assets tied to toxic mortgages. It was an unprecedented effort to stop the contagion of fear that seemed to be threatening the rest of Wall Street.

While publicly supportive of the deal, Treasury Secretary Henry Paulson, a former Wall Street executive with Goldman Sachs, was uncomfortable with government interference in the markets. That summer, he issued a warning to his former colleagues not to expect future government bailouts, saying he was concerned about a legal concept known as moral hazard.

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Comments and User Reviews

  • grey area

    we can all thank george W. and all the greedy wallstreet fat cats for the meltdown. i wonder what woulve happened if mccain/palan won the election?? wow man i can only imagine- WW3 then mccain dies cuz hes 150 yrs old and a gigantic m0r0n (palan) is running the now broke , collapsed country, wouldve been fun no doubt

  • James

    Typical liberal documentary.There is no such thing as "too big to fail", only "too connected to fail". The producer of this documentary had made a joke out of it by interviewing Barney Frank. He is the biggest moron in the House of Representatives who had continuously pushed financial institutions to lend credit to unworthy borrowers.

  • Waldo

    How can explaining what happened without making a single judgement be a, "liberal documentary"? No one had to push finacial institutions to lend money to "unworthy borrowers" (typical elitist term), they did it because they were getting stinking rich on selling credit default insurance and bundled debt. If these finacial institutions were made to take responsibility for their own loans (part of Obamas wall street reform package) then no amount of government persuaion could have moved them to lend to the less able or finacially challenged. And yes, there is a such thing as too big to fail when the failure of a company can send the whole finacial market into collapse due to a crisis of confidence and force this country into a depression. It has happened in the past, with the great depression, and it happened again with Lehman brothers. And, it will happen in the future if the government does not regulate and make sure no company becomes this connected within the system.

    The melt down is pure and simple, a perfect example of what happens when you let capitalism run unchecked. The bailouts where a unfortunate neccesity, and proposed as well as backed by a conservative republican white house, federal reserve, and congress. And now we have the tea party and capitalism enthusiasts screaming about government regulation and over sight, and the American people seem to be blind enough and ignorant enough about the problem to back this movement. The republican congress has denied any funding for the wall street reform package or the health care plan until at least April, when funding for government initiatives comes back up. At this point the tea party will have taken the seats they won in the fall of this year, so you can bet thess programs will not get funded and big banking and wall street will go back to their faulty lending practices and complicated financial instruments that alleviate responsibility and spread toxic assets through out the system. This economy will fail again in a short amount of time. When this happens their will be no more money for bail outs and we will enter a depression. I wonder what the conservative hate machine will have to say for itself at that point. I am ashamed of this countries war practices and economic usury. But, if the mass public can't wake up after what we have all seen and experienced, well we are only getting what we deserve.

  • Waldo

    Oh, and if you conservatives think we don't know why you hate Barney your wrong. He's gay, get over it already. At least we got some small measure of sanity from the lame duck session, go liberals!

  • Wayne

    Greed. Fiscal liberalism dressed in a conservative coat. They don't teach ecoomics in school anymore. They teach economizing...teaching children hot subsist on less and less...their future. Keeping the population dumbed down and easily attracted to emotional sales pitch for easy money in hosing. The nly easy money landed at te feet of wall street bankers.

  • Waldo

    @ Wayne

    I know that traditionally the whole idea of capitalism without regulation or oversight was classified as economic liberalism, the opposite of Kensian economics which called for government intervention through controlling interest rates and increased spending by the government to put money back into the system and hopefully spurr retail sales- inturn bringing about a recovery. But now days it is the conservatives that call for no regulation or manipulation from the government. They have managed to convience the public that somehow the corporations and big business has our interest at heart and not simply making the most profit no matter what it does to the economy in the long run. I give the conservative administration in power at the time of this collapse the credit they deserve for realizing that they had to do something to try and hold back the total failure of the markets, but they went about it totally in the wrong way. The simply handed over billions of tax payer dollars with no demand for an accounting of what went with the money or a call for changes in the way that these business were doing business. We can't expect any different outcome if we allow them to do the same things they were doing and continue to shirk responsibilities and flood the markets with faulty assets.

    Don't get me wrong, I am totally against the federal reserve, which is not federal in the first place and is privately owned and operated by big banking interests. They were created in order to try and avoid these types of failures by manipulating interest rates and the amount of currency in circulation, but they abuse this power in my opinion. They engineer economic crisis to bring about political change they find beneficial for big banking and corporations, which is enevitably less regulation and oversight and more usury of the common man.

    Right now corporations and banks sit on trillions of dollars, according to the AP, which they refuse to invest until they get what they want, which is the permanent reinstatement of the Bush tax cuts, at the cost of record debt, and freedom to do as they please no matter how unethical or negative for the stability of this nation. I have no idea what it would take to wake this country up to the fact that if we give these people free reign they will not rest until they are making record profits again at our expense, and all things have been privatized which means all things are about nothing more than profit including education, health care, and social programs for the needy and less forutnate.

    Also make no mistake that I do blame the government for many of the ills we are experiencing. They got in bed with insurance companies and mandated liability insurance for every one that owns and operates a vehicle. At the same time state governments got in bed with same people and made it impossible to purchase insurance across state lines. Now since most states have only a handful of insurance providers operating within their territory this means these few insurance companies can get together and set costs at a ridiculus rate. They are making a killing off of this mandate at the expense of the average joe that has to have transportation to survive. This is just one good example of how government and big business has gotten together to ruin this country. Many other environmental regulations and so forth have shut the little man out and allowed the big businesses to monopolize things like the timber industry, heating and cooling, and many more feilds.

    But notice that government alone and by itself is not the issue, they do not gain by doing such things. Its once you combine them with big business to fund these extravigate and manipulative campaigns and unfettered capitalism that we suffer. Most of us agree that some type of government and rules are neccessary for a safe and productive society. We must call for capaign finance reform and more accountability from government. We must once again return to actuall debate on real issues amongst candidates, instead of morality and ideology taking center stage. We must find some way to sever this evil alliance between government and big business, or I fear eventually this country will either be gone or unrecognizable. It is now or never I fear, we must wake up. Turn off your tv's, put down your cell phones, let go of religouse ideology and legistlated morality, and get involved America!

  • Waldo

    Wow, that was mouthful, I feel better now. Sorry for the domination of the thread guys. I will back off for awhile.

  • Robyn

    This financial meltdown was the only chance that the middleclass had to be effectively involved in the economy of the U S. These unscrupulous financial institutions that have hijacked our economy through the corporate lobbying of our elected officials have finally killed the goose that laid the golden egg. Their depraved greed-lust that over-valued homes and their issuance of interest only mortgages had finally undone the strongest economy the world had ever known. If they had been left to fail, it would have been a devastating blow to the world power players, but middleclass entrepreneurs would have salvaged the economy. After being given the +/- $750 billion, these psychopathic entities bought other companies for pennies on the dollar for their own gain and put nothing back into the economy in the form of middleclass business loans. Paulsen and Bernanke think they have saved the economy; what they have done in fact is drive a stake through its heart. If that money had been given out as small business loans the US economy would be up and running already; instead we have revived a corrupt system that is bound and determined to destroy this country by lobbying their way to greater profits and sending more and more jobs overseas.

  • Nigel from New Zealand

    This documentary is a sham! Bernancke & Geitner are pushed as genius? what the @#$%! What an absolute white wash, these corporate criminals know the score because they are in on the game. Bernancke the genius in 07 just before the meltdown publicly declared "there is no risk of a recession" or try the so called "Green shoots" farce in 09! What a bunch of shills.

  • Waldo

    @ Robyn

    I never thought about it that way, that the money could have been given out as small business loans. Great idea, somewhat of a risk, but still great idea. Makes me wish we would have given it a shot, they had to do something but what they did was for the most part a very temporary fix, and a handout for old buddies at the same time. Everyone blames the current admin for it though, it was Bush and the feds that gave out the wall street bail outs not Obama, he wasn't in office yet.

    Of course you do have to remember that would have let the market completely crash and many hard working middle class investors would have lost their nest egg, mnany hard working middle class people worked for these companies that were going bust as well and would have lost their jobs. Yes the small businesses possibly would have brought the economy back eventually, but much too late to save these peoples retirements. Then again they eventually lost their money anyway so, who knows. Maytbe you are right. Definitely something to think about.

  • Waldo

    @ Robyn

    You know the more I think about it, that would not have worked in my opinion. Small businesses need open lines of credit or they simply can not operate. If they had of let these companies crash and burn and the market fail completely, all credit markets would have been frozen completely as well. The government can't stay in the business of financing small businesses for open lines of credit, its too long term. Many small businesses went under right after this because credit markets froze even with the bail outs, to have given out this money in small business loans would have been to set those businesses up for failure, credit markets frozen and retails sales bottoming out due to high unemployment. They should have required the companies they bailed out to keep the credit markets open and working so that small businesses coud attempt to at least stay open. They should have also required each company they bailed out to make so many small business loans to new businesses as well. This way they have bailed out the big guys keeping the credit lines open and opened the door for growth at the same time, as well as made some stipulations about what the money they were giving out was to be used for. Its a combination of your idea and what they did. Thanks for putting that idea in my head, I am writing a final paper for macro ecomonics this quarter and this would be a great topic.

  • http://web.me.com/ddharrington/iWeb/site/dean_harrington_visual.html Dean

    The set-up for this failure started with Reaganomics ... continued through to the present and that was ... unregulated financial markets where anything goes ... all the way up to public bailouts of very wealthy financial firms! They have the money and the public has the debt ... who's interests are being held dear ... not the publics!

  • Nigel from New Zealand

    @waldo
    backing off?

  • http://n/a Za tarra

    When QES3 rolls around to bail out the debt city and local goverments have to keep them out of bankruptcy so the they can continue to enforce the federal goverments laws, we will know the end is near. Learning about hyperinflation before it happens..... priceless! But at least those rockets off the cali coast will not change direction from west to east till QES4, by then we will have devalued the worlds investement in the dollar by 90%. i only ask that would they pls start printing money on softer paper so when i wipe my bum with it i can think about what a great job Ben, Hank & Timithoy did improving the dollar. oh and they might want to think about quilting and using ink that is made of soap so it cleans my arse also. an printing the dollars on a 5 inch wide roll that has a cardboard center for those quick deposits. if we do this and make every left hand ass wiper in the world have to buy in to it we might just see our way out of this economic singularity. WWIII OR THIRD WORLD STATUS HERE WE COME G E R O N I M O...........

  • Steddy

    This is awful! Did Ben Bernanke produce this documentary himself?

  • SWM

    Good lord. Nearly every post on this page is rife with fundamental misunderstandings of finance and financial markets. I am amazed that you all can post them with such an air of confidence. One at a time:

    1- not worth responding to

    2- Frank is a financial illiterate, no doubt. "Too big to fail" is a nebulous idea that could be evaluated if we were to set some limits on it (e.g., an acceptable floor for Real GDP), but rejecting the notion wholeheartedly is just counterintuitive.

    3-Stay in physics. There is nothing inherently wrong with selling insurance for bond defaults, and the fact that you used the term "bundled debt" instead of "securitization" suggests that you are so unfamiliar with the jargon of finance that you do not understand the mechanisms by which it works. Given solid valuation and leverage practices, mortgage-based securities (and any debt instrument that can be securitized) can be a sound investment. It is not a simple question of whether there's too of the instrument, as you suggest. Rather, it's a mix of: how well is it valuated, how much do you have, and how levered are you once it goes bad? The enormous accounting leverage (I've seen as high as 35:1 assets:equity) will slaughter you if the valuation is bad, which it was in the case of Bear Stearns. The rest of your post is full of intellectual masturbation and notions that are both vague and unsupported.

    4-No, many conservatives hate Frank because he's a goddamn moron. It is telling that this documentary is driven by interviews with journalists, who have no idea what's going on rather than, you know, financial experts. Sadly, those journalists display a degree of understanding that makes Frank look like a Toddler. The next most despicable thing to homophobia is someone who accuses others of homophobia without basis to win an argument. You lost the argument, but you win the award.

    5-I literally cannot understand your point with all the typos and each sentence being completely unrelated to the one preceding it.

    6-Hey, economic political philosophy from the undergrad physics major. I'll leave you be on the labeling of antiquated political views. But the hordes of assets that large corporations are sitting on is not some sort of cartel-like hostage tactic as you paint it. This is actual a sign of corporations being what they should be: wary and jealous of their money and dutiful to their shareholders. While federal taxes are always in significant flux, they are far more so now than they they usually are. As a result, the investments these corporations wish to make are strongly dependent on an outcome the corporations don't yet know of. Accordingly, they're plugging up those assets until they know what to expect in the market and they have enough certainty to start making informed investments. Hell, considering your pandering for regulation you should love this behavior, not decry it. The rest of your post is mere rant.

    7- s'all good

    8-Your solution is to allow our dominant financial institutions to collapse, and then make enormous transfer payments to small businesses? I will give you high marks for idealism. But then I'm forced to take all those marks away, and then some, because your proposal is the financial equivalent to taking a 12 gauge, loading it with 00 shot, and shooting yourself in the stomach until you bleed to death in a painful and stupid fashion. This is notion is almost dumb enough to get you elected to office. Let's start with the basics. You realize nearly every small business is heavily dependent on credit from larger financial institutions, right? Next, you realize that any consumer with significant equity investments, mutual funds, etc. is going to lose all their value as the major financial institutions fail, right? And that that investment value gives the consumers the disposable income they need to actually buy from small businesses? You also realize that any medium or large corporation has significant debt on its balance sheet, and with their creditor failing, will be unable to continue anything dependent on non-equity? Sweet, bye-bye all corporations! Now everyone in a corporation is getting laid off. Next, everyone dependent on that corporation gets laid off, which includes pretty much everyone not working in the public sector. This robs all working class people of labor jobs, all middle class folks of managerial jobs, and all upper class people of their money, since any investments they had in either a large corporation or investment institution are now worth nothing. OK: we now have small businesses flush with cash, but no consumers, creditors, or larger corporations. Unfortunately, they have no consumers, so they have to quickly start relying on that cash to pay off bills. Once it depletes, they have no creditors to turn to because you let them all fail. At the end of the day, rather than bilk the taxpayers to keep them alive a little while, you've managed to crash the entire economy. Congratulations!

    9-Spent some time in NZ, go All Blacks.

    10- You actually gave serious consideration to 8's idea. I sure hope your next post realizes that it has more holes than pumice.

    11- Bingo! You made the realization

    12- Reaganonomics has its flaws, and we could discuss them but we'd have to get much more specific than what you're providing. Bash the mega financial firms if you want, but you do realize if they go then we ALL go. That's just the way our economy is structured right now.

    13-Go All Blacks!

  • JustSayGrow

    The Federal Reserve, right next to Federal Express in the phone book. A corporation. The corporation that controls the money in the usa. How is it that the amerigun people believe that the administration controls the peoples, when it is owned by the corporation. I do believe it was pres Hoover sold the country out. No point blaming, bush, obama, or any other token figures for the cess that they call america. Revolt!

  • Waldo

    @ SWM

    Well, excuse the rest of us for having any ideas or contributing. I will freely admit economics is not my strong point but you are a conceded elitist, pure and simple. I don't think anything I said was that far off the mark, nor do I think you have anything to say except to insult everyone and claim superiority. People like you are why I stay out of economics. Most economists are elitists that think no one has the right to speak about the economy without a grad degree from Harvard in economics, besides its boring and shallow.

    You should be glad the public is taking an interest, instead of insulting whole threads of people and trying to intimidate with jargon. But hey, you have to make yourself feel smart somehow huh, you failed. You seem elitist, big headed, full of it, but not smart at all. And no matter what you say banks being able to sell their responsibility instead of stand behind it is not a good idea, it does not force them to vett borrowers and opens the subprime door wide. As far as it being a good investment- who cares? Thanks for ascending from on high to mingle with the commoners though.

  • Robyn

    @Waldo
    Small businesses produce about 80% of the available jobs in the workforce. Large corporations have a history of eliminating them. You don’t see hostile takeovers of small businesses. I agree this problem was mostly caused by our first retarded President (GW). He was a puppet for the corporate agenda, but Bill Clinton set the stage for this with his signing of the NAFTA bill, which allowed corporate America to start dismantling the economy by outsourcing middleclass jobs and importing cheaper raw materials. The only way you will kick-start this economy is with small business opportunity; except for the higher echelon of corporate employment, most corporations do not pay very well. I do not see how you can revitalize an economy by dumping Billions of $ into companies that send their jobs overseas.
    I live in the Hudson Valley where IBM use to be a major employer; they paid well and there were many more jobs created by small businesses that were parts suppliers for IBM. The economy was very strong here. In1994 +/- they moved out, lock stock and barrel, it took several years to complete, but when it was, the economy here was devastated. In the city I live in, before IBM pulled out of the Hudson Valley there was on average 50 homes for sale at any one time and the entire area was crawling with small businesses; after that there were about 5,000 homes for sale and virtually no employment opportunities. Now we have a retail based economy, which is notoriously low paying and part time with no benefits.
    My point is that to companies like IBM, the employee use to be their greatest resource, now it is the stockholder and employees are considered expendable. This is the attitude of most, if not all corporations today, and you cannot rebuild an economy with that business plan. It may be good for the corporation and its stockholders but it is not so good for the local economies where they do business.
    I agree that there should have been a prerequisite to the bailout that required small business loans, but GW and crew were too busy stealing $billions from the wars in Iraq and Afghanistan to be concerned with trivialities like that; after all his terms in office were over…it is the next guy’s problem. Until we eliminate the corporate lobbying and outright purchasing of our elected officials, I don’t see this problem doing anything but getting worse.

  • benny

    what a load of crap!! what a waste of time...... a great documentary if you want to spin a lie!!!

  • Josh

    It's all a scam and the american people are to stupied to stand up and do something about it. Shame on us. Clinton, Bush, Poppa Bush, all the Bank excectutives should be in prison. We need to stand up and have a revolution. You wouldn't let me walk up to you and take you're money or home so why let those jackasses take it from you. We need to quit being so ignorant. I'm calling for a world wide revolution.

  • Waldo

    I'll sign up for that Josh, except I have nothing against clinton. He managed to balance the budget and leave a surplus when he left office. The only thing I hold against the man was his massive deregulation that set the stage for abuse. In his defense though he was advised to do so by people he trusted and it did work for the short term. Bush senior had left us in a mess and he had no money to make the changes and reforms he promised during the election. He was convienced to deregulate and that the markets would allow for the life he wanted to create for the American people. It worked for awhile, but eventually landed us here.

  • Charles

    The huge salaries and bonuses are what really frost me.

    Firing all those tied with fraudulent loans would leave empty offices, which would be a hazard in and of itself, but I think some high profile prosecutions would be helpful.

    Unfortunately, financial speculators have proven themselves, unable to control themselves, (regarding greed), to rely on them to do the right thing for the nation/economy. Of course they should not be expected to do the "right" thing. That is not their function. Therefore, I really see no alternative than to regulate their acceptable behavior, (which all bankers the world over -loath). I see this as the practical, though distasteful solution.

    If everyone kept blowing themselves and others up at the gas station, we would have to eventually make a regulation banning smoking at the gas pump.

    Regulations are a neccesary evil to all societies. What prevents me from killing off my neighbor to take his house because I like it better than my own house? In more barbaric times, this was not neccesarily so. Today it is a common knowledge or common sense or common law component of our civilization. I hope that I am right about this, (as he quickly and repeatedly looks back over his shoulder for the flying mace). :~)

    Regulate only as neccesary and vigarously debate it.

    Survival must take precedence over the game. What game? Well, "Partisan" of course. Hey, I just found out that more than two can play "Partisan". That's cool.

  • Waldo

    @ Charles

    They do have a ragulation where I live that you can't smoke at the gas pump. That means that some brilliant genuise in the past decided to smoke while pumping gas and probably blew the place up (LOL). I agree with you though, on a more seriouse note. Regulation should only be applied where neccessary, but it should be applied vigorousely in those cases.

    I think the masses agree with you as well, people are tired of watching the rich get away with ruining our future and then asking for more in the same breath. The recent polls showed very popular support for ending the Bush tax cuts and regulating wall street practices, of course the opponents of this will always say we are all brain washed and don't understand economics. Funny, most reputable economist also support regulation and kensian economics, are they all brain washed as well? Don't let them fool you, we have recent history on our side as well as popular opinion.

  • Charles

    I think that the repealation of the Glass-Steagall ACT was the single largest error. Re-enacting Glass-Steagall would be an awkward, but I believe beneficial move. Perhaps, in a phased-in manner.

    Increasing reserve requirements and requiring a reasonable reserve to be held by insurers would also be wise. Futures contracts and short selling also worry me a great deal, but I can not think of what can be done to make these less casino-like.

    And what can be done to protect individual property owners(buyers) whose loans/deeds are blended into Mortgage-Backed Securities? America used to be one of the safest places in the World to invest in real estate because we had clear titles to our land, and a stable government and economy.
    It is very difficult to re-establish a reputation.

    I won't say abolish the Fed entirely, for I believe that Congress can do a far worse job of it, but I think an annual audit of the Fed, and general regulatory requirements on the Fed, may be helpful. In fact, audits even of government agencies is a good idea. For example, how many trillion did the Pentagon lose track of? Oopsy. Completely unacceptable.

    99.99% of us would be in prison for doing far less, than many of these individuals and groups have done.

    Absolute power corrupts - absolutely.
    Everyone wants to be the one who thought of this paraphrased saying. LOL

    It was Lord Acton.

  • http://princejaka.wordpress.com princeton

    @waldo

    kensian economists always will be the most reputable and financially backed because they support government control and expansion of power over the economy.. like the king's court economists who always justify political control over the people's labor, thus enriching politicians.. why would it ever be the other way around.. do you actually believe the central banks and they're elected politicians will ever support "laissez faire" which virtually grants them no personal profit?

    Kensian economics is completely wrong without a doubt and represents several violations of basic economic principles.. supply and demand (what the people want and how much they want to pay for it) should always control the market, not some dim-witted politician's notion of "regulation" and "common good"

    The Austrian economists have been saying this for over a century and soon the truth will be out.. artificial control of the economy (force/legislation/regulation) always breeds corruption and instability... under central bank control, inflation is the norm and currencies chronically lose value, as opposed to what they would be doing if left on their own, actually appreciating over time as more and more goods and services become available at lower prices...but no! so much currency is conjured up out of thin air and thrown into circulation that we have never been able to fully enjoy the fruits of private labor & technological advancements.

    this is without even mentioning the fact that almost 50% of everyone's money & time gets sucked into political agendas through taxation that rarely if ever at all benefit those who are stuck with the bill.

    waldo, why do you blame capitalism, when 50% of all private production is manipulated by the same people you want to "regulate" the markets?

    and why do you blame capitalism when those same people through the central banks manipulate the currency and interest rates?

    deregulation of markets by government is a farce, because of taxation and the central bank.. this is where the instability arises..

    meanwhile regulation by government decree (violence) always leads to corruption, because the regulators will inevitably get bought out.

    A truly free market would regulate itself and corruption would not be as prolific because competing regulating bodies would all oversee each others' actions as opposed to some massive gunz in your face regulator that cannot be overturned.

  • http://princejaka.wordpress.com princeton

    @everyone

    I am amazed when people blame corporations for buying and lobbying politicians.. and think they will solve anything by "regulating them" or "railing against" "corporatism".

    when you have a group of individuals whom you allow to use force and initiate violence to achieve their goals, then what else do you expect business owners to do.

    when you have a government which can threaten private citizens with violence and kidnapping, then you have automatically created the worse corruption mechanism possible.

    In a truly free market without sanctioned coercion, then the people would be the only ones a corporation could appeal to, by either providing cheaper, better services, or outsmarting competitors through advertising and cutting costs.

    Now that you have nanny gubment which can pass laws and shoot people who don't comply, why should corporations appeal to the people anymore?

    It now becomes a matter of who can buy off the politicians and get a law passed or get a gubment contract.. forget fair and square competition, it now become a matter of buying a gun at the white house or city hall, so my competitors are breaking the law by competing with me, or so taxpayers can subsidize my business and maybe even bail me out because I convinced them I am "too big to fail"

    this is so obvious, but yet so many so called "expert" economists ignore that and want to rail at corporations as if its their fault there is some group of people with guns.

    there was a quote, & I paraphrase:"when doing business, you better get involved in politics, or the government will ruin your business!"

    businesses have no choice... the government has the guns.. not the corporations. will you people wake up to the violence at the core of our society that is responsible for all our woes?

  • peter

    I am just glad this is all beginning to happen at last... the non-commodity money system has never worked for well over 2000 years, it's about time it collapsed... then we can get back to non ownership and begin to create peace on this planet.. one definition of insanity is to keep attempting something that didn't work last time and expecting it to work this time... when we wake up and realise that the lunatics have always been in charge of the asylum.. then we will change and the peaceful ones will have their needs met and we will no longer have the greed and narcissism that is connected to power and control that underpins the financial system.

  • peter

    And I hope this happens sooner rather than later.. I want to be alive to see this system fall once and for all

  • Robyn

    @ Princeton
    It is the corporations like Monsanto who are putting the guns in the hands of the ‘gubment’. I agree the way the US government has evolved is a major contributing factor of this problem, BUT it is the major corporations that are providing the money for political campaigns. It is estimated the 2010 midterm elections cost about $4 billion; that money did not come from individuals like you and me! It came from corporations like Monsanto that then have their ‘ex’ employees appointed to key positions like the FDA so they can influence legislation in Monsanto’s favor. The problem I have with corporations is that they have only profits as their agenda and do not care about long-term public safety. Our Government was created ‘of the people, by the people and for the people’; because of corporate lobbying of elected officials it is now ‘of the corporations, for the corporations and by the corporations’. If this coerced legislation was in the best interest of the citizens and farmers of this country I would not have a problem with it; but it is not. The video ‘patent for a pig’ shows how they work! They splice a gene in a pig that gets it to gain muscle weight and now they are trying to own every pig on the planet that has that genetic trait. They are doing the same with grain farmers. That is not good for any economy; once a monopoly is created they can name their price for food.

    I am starting to think there are two answers to this predicament that will start to address the problem. The first is eliminate corporate lobbying and the second is limit ALL elected terms of office to two (consecutive or alternate); this will break the strangle hold the corporations have on this country and eliminate the Dynasties that foster it.

  • Waldo

    @ Princeton

    I am not starting with you Princeton, its getting old. We have argued this same issue until I am plain sick of it. You will never see the light and always think corporations and big business having free reign is the answer, I will never see your point and will always think they are the problem when not regulated or controled. Let it go for christ sake already, you are never going to change my mind about the fact that no government means no capitalism or business any way. History shows over and over that in the distant past the one thing that a empire could do to facilitate trade was to have one currency with a set exchange rate and rules for business that applied in every part of the empire, look at Rome for proof of this. Otherwise things work differently in every little section of the empire and people create their own currency that all have different exchange rates. Also, crime and bandits run rampant with no law or way to legal protect ownership so business is out of the question. Another issue, contracts and holding the other party to what theyagreed to. People sign contracts and invest millions based on the expectation that these contracts are legally binding. Under your anarchy system nothing is legally binding and people would simply refuse to hold their end of the bargain up once they got what they wanted.

    We do agree on one thing, I would do away with the fed my self. The only difference in our opinion here is I would have another body, controled by elected officials do the same thing the fed used to do. Just like what Lincoln did with the green back. The problem is not the manipulation of interest rates or the control of how much currency is in circulation, the problem is that the fed is controled by big banking and we citizens have no say because the people running it are not elected and do not answer to the American peoples vote. In other words the fed abuses this power in favor of the corporations and big business.

    I respect your opinion as your opinion, I have finally come to believe that you do not support nonconventional opinions about the law, medicine, politics, government, and physics just to be different. These are obviousely your real opinions, hard to believe someone could hold this many nonconventional opinions and really be thinking out every issue and not just being a rebel without a cause, but I will give you that benefit of the doubt. Now please stop trying to open arguements with me on every thread about economics, medicine, polititcs, physics or whatever you disagree with me about. State your opinion all you want, this is a free country and this is a fair balanced public site, but you are not going to get me to argue with you anymore. Its pointless and I am quite sure everyone here is tired of hearing us go on and on. Thanks for all the debates and your attention, I wish you well.

  • Waldo

    @ Princeton

    Oh, and I apologise for being rude in the past. I really was conveinced you were just being unconventional for non conformities sake, not anymore. I should not have been so judgemental and rude toward your opinions, sorry.

  • JF Leblanc

    This is the PBS Frontline episode, with all the marking removed..

  • phil atio

    They should let lehman fail, shoulda let bear stearns failed and shoulda let aig fail. If they made bad investments they deserved to fail, anyone who was dependent on them to the point it would cause them to fail shoulda failed too! If your bank fails, you own your house, you own your car,you have no mortgage, no car lease payment, no car payments, no loan payments. Americans woulda been rolling in dough but hank paulson hates middle class america and Obama government is anti middle class white people and want to keep black people poor so that we can be dependent on government forever so they can expand big government

  • over the edge

    @phil
    if a bank goes bankrupt the loans are sold to other banks for pennies on the dollar the mortgage,car payment and so on are still owed.secondly many of these banks hold peoples retirement (directly or indirectly) or savings now there is insurance held by the bank for deposits (there is a cap tho) but the failure hurts the middle classes retirement and savings dramatically.

  • tito

    Marx, wake up! show them the way!

  • Dirk

    It's so easy to blame Wall street for all of this. Americans should look in the mirror and see exactly were this problem began. It started with people spending more than they could afford, wanting a second car so their driveway was just as full as the neighbors one. Americans got greedy and overrated themselves extremely. Work, earn, save, spend and spend wisely. Somewhere people got lost someway down that road.

    If you are a country with the size of America, with the economic system of America, with the talk and the confident of America, you should act like it as well. Clearly American citizens and financial institutions weren't able to cope with the responsibility they were given. A true shame. This all proves once more capitalism these days isn't worth much without control of a government.

  • Rendition88

    Ugh, I am starting to notice that this website is deluged with marxist and communist rhetoric. Do you people have a different color tin foil hat for every day of the week or is one sufficient?

  • Dbmwjo

    SWM,

    Out of curiosity, what did you think about the presentation provided in this documentary?

  • Ron

    Waldo
    I think you should watch Quants a documentary on the first page of the economics category. Go into it about 10 minutes or so and GW Bush is there talking about how some segments of society should be helped and will be helped by the federal govt via Fanny May and Freddie Mac to buy a house.

    But the fuel was the Federal Reserve lowering interest rates to 1% and holding them there for years. That combined with fractional reserve banking and an unregulated derivatives area with the blessing of the US govt to help out less qualified people opened the door to gree like none of us have ever seen and hopefully will not see again.

  • Ron

    Waldo and Robyn

    A solution proposed by a few was instead of the life lines to the banks give each american householder a 3 year tax rebate with stipulation that X % be put down on their mortgage. Thust the banks get what they need and the american household gets what they need.

    What happened was moral hazard was ok for the banks but not ok for the householders. I can understand the anger people have.

  • http://www.customfit.eu Sunglasses

    What a movie! Damn!

  • wet_willy

    I love that voice of the narrator

  • http://twitter.com/sxers2k8 Uhlabomber

    Love how they make Paulson and Bernanke out to be the savior of sorts when in reality they rewarded the treatury of the investment banks that were selling bunk CDO's filled with sub-prime loans to investors only to bet against them with credit default swaps. Investors lost everything while the banks got rich from the government bail-out of AIG. 100 cents on the dollar? That is like a huge attaboy. They created this perfect storm by pushing for non-regulation on derivatives while lifting a lenders constraints on how much leverage they could create against current capital. The organizations weren't getting rich during the bubble, individuals inside those organizations were. Watch this documentary, then watch Inside Job, then decide.

  • http://pulse.yahoo.com/_Z2SNCYKWFBMUWZZDBIB7IDAUWA CMT

    The banking regulations that started the bank meltdown were passed by a Democratic controlled Congress during Clinton's administration. The Affordable Housing Act; look it up. Rules were relaxed further under Barney Frank's chairmanship of the House Banking Committe. Dodd from the Senate share blame too. But Republicans will share some of the blame too. However, the bulk of the blame from the political side rests mostly with Democrats.

    Watch "Inside Job"; this is a great documentaray and will inform you of who is to blame. Oh, and don't forget the combined individual responsibility of those that filed for loans and lied about their income.

    And yes, there are some crooks on the stock market and in the banking industry as well. "Inside Job" will have to be rented...

  • http://pulse.yahoo.com/_Z2SNCYKWFBMUWZZDBIB7IDAUWA CMT

    Dirk, spot on. People do not take personal responsibility. The markets responded to increased risk by allowing derivatives to spread the risk. The problem is that the house of cards was weaker than even they knew. As low as the government got with their on interenst rates, they are even lower now. The big difference is that banks no longer are allowe dto give loans out without concreate proff of income.

  • http://pulse.yahoo.com/_Z2SNCYKWFBMUWZZDBIB7IDAUWA CMT

    They are not sold to other banks for pennies on the dollar. Most loans are backed by the pseudo governmental companies such as Fanny Mae. This is why we keep pouring money into them and why they keep raising fees. They do dump properties to get them off the books so that they can go out and loan to more credit worthy customers, though. The only time stuff is sold for pennies on the dollar is when a bank fails and another bank gets to buy them out. Wachovia is a prime example. The government steps in, loans the money to a rival bank and voila', the rival banks gets an essentially clear slate and all the deposits the failed bank has. Ain't socialism grand?

  • http://twitter.com/Houyqueen Lucy Saw

    There's one thing I don't understand. Why did some of these companies not want to take the money?

  • KalaKillsTime

    You have put it very well. The problem is, however to my mind, not limited to the US. I am in India, and I see how easily the wisdom of generations past is being abandoned by so many just so they can live way beyond their means.

    At one level it was a failure of individual conscience and value system. However, at the same time there is no denying that banks and more importantly the bankers who ran them, acted with such greed that till date I am shocked that such a thing could have happened.

    I am also a little miffed with the phrases like "the bank failed" or the "bank went belly up". I disagree. The bank did not fail, it is an inanimate object, a building. The thinking is done by the people who run them. The decision, the greed, the selfishness is all human.

    Where are these people who took these decisions? What became of them? What personal liability did they bear for bringing America and several other countries to their knees? Lives destroyed, jobs lost, homes and families demolished...and people act as if it was an earthquake or a fire that did it. NO. Greedy people did it. Greedy people who made billions from the meltdown. People who walk free without ever having to explain or account for their greed.

    I would love someone to post a reply here stating that some affirmative action was taken against these bullies.

    Otherwise the only message that this fiasco will send to bankers is 'how do we organize the next disaster'.

  • who_me_yeah_you

    The Party has decreed that aluminium foil hats be provided to the workers as quotas have been surpassed. We can get them in several shades of red. Tin foil? Are you still living in the cold war.

  • henrymart81

    Taking the money was a sign of weakness. If a company needed emergency funding it would scare investors away. So every company was forced into taking the money, so it wouldn't expose who was weak.

  • Attaboyslim

    Throughout all of the fancy explanations of the good and the bad; with some wearing black hats while others had white hats and rode majestic horses to save the day, there was a mysterious absence. To begin with, what possible stress could the Federal Reserve have to deal with, considering the fact that they will only benefit from the printing of more money from the interest. Interest, that will naturally be paid by the American citizens but that is another discussion.

    The fact that the Federal Reserve Banking system isn't provided as constitutional aside, fraud, theft and the conspiracy to commit ... are supposed to be illegal acts. These things were never discussed and that is a huge issue. Consider this; the people involved in the FED, Banking or Wall Street were not only paid multiple times and got very wealthy at the expense of the US tax payers but their greed, surpassed that fact. Those huge checks that were "regretfully" passed out to the 'Big Nine', was a reward for their "supposed" mistakes.

    Performance bonuses that were nauseating in size wasn't enough as they came for more money with "reluctance" and the FED, gladly printed additional currency. The aspect of accountability was never discussed and yet the repercussions were implied to become the burden of the tax payer; innocent generations, I might add, who never had a voice in the matter. There can be nothing fundamentally honorable in a system that praises the wicked by using authoritarian force to bring hardships on the decent. The American people have become weak and the people in power have continually exploited our passivity.

  • http://pulse.yahoo.com/_7SMTJ7IQC74TSD5F74NYJOSY24 Rainmaker

    It's nothing about looking weak, but simply about government owning a large part of your company and, thus, controlling you. No private company wants to be nationalized.

  • http://pulse.yahoo.com/_7SMTJ7IQC74TSD5F74NYJOSY24 Rainmaker

    Nearly all documentaries from PBS Frontline, while surely being informative, are at the same time far from being objective. Like a government making a documentary, with the obvious consequences to its content.

    The banking sector shouldn't have received a cent of our money without accepting very strict regulations of its daily activity. In 5-10 years the financial crisis will surely repeat itself, but this time really crushing everything around it. Why? Simply because the problem hasn't been fixed during the 2008-2009 financial crisis, and the banks keep doing exactly the same. Moreover, they'll be risking even more, understanding that this system is totally unstable and can crush at any moment, so what really matters for them are this year's bonuses made through risky decisions.

  • http://pulse.yahoo.com/_ODU7BANZXUJ45RUKZGLRIJXYY4 anna

    This is just a repacked Frontline report...

  • http://pulse.yahoo.com/_ZMK6YNWJACHQ5CRCJW5TNYFURI KsDevil

    Here we are 3 years later and the ecnomy is still floundering from similar circumstance...loss of confidence.

  • http://www.facebook.com/people/Jonathan-Hornlegs/691280296 Jonathan Hornlegs

    Well put my friend.

  • http://www.facebook.com/people/Ali-Khan/1218322144 Ali Khan

    for me this documentary is nothing but an attempt to make paulson and bernanke look good and and white wash the crimes the did against the people of this country. i refuse to beleive that these guys did not know what was coming when, right under their nose, the banking sector was de-regulated to practice the toxic loans and mortgages. i beleive they actually planned it, so american public money be robbed one more time.

  • Liebewitz

    TEPEE or not to pee that is the question---whether it's nobler in the mind to have a tent near Wall St---or strike out against a sea of trouble-and by opposing, end them .

    Well done...but we-the People -would do better to put our tents outside politicians' houses-----literally-to 'where they live '

    --------------------

    Tthe ancephalous but rich, 'fruit of Gekko's loins 'in their Daddy's office --on Liberty and 48th St --need to see more than this street theatre
    Thousands have left Wall St-who profited from the lead of their 'Chiefs ' below-and who remain wealthy and seeking more or are now..... uncommonly wealthy -on permanant vacation near a golf course-somewhere -neither too hot-nor too cold, but just right.

    The idols of the latest Apocalypse-included but not limited to the US-variety of-Tim Geithner & Alan Greenspan & Hank Paulson-with that other guy (who looks like a club bouncer -but whose name escapes me-(ah-yes) Lawrence Summers

    Their fans of this global X factor game-being.most of the acquisitive ; aspiring ;but least inspiring people of the western world-from DC to Dublin-to Darwin via Dubai. Alliteration has it's uses.

    The banking class were patently greedy which is in their DNA-since early last centuryc 1901. Little excuse to miss it.

    The real blame lies with the power ;privilege and legacy chasers-who are politicians-
    and the assinine but effective media class-including members of the advertising PR-and marketing 'industry'-or sons and daughters of Beelzebub.

    Rise up, friends---smell the coffee they're selling you-with everything else-on a burger
    and resist further corruption.

    We may never have a meritocracy-
    we were fooled with a democracy;
    the least we can do now is to avoid and deny the hypocrisy of today's 'media o cracy-and their friends in power'.

    Maurice Aherne
    Ireland

  • stepitup_onenotch

    I agree with Ali Kahn. The film portrays Bernanke and Paulson as tragic heros, trying their best to save the country when all they did was save the rich elite bankers and their system. Nothing will change until the Finance sector is re-regulated. The best film on this topic is Inside Job.

  • http://profile.yahoo.com/ABN37MIPRDMRW3UX3U3LJOVLSA manfruss

    Word of advise. You're home (or anything) is only worth what people are willing to pay.

  • http://profile.yahoo.com/ABN37MIPRDMRW3UX3U3LJOVLSA manfruss

    The biggest thing that strikes me.... is why the CEO's and decision makes in these banks, didn't have to cough up their freakin' money, for their own business. They should have paid first, and then "maybe" have the government help with the rest. Them CEO's should have been ruined for their actions. That's what happens to any business peon who don't do it right.

  • http://profile.yahoo.com/PUUPQ7X4NUWI5ZU6YRWJMB7EG4 dead pres

    we do not really have to know the immediate outcome... God will judge them for their crimes, and he will judge us too. Who can truly say that they do not know greed, the truth is we all fall short.

  • http://profile.yahoo.com/PUUPQ7X4NUWI5ZU6YRWJMB7EG4 dead pres

    If the government buys stock in your company; and if they buy a large amount of shares, then essentially they own part of that company, and it is the majority of shareholders who control the company. Government control is a bad thing. Our freedom is very precious, and slowly we are losing that grip on freedom.

  • http://profile.yahoo.com/PUUPQ7X4NUWI5ZU6YRWJMB7EG4 dead pres

    The core issue here is greed; as long as it exists in human hearts, this will loop around, it will happen over and over again. We can try to patch things up, but greed will find a loop hole.

  • http://profile.yahoo.com/PUUPQ7X4NUWI5ZU6YRWJMB7EG4 dead pres

    Jesus- "Do not suppose that I have come to bring peace to the earth. I did not come to bring peace, but a sword."

    "For I have come to turn," ...
    "A man against his father, a daughter against her mother, a daughter in law against her mother in law-
    a man's enemies will be the members of his own household."

    Peter, there will be no peace on earth, until the Lord returns; but you can find peace even now. God brings inner peace, the Holy Spirit brings peace to a restless soul. Amen.

  • Robyn318

    Greed is a symptom of our addictive personalities, that, on the surface, when exercised by a mortal individual isnt such a bad thing, it creates jobs and its voracity changes gears when the person dies. Corporate greed on the other hand is another animal altogether; it becomes ‘too big to fail’ and in a sense becomes immortal, more intelligent, resourceful and insidious in its dealings.

    The problem as I see it is that we (the U.S.) are a Republic that elects Representatives (the Electorate) to legislate for us (division of labor) and we, through our higher education like Harvard Business School have become so intelligent and manipulative of the political process that it not only is ineffective any more, but has redefined the term ‘individual’ from a warm-blooded entity to include one created on paper (Corporations).

    Yes, greed is a major symptom of what is wrong, but it isnt the problem. The problem is increasing intelligence and a political system that was not designed for the fast paced changes we see in society today. Within the last century we have seen the U.S. go from an agriculture and manufacturing based economy to a stock market based economy; the monetary system go from tangible gold and silver to intangible fiat money; the country’s wealth go from the hands of corporeal people to corporate think tanks: essentially a shift from being hardware-based to software-based, and there doesn’t seem to be an inherent solution to the problem short of revolt.

    Another symptom is the redefinition of ‘individual’, which use to mean flesh and blood entity and now includes government sanctioned ‘virtual’ entities in the form of corporations. We live in a Capitalistic society where money talks and b*llsh*it walks and unfortunately for the flesh and blood variety of individual the virtual individual has the ability to amass more money through IRS sanctions and therefore get the legislative attention of the electorates; a situation the Constitution of our Republic was not designed to address. Just as at the start of this Republic there were slaves which helped forge this nation for the benefit of its influential members, the ‘virtual individuals’ are creating another class of slaves for the same purpose.

    To solve this problem we have to revamp our educational system from propaganda based to fact based and stop instilling into our students and future voting citizens that this is a democracy where the majority rules, it is not…It is in fact a Republic where we vote for electorates who vote on our behalf for what is best for us; often voting into office many who have private agendas instead of public ones.

  • Tesseractor Telemetric

    this is a paltry revisionist attempt at history. If you don't know anything else, I'm sorry. It isn't going to get better than this.

  • smokey

    My question is,how could the the government bail out the banks when it itself is is bankrupt and has to buy the money at interest from the private bank that prints the currency notes.?

  • Ankit Mittal

    The basic foundation of the banking system itself, is wrong. How can banks just 'create' money to loan out? In very simple terms, if someone deposits $100 in a bank, the bank can loan it out as $900, and the collateral is never worth the $900. It all comes down to the time when people start demanding money from banks. Because there is no money to pay, it's only digital money. They might even convince the government to print more currency (like they always manage to do), but it ultimately comes out of the work citizens do. And then everyone hails the government that they prevented a global economic crisis. It's a very simple game, made complex so that people can't see it through.
    18,000 children die of hunger every single day, and a handful of American bankers are responsible for this.

  • Swapnil

    I am astonished to know that the very people responsible for this utter crisis were not prosecuted and are still "Reining the Wall Street"! Freaking!!!

  • Zapata

    In our Freedom of Speech society we are not told, nor are we allowed to ask what persuasion a significant and highly disproportionate number of the perpetrators of this immense swindle are.

    If you were to investigate, you would more readily understand Henry Ford and others' aversion to that greed and that creed !