Our government sold us out to Wall St. Essentially, we have no real leadership, as Wall St. runs the show. I've been on blogs that PREDICTED every aspect of this meltdown from start to finish. Go to "Housingpanic," or "Thehousingbubbleblog," or "Dr.Housingbubble." These problems were COMMON KNOWLEDGE in the blogosphere! You can't tell me that Greenspan, Bernanke, Paulson, etc., didn't know!
The worst of it is the filthy thievery; the bailouts are simply THIEVERY. There is no other way to describe what they have done. They give billions, maybe TRILLIONS, to the same bastards who CAUSED the problem in the first place! Talk about moral hazard. My God, look what they have done. Because of The Fed, Wall St., the banking industry, the real estate industry, the mortgage industry...the entire world economy is ruined. The pain that these greedy fools have caused will never be forgotten nor will it be forgiven. I wrote emails and letters and made phone calls to try to stop the thievery, all to no avail. They DON'T CARE what we think. Private profits and social losses. It's INSANE! I'm a teacher and I cannot afford to buy a home in California, because these stupid asleep at the wheel bastards allowed housing to inflate to TEN TIMES a teachers' salary. To add insult to injury, now they're trying to reinflate the bubble. I am FURIOUS about this matter. I no longer have the same feelings that I once had for my country. I feel like the ruling elites and crony capitalists have stolen the future of America...
los angeles, CA
This was the first program to explain this mess clearly. Although I was disappointed that it didn't mention that all these credit default swaps had been illegal from 1908 until 2000. These regulations were put in place after the market panic of 1907. These regulations were meant to prevent the same horrible event from ever happening again. What we need are govenment leaders that know the the history of the markets not businessmen that have no interest or knowlege of this topic.
There used to be a time when only banks gave out home loans. Again the regulation was taken away and now we have learned the hard way why this law was originally created.
We need to incease taxes the upper 5% income of the people. They are the ones that made this mess and they should pay for it. They are well off and won't feel the pain of this historically bad economy. We need more govenment spending for the working classes that struggle and that are gettting laid off everyday.
After 9/11 so much help and aid was sent to to NYC to these people that worked in the wall street area after the twin towers fell. Is this how they repay un in return? They come up with a scheme that results in eveyone loosing a big portion of their retirement accounts ? Is wall street with us or against us.
Frontline made it clear that Paulson was forced to "betray" his own principles of free marketeering by more or less forcing the 9 largest banks to accept federal money to "save the economy". What was omitted, however, was that since there were no real constraints or guidelines attached to these funds, those same banks took our money and hoarded it instead of lending it out to unfreeze the credit market. Did Paulson betray his ideology only to be betrayed by the his former colleagues or was the whole thing done with a "wink and a nod" landing his old buddies a giant windfall?
Two Part Solution to the economic crisis
1) Suspend all Federal taxes for one year. Phase them back in over the succeeding years. Use an inflation trigger of 5% or more to start reinstatement earlier if needed. Advantages - a) No new bureaucracy needed. The mechanism is already in place. b) The impact will be immediate because people will see a significant increase in their paychecks immediately. This will lead to increased spending which will jumpstart the economy. This will create jobs and decrease unemployment. The additional money will also help people pay their mortgages.
2) Issue "Hope Bonds (they would be like war bonds). People who buy the bonds will receive a guaranteed return on the bonds, say 4%. The proceeds of the bonds would be used to buy up bad bank debt at the rate of a penny on the dollar. Advantages - people will have a safe and secure investment, and banks will be able to unload bad loans. Why a penny on the dollar? Since no one wants them, I gave a them a value of just over zero.
How will we pay for this? The US government has already demonstrated a desire to go in debt to solve this problem. The loss of approx 2.3 trillion in revenue will match the amounts mentioned in programs now, but the results of this program will be immediate
I refuse to believe that this crisis started with the subprime mess or the 2nd Bush administration. This crisis was 30 years in the making starting in the the late 1970s when deregulation started to undo some of the restrictions put into place in the 1930s. Laws such as the Glass-Seagal Act were put into place to avoid another mess such as Great Depression.
In 1982, Reagan signed the Banking deregulation act and by 1989 we had a flow blown banking crisis. Yet we did not learn from the Savings and Loans bailout.In the 1990s, Clinton and Co continue to kill Glass-Seagall and allow these new modern Financial instruments. In effect, Clinton and Reagan both allowed for an environment that created the biggest Ponzi Scheme that is bringing down the economy.
So to say that the sub prime mess is the cause of this nightmare is to ignore the facts of the past 30 years.
Santa Clarita, Ca
Great, great program.What ever happened to the Peter Schiff interview that was on "The making of Inside the Meltdown" video?
FRONTLINE's editors respond:
Unfortunately , due to the time constraints of a one hour report, we are unable to include everyone who was interviewed.
First, I think Frontline is consistently at the top of the journalism ranks, so thanks! With respect to this topic, one thing you did not cover is that the original usage of funds for TARP got turned on its' head very shortly after the passage of the authorization. Why? Paulson and Bernanke realized that the actual dollars associated with toxic assets far exceeded their ability to get them off the bank's balance sheets. This alone should tell us how scary things are.
To this day, no one is able to place a "value" on these assets. Consider that the original face value of these loans might have been say $1 trillion dollars. By virtue of packaging these into structured investment vehicles these assets became valued at something like $50 trillion dollars... This is why the banks don't want to lend to each other - they know how bad things are in their own portfolios and they suspect the same of the other banks or worse. Until the financial system can "set a market" for these assets there is no trust and nothing will happen. The other miss in this report is that Paulson gave the money to the bank holding companies (not the actual banks that lend money) with no strings attached. The bank holding companies kept the money and did not injest into the system. Any additional funds need to go to the banks themselves (not the holding companies) with very sure strings attached and transparent oversight.....
So let me get this straight: all the Republicans wear black hats and the Democrats wear white hats, right? Paulson was a bungler and Geithner is a hero. Sen. Dodd and Rep. Frank are naive victims and bipartisan do-gooders, while grandstanding House Republicans are all blowhards and obstructionists.
This isn't journalism, it's a revisionist smear job.
The gratuitous audio "overlay" at the tail end of the problem announcing the triumphant arrival of Obama as our living savior is just icing on the cake.
Next time, how about an incisive look into the role low income housing advocates and their limousine liberal allies on the Hill played in the sub-prime loan debacle?
New York, NY
What a super show!You point out so clearly, but not obviously, that it was and is , the Credit Default Swap market that is the lingering death of the World Economy.The Mortgage Market in the US is 12 Trillion. The sub prime market is about 850 Billion or roughhly 7% of the total
.The unregulated CDS market (thanks Phil Gramm and his Republican brethern) totals 60 Trillion dollars. Is there that much money in the Universe to protect holders of this insurance? I do question why Paulson had to unravel what was lingering there on Lehmans books. What did he expect to find?
Staten Island, New York
Your video indicates the shock of Congress about the toxic securities. I don't understand how they could be shocked.
We sold our home in 2007. The people who bought it paid $0 down and walked away from the table with 2 years of insurance and taxes $1000 cash. Even the simple minded know that a transaction like that has a good chance of never being paid back. If these people get into financial trouble they will walk away. They have no ownership in the property. Congress has oversight over Freddy and Fannie. They also have oversight over the banks. At the same time they were legislating that banks make more loans to low income people.
Now our President wants to bail these same people out of their loans with my tax money. I think the tax payers of this country have paid enough.
It was an excellent program.
What I would like are more specific details explaining the exact connections by which the investment firms Bear and Lehman had a stake in ALMOST ushering in FINANCIAL ARMAGGEDON. For example, explaining in more detail the repo market, explaining which companies was Lehman tied into that would have cascaded into a meltdown had it not been for gov't intervention, etc.
I have watch FRONTLINE for many years. I can't think of a single presentation that captured my interest and attention to the extent of this presentation. It concerns me greatly that so much power is placed in the hands of so few people especially given the risks of their failure to act and behave responsibly. I am a conservative Republican but such actions on the part of of the few is unforgivable. Measures should be taken to place such individuals as the CEO of the major investment banks personally responsible for their actions including fines and the risk of imprisonment. No person (or company) has the right to jeopardize the sovereignty of our nation.
A lot of comments are critical that the documentary failed to address the causes of the meltdown. I thought that the title "Inside the meltdown" described that the documentary gave us an "inside" view of what was happening during the meltdown - and as such it is an excellent piece of work in my opinion.
Prior to watching I was highly suspicious and critical of Bernanke and Paulson. I am still of the opinion that both are locked into economic world views that are too simple to understand the big picture. But the documentary put me in their shoes and these guys were in a very very difficult situation and under massive time pressure. As a result I now feel compassion for these guys and can also see that Paulson was acting from a place where he was trying to save the system - as opposed to one of bailing his mates out or taking some ideological stance. (His 3 page document and ultimatum sounded like George Bush's Iraq story and made me suspicious)
Once again. It is a great piece of work and does document an insiders view.
The root problem is that the "middle class" is overly stressed in supporting our economy. They incur debt through credit in order to have somewhat of a personal comfort zone in everyday living. They are mostly underpaid and lack employment stability due to "outsourcing" and cheap labor. They don't really have any comprehensive health care or retirement savings. In other words everyday "the middle class is hanging on a thread".
America will not truly recover unless the middle class is stabilized.
Wesley Chapel , Florida
I watched the program and read through all the viewer's posted reactions. I believe that you will agree that your program last night barely scratched the surface. I believe that PBS owes it to the American people to inform and educate the many contributing factors that caused the global financial meltdown.
As an earlier posting suggested that Frontline ought to do a multi-part series addressing the financial systems evolution from Teddy Roosevelt trust-busting, Great Depression & FDR on through Reagan, S&L bailout, Glass-Stiegel repeal, mass deregulation, Enron, government well meaning interventions, etc. global trade leading to global dependencies, easy credit...to meltdown. Apparently we're not mature enough for free markets. The real moral hazard is greed.
Frontline, you have a great reputation. Please don't let us down.