After watching I had a few questions.
All though a lot of time was spent on Bear Stearns, Lehman Brothers and others very little time was spent on Fannie Mae and Freddie Mac. A little over a minute, I think. It was noted that these were some of the largest companies on the planet. Why did they get such little air time?
We know that at the time of crisis Fannie Mae and Freddie Mac were processing almost 90% of secondary loans and securitizing them. What percentage of the 'toxic' loans held by Bear Stearns and others were at one time or another packaged by Fannie and Freddie?
Since sub-prime loans were a speciality of Fannie and Freddie (GSE's) and the government require a certain amount of these kinds of low interest loans for companies to keep on lending, why does it appear that government had almost nothing to do with creating this problem?
When are you going to do a who on the largest companies in the world?
It would be of special interest if they had a history of corruption and bad judgements as Freddie and Fannie do.
Did I miss something? Or did the U.S. Department of Justice? Where was the united States Attorney General as Frontline's story unfolded? Was there no perceived legal issue in the wasting of national economies from here to Iceland? And the wasting of assets necessary for the health and well-being of every child, every employed and retired person, and the infants soon to be born in the United States?
Pagosa Springs, , Colorado
The key to understanding the economic crisis is to follow the fake money, which takes us to a place where this documentary for whatever reason does not go. Like other reports on the crisis, "Inside the Meltdown" does an adequate job of showing us the most visible aspects of the meltdown, i.e., the troubled housing market; but the will to go beyond the familiar and into the dark heart of the obscured matter remains strong among mainstream reporters, including this one. (Let's hope PBS probes deeper into the issues in the next two installments.)
So far, government solutions have focused on "freeing up credit" for borrowers, as if this were a credit crisis. But this is a DEBT crisis, not a credit crisis. The reluctance of banks to lend and extend credit is a SYMPTOM of too much debt in the system. Banks simply don't trust overleveraged borrowers, including other banks, while many banks may be unable to meet reserve requirements to lend the kind of money in demand. By trying to free up credit, the government battles a symptom and fails to address the root cause of the problem: derivatives. An ocean of debt now exists in derivatives markets. There, according to some estimates, hundreds of trillions of dollars (yes, trillion with a "t") have been implicated in speculative financial transactions. ... How did this happen? Well, without federal regulators looking over their shoulders, Wall Street gamblers ran amok with other people's money, and then borrowed a lot more. They bet it all, including nonexistent capital, on a rising housing market, and they lost. Now the losers can't pay up. Winners can't collect. That's inevitable when you play with monopoly money. Wall Street's point men in the Bush administration (Paulson) and the Federal Reserve were succesful in putting up taxpayer money to match some of the monopoly money in the banksters' books. The Federal Reserve created money out of thin air and loaned it to the US government (at interest) so the US government could bail out Wall Street gamblers. Public funds were thus used to prop up a fraudulent financial system based on Enron-inspired bookkeeping; and unless the Federal Reserve prints a few hundred trillion more dollar bills to cover Wall Street's losses--which it can't do without causing runaway inflation--this "solution" of borrowing and spending serves only to delay the inevitable crash of the fake economy. But the fake economy needs to crash because it produces nothing of real value and has only served to transfer wealth generated in the real economy to the pockets of Wall Street executives who then buy our phony elections. Yes, letting the fake economy crash will be painful, but the longer we prop up the lie, the more devastating it will be to the real economy when it finally does crash. Of course, the longer you live the lie, the harder it gets to face the truth. Obama's stimulus package is an extension of the bailout lie. Aside from plunging the nation even deeper in debt, all that stimulation is going to end up in a bank (where else does money end up if not under the mattress?). And thanks to the Commodity Futures Modernization Act (which keeps derivatives markets virtually unregulated) and to the repeal of the Glass-Steagall Act (which allows investment banks to speculate with commercial bank deposits), all that money will be vulnerable to the same kind of wheeling and dealing that has brought us to where we are now--on the brink of another Great Depression, soon to be followed, I imagine, by the misery of another World War. (Emboldened by the US's unconditional support, Israel is doing its best to start it!) Like so many others, I hoped Obama would bring real change. I hoped he would end our commitment to preserving the fake economy, among other things; but apparently, sometime between the election and the inauguration, Obama was taken behind the curtain, introduced to the real rulers of this country, and was told how he was going to "manage" this crisis. As the French say, the more things change, the more they stay the same.
Let's hope that PBS and other media outlets start digging deeper into these issues. We need real watchdogs, not self-censoring lapdogs who safely regurgitate what the military-industrial-financial complex has approved for dissemination.
"Inside the Melt Down" FRONTLINE's in-depth public interest story about the present financial crisis, should be required viewing for all members of Congress, financial institution, economist and the general public that are concerned with the brink of destruction that a global economic melt down would cause.
This episode of Frontline was well produced and dramatic but I believe you made several errors of omission based on a desire to create a political angle. Your main hypothesis is that Hank Paulsen let Lehman fail because, 1. he is a right-wing fanatic and 2. he hated them from his days as CEO of Goldman Sachs. You did not mention that up till two days before Lehman's failure most of the key players believed Barclays bank would takeover Lehman. Infact, according to the Wall Street Journal, that deal only fell apart during the late hours of the privious Saturday night when British regulators failed to approve the deal. Secondly, the show repeatedly said that Bank of America should have been forced to take over Lehman. Of course, by late Sunday BoA was well into acquiring Merrill Lynch. Had the Treasury force BoA to takeover Lehman, we would be today talking about Merrill's failure and its' effect on the economy.
You missed the opportunity to have a serious discussion about the limits of a free-market economy and the unintended consequences of "progressive" policies by attempting to turn this right-wing plot. Why were only democratic members of Congress interviewed? Why was Paul Krugman given such a prominent role? And, most of all, why did we not hear from Mr. Paulsen, Mr. Fuld, Mr Diamond, Dr. Bernake, or any of the real players in this episode?
Your show really put into perspective the economic collapse and it's Global implications. Why did our elected officials wait so long before taking steps to correct the sub prime mortgage and the financial industry? What role did deregulation of the financial industry play in the economic meltdown? These questions are not easily answered and perhaps never will be. Government intervention has not been successful in the past so why will it be now.
Re "The Meltdown", I don't recall any mention of the rating agencies giving very high ratings to subprime and other very bad investment documents. That is my only serious criticism of "The Meltdown". If there is followup programming of this matter, I strongly suggest that the rating agencies part in the current financial collapse be at least mentioned.
The economic crisis began when the average price for the average house exceeded the average family's ability to pay back the loan.Deregulated financial institutions invented ever more creative ways to give people what they couldn't afford. The fact that those same institutions also sold insurance(?) on these risky investments only compounded the problem.
The lesson we should learn is that people need rules (especially the business community where the customer certainly is not always right). Human beings are selfish and greedy and those characteristics are present in the institutions we create. We all need a "higher power" to keep us under control.
It's long past the time we should have dumped the Christal for Bud.
Dramatic recap. Please see if you can manage a more in-depth analysis in future. How could you miss the parallels of this failure with the initial cancer known as Enron? Talk about the deep chasm of greed created by de-regulation. Talk about how the US credit rating agencies are also corrupt. Then you can lead, next time, with how financial entities cannot have the 'fox minding the hen house.' Talk about what it means when the best schools teach financial engineering instead of fiduciary responsibility. Take a snapshot of the current financial status of someone who has lost job, home, and future, and contrast this with the lifestyle being led TODAY by Paulsen, Fuld, UBS CEO, all of them. Take it global, Frontline. Be braver next time.
This was very interesting. The detail that was particularly news to me was the description about the overnight markets causing the demands for action by making a judgment about whether a bank gets to live another day or not. I agree with other comments that this is just the beginning of necessary information about what's been going on. It's a good snapshot of an acute crisis during a specific time--but it's not the full story.
I followed along until the drama about Paulson forcing the other banks to enter into the bailout agreements. I did not fully understand why he compelled them to participate against their will. If they didn't need the money, were they forced to take it to mask the severity of problems at other banks? That just makes no sense to me other than the whole thing must have been an elaborate poker game--Paulson spent valuable taxpayer money to bluff the worldwide markets? I feel like the film was trying to tell me that it was worth it (and that Paulson and Geithner are heroes) but I'm still not buying it.
The film seemed to gloss over Tim Geithner's responsibilities at the NY Fed. It sounds like they didn't investigate Bear Stearns until rumors were causing damage. But shouldn't the Fed have already known how extensively enmeshed were the bad deals? Shouldn't they have known the risks earlier?
I'm interested in learning more about how Obama's econ advisers were deeply involved in the Soviet Union's transition to capitalism and how their actions created extreme hardship for regular Russian people, particularly for women who were forced into prostitution when they were suddenly left with no incomes at all after the fall of communism. I only just learned about "The Harvard Boys" through a 10-yr old Nation article that was posted recently in a blog comment, probably on TruthDig. I was truly shocked to learn about the involvement of Larry Summers et al in the Russian mess. Does not make me feel confident they can dig us out this hole either.
Very insightful program. Perhaps one hour was not enough time to get into specifics, but as one commenter noted, the crisis predated Bear Stearns. I am still wondering why no one is really calling Barney Frank on the carpet for his role in pushing for relaxed lending standards for Fannie and Freddie to increase home ownership in the mid 90s, and his current stance on toxic mortgages.
White Plains, NY
Unfortunately, this program was incomplete and biased. Instead of interviewing public figures like Nassem Talib, http://www.fooledbyrandomness.com/, or Nouriel Roubini, who have attempted to represent the side of "this is dangerous, please stop;" your program allowed the corrupt "experts" to get away with the stance of "who could have seen this coming."
As an independent trader, I can only receive 4 to 1 leverage, which I never use; yet the unquestioned "genuises" had 30 to 1 leverage. This was among the many flaws unexposed by this program.
I was disappointed that you chose as your story for the meltdown the struggle of Henry Paulson with his ideology. This is not Oedipus, or even Shakespeare, i.e., How The Mighty Have Fallen. The story is about the millions of people who have and will lose their livelihoods--jobs, pensions, medical care, homes. That is the real tragedy. This is a story of the failure of capitalism, the failure of our government to regulate a small class of rich and powerful players, and defend the interests of the citizenry at large.
Sacramento , CA
Once again Frontline has shown itself to be one of the foremost and reliable sources of information and analysis available. As a US History teacher I have been trying to get my students to understand the importance of History in their lives, especially in terms of understanding why history seems to repeat itself. We have just finished the units on the Great Depression. "Inside the Meltdown" has allowed many of my students to make comparisons and connections to the policies that were in play at the time of "The Great Depression" and what the video calls "The Second Great Depression." While the exact sequence of events are different, the same dynamics of bad investments, poorly devised loans, an attempt to live off greed in a "feel good era," interconnectivity (US and Global) and reliance upon Wall Street are all similar to what was experienced from 1929 to 1940.
My students are currently scratching their heads wondering why our government allowed these institutions to go un-regulated; why laissez-faire policies toward big business are still implemented; why conservatives are so against regulation; why these very same conservatives are now abandoning their ideological principles and referring back to FDR policies and remedies; and whether the government is working for us (the people) or just Big Business. Fear not, I have introduced the other side of the spectrum and discussed the problems and issues of over-spending, misdirected spending, corruption and greed, as well as the problems of spending our way out of this "2nd Great Depression."
Thanks for this teaching moment. I watched this on TV last night and knew I had to get my students to see this video. Lights went on and my students voiced an understanding that was not coming through from classroom discussion alone! Bravo Zulus!!!
I thought this was an amazing glimpse into the horror of the current meltdown as it actually transpired. Although it did not go into everything that caused it (the meltdown and continuing market slump), the show was less than an hour in length, which is why I (and my Mother at 71) found the documentary absolutely riveting! Hopefully there will be follow ups... the greed, arrogance, and disregard for the spirit and rule of law let alone fair practices that led to this low point that we now find ourselves. Credit rating agencies top the list in my view, our entire system is based on an element of trust, which has been violated at almost every turn.
Fort Myers, FL