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FrontLine on the financial crisis.
Old 04-25-2012, 08:25 PM   #1
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FrontLine on the financial crisis.

Last night Frontline had very good documentary on the financial crisis.
The first two hours are here. The final two hours are coming to PBS May 1.

I thought the first hour on the history of credit default swaps was particularly good. The JP Morgan bankers who started the CDS back in 1994 were interviewed and very articulate. The also have in depth interviews on the web site.

I have read many books and watch most documentaries on the crisis and I'd say this is one of the best ones, even if at this point it is not real news.
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Old 04-25-2012, 08:37 PM   #2
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Last night Frontline had very good documentary on the financial crisis.
The first two hours are here. The final two hours are coming to PBS May 1.
Yes! I have it recorded and will be watching it when I get a chance. Don't tell me how it ends please!
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Old 04-25-2012, 09:36 PM   #3
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And Congress has Roger Clemens on trial.
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Old 04-26-2012, 12:20 AM   #4
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And Congress has Roger Clemens on trial.
It's an election year. Investigating the nice folks funding all those SuperPACs would be a career limiting move.
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Old 04-26-2012, 08:33 AM   #5
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It's an election year. Investigating the nice folks funding all those SuperPACs would be a career limiting move.
And every other year is an election year for congress.
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Old 04-26-2012, 08:45 AM   #6
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I really enjoyed it as well. I am by no means a feral, "anarcho" Occupy Wall Streeter but it certainly is disgusting that no one has ever been prosecuted for this mess. Wall Street skated and Main Street got screwed isn't even a truism. Its just plain true.

And it was very telling that certain banks knew what they were getting into and certain didn't. The one thing I think I have learned is that when people start talking in absolutes about a financial topic, you know you are in bubble territory (ie: "American house prices can only rise forever" "This Internet economy is completely replacing bricks and mortar")
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Old 04-26-2012, 10:33 AM   #7
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I DVRd and watched it too, also thought it was one of the best summaries I've seen. Really looking forward to the 2 hour parts 3&4 next week.

It's interesting to see how this played out, the sequence of events is important, and part 1 layed that out beautifully. CDOs aren't new at all, mortgage backed securities have been around for decades, and until subprime they were considered a bulletproof investment. CDSs have also been around forever, basis of commodities, and they were also a good idea as first conceived an applied by JPMC to corporate debt, though it's interesting they seem to have invented them but stayed away from CDSs on CDOs made up of residential loans with increasing toxic loan components. It's only when CDOs containing large percentages of subprime and CDSs were applied to them, and then leveraged, that the (disaster) die was cast. And while the ratings agencies probably should have known better, it's somewhat understandable they could give high ratings to inferior assets because they had the CDS insurance to protect against losses. Most everyone, including the public, seemed to think real estate appreciation could only go up, otherwise how could so many people get so far over their heads? I finally understand traunches now I think. I still can't grasp synthetic CDOs, and that's key I gather. Ultimately too much credit, too much leverage, inadequate capital requirements.

I am not excusing anyone, but for those who want people prosecuted, what exactly would be the fundamental charges? Most of the clear criminal acts were not fundamental. Some awfully smart, but greedy, people got fooled. It's not "fair" that Wall St got bailed out and Main St didn't, but it's possible life as we know it would have ended for generations if the financial system was left to creative destruction - we will probably never know for sure.

I am more worried that nothing has really changed. We won't get fooled in exactly the same way, but who knows what awful bubble will develop that very few people will see or understand before the bust.

Critiques are welcome, I am sure I'll never fully grasp what happened, still learning.
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Old 04-26-2012, 04:59 PM   #8
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One of the nice things about the documentary is the very extensive website the team developed working with Duke University.

I have watched several hour long interveiws on the site. Wells Fargo's outspoken CEO Richard Kovacevich makes several important points which haven't really been made by any of the histories of read of the crisis. First it isn't all of Wall St or all banks, that brought done, it is about 20 large financial service institutions out of 6,000 banks that did the lion share of the harm through stupidity, incompetence and unhealthy amount of greed.
My list (and I suspect Richard's wouldn't be that differerent) is

Almost of the investment banks: Goldman Sach, Merrill Lynch, Lehman Brothers, Bear Sterns, and Morgans Stanley (only GS, and Morgan Stanley survive)
The three rating agency Moody's, S&P, and Fitch
Fannie and Freddie
The subprime lenders: Country Wide, Washington Mutual, Wachovia, CitiGroup and a couple others
The investors: Namely German industrial banks
The regulators: The SEC, the Office of Thrift Supervision, Office of Federal Housing Enterprise Oversight(regulator for Fannie and Freddie) and the regulators of the Federal Reserve.

The other point (touched on in the documentary) Richard makes and is that Paulson (with the cooperation of Geitner and Bernake ) made a huge policy mistake by forcing all of the banks to TARP funds. Paulson wanted all banks to take TARP funds so that market wouldn't see that BofA or CitiGroup was taking a TARP funds and JP Morgan and Wells weren't and conclude that Citi and BofA were in trouble. What happened is that when the market saw that AAA rated Wells Fargo is getting a bailout the conclusion was that situation was truly awful. Everybody knew that BofA and Citigroup were in deep trouble.

I think the data supports Richard's view the Dow drop 40% from the time of the TARP announcement but financial shares went down 80%. Wells Fargo dropped from $33 down to $7.80. As Wells shareholder at the time I remember thinking both Wells is crazy cheap, and also "Clif you are out of you mind, you really don't have f*ing clue as to what is Well's balance sheet if the Government is bailing them out maybe they are another Country Wide".

As far as punishment, it is very frustrating that none of the folks involved with potential criminal activities, (like Lehman Brothers cooking the books by transferring $50 billion between the UK and US, recently reported on 60 Minutes) have been prosecuted. On the other hand if you look at the list of guilty institutions the shareholders got killed for almost all of the firms (and most employes and all senior manager had large chunk of their wealth). Even the Office of Federal Housing Enterprise Oversight was shut down. So while its true that many Wall St folks still ended up as multi millionaire it is mostly because many of them started of as deca millionaires before the crisis.
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Old 04-26-2012, 05:33 PM   #9
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Watched it, I like seeing history like this. Of course, anything that has Bethany McClean (sp) in it, I'm a sucker for. Gosh, I love that woman's voice, and she's a good-looker too. Thank God my wife doesn't follow ER forums-
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Old 04-26-2012, 05:43 PM   #10
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Quote:
Originally Posted by clifp View Post
One of the nice things about the documentary is the very extensive website the team developed working with Duke University.

I have watched several hour long interveiws on the site. Wells Fargo's outspoken CEO Richard Kovacevich makes several important points which haven't really been made by any of the histories of read of the crisis. First it isn't all of Wall St or all banks, that brought done, it is about 20 large financial service institutions out of 6,000 banks that did the lion share of the harm through stupidity, incompetence and unhealthy amount of greed.
My list (and I suspect Richard's wouldn't be that differerent) is

Almost of the investment banks: Goldman Sach, Merrill Lynch, Lehman Brothers, Bear Sterns, and Morgans Stanley (only GS, and Morgan Stanley survive)
The three rating agency Moody's, S&P, and Fitch
Fannie and Freddie
The subprime lenders: Country Wide, Washington Mutual, Wachovia, CitiGroup and a couple others
The investors: Namely German industrial banks
The regulators: The SEC, the Office of Thrift Supervision, Office of Federal Housing Enterprise Oversight(regulator for Fannie and Freddie) and the regulators of the Federal Reserve.

The other point (touched on in the documentary) Richard makes and is that Paulson (with the cooperation of Geitner and Bernake ) made a huge policy mistake by forcing all of the banks to TARP funds. Paulson wanted all banks to take TARP funds so that market wouldn't see that BofA or CitiGroup was taking a TARP funds and JP Morgan and Wells weren't and conclude that Citi and BofA were in trouble. What happened is that when the market saw that AAA rated Wells Fargo is getting a bailout the conclusion was that situation was truly awful. Everybody knew that BofA and Citigroup were in deep trouble.

I think the data supports Richard's view the Dow drop 40% from the time of the TARP announcement but financial shares went down 80%. Wells Fargo dropped from $33 down to $7.80. As Wells shareholder at the time I remember thinking both Wells is crazy cheap, and also "Clif you are out of you mind, you really don't have f*ing clue as to what is Well's balance sheet if the Government is bailing them out maybe they are another Country Wide".

As far as punishment, it is very frustrating that none of the folks involved with potential criminal activities, (like Lehman Brothers cooking the books by transferring $50 billion between the UK and US, recently reported on 60 Minutes) have been prosecuted. On the other hand if you look at the list of guilty institutions the shareholders got killed for almost all of the firms (and most employes and all senior manager had large chunk of their wealth). Even the Office of Federal Housing Enterprise Oversight was shut down. So while its true that many Wall St folks still ended up as multi millionaire it is mostly because many of them started of as deca millionaires before the crisis.
Helpful insights, thanks!
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Old 04-26-2012, 08:02 PM   #11
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I've Tivo'd it and am looking forward to it, but I'm worried it's just going to make me more cynical about corporations and government.
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Old 04-26-2012, 08:24 PM   #12
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I've Tivo'd it and am looking forward to it, but I'm worried it's just going to make me more cynical about corporations and government.
You can take it to the Bank!
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Old 04-26-2012, 10:57 PM   #13
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Just before the Frontline episode The American Experience Series played a documentary on the Crash of '29. I only saw the last 20 min which featured some of the reforms and how many of the principals lived out thier lives. It was an interesing bookend to the Frontline episode which started with the repeal of many of the reforms from the '30's crisis.
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Old 04-26-2012, 11:31 PM   #14
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Just before the Frontline episode The American Experience Series played a documentary on the Crash of '29. I only saw the last 20 min which featured some of the reforms and how many of the principals lived out thier lives. It was an interesing bookend to the Frontline episode which started with the repeal of many of the reforms from the '30's crisis.
I caught only the last few minutes of the AE show and hope that airs again soon, as my cable TV carrier has 3 area PBS stations (WNET, WLIW, and NJTV) here in New York.
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Old 04-27-2012, 03:45 AM   #15
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I agree 100%. IMO, very significant currency devaluations are looming. Where we least expect.
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We won't get fooled in exactly the same way, but who knows what awful bubble will develop that very few people will see or understand before the bust.
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Old 04-27-2012, 06:33 AM   #16
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I've Tivo'd it and am looking forward to it, but I'm worried it's just going to make me more cynical about corporations and government.
It will. But it is gripping stuff and well worth the watch anyway.......
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Old 04-27-2012, 07:50 AM   #17
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All the Frontlines are good. One of my favorite no-miss shows. I remember William Black being interviewed about 3 years ago on Moyer's with the related savings and loan scandals. He was one of the first to shine the light on this mess of crookery. It was stuff you don't get on the news.

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Old 04-27-2012, 09:13 AM   #18
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Wall St. is a Kabuki Theater.Many of the main actors are sociopaths.Due diligence,buyer beware.
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Old 04-27-2012, 09:23 AM   #19
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I remember when this was unfolding that both Jim Kramer and Larry Kudlow admitted they didn't know what a CDO was.
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Old 04-27-2012, 09:27 AM   #20
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I remember when this was unfolding that both Jim Kramer and Larry Kudlow admitted they didn't know what a CDO was.
Correction. They didn't know what a CDS was. And after watching I'm just as confused. laugh.
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