Great Documentary on the Financial Crisis

My VP at work is an ex-Goldman Sachs investment banker and recommended this Frontline series on the recent financial crisis.  I have watched most of the parts that have come out and it is extremely good.  It is available to stream for free on the Frontline website.  Each part is an hour, and parts one and two have currently come out and are available on PBS’ Frontline site.  Parts three and four are scheduled to be released on May 1st.  I highly recommend that anyone interested in finance watch this, especially those of you who are still students and want to work on Wall Street.  At least when I was going through the interview process a few years ago, questions on the financial crisis were common.

I am a big fan of the documentary Inside Job, which explains the financial crisis in a simple and easy to understand way.  However, it is still fairly high level and glosses over a lot of the details.  Furthermore, it took a very anti-finance view and was quite biased in some of the reporting.  I’m not saying the reporting was wrong, but some of it was designed to make the people who work in finance look bad as a generalization (when only a small portion of those people had anything to do with the financial crisis) and much of it belittled finance as a whole.  When operating correctly within the right safeguards, the financial system is an extremely vital driver of economic growth.  This Frontline documentary does a great job of getting into the details, having secured a lot of interviews with the people most directly involved.  It also takes much more of a “reporting” point of view rather than the more inflammatory “crusading” point of view that Inside Job took.

I no longer work in finance, but my own personal view is that the government gave the financial industry some medicine that cured the symptoms of the financial crisis but did nothing for the underlying disease.  True, regulations have tightened and we probably are sufficiently safeguarded against any meltdown of significant size for the foreseeable future.  But, as many of the documentaries point out, the cause of the problem is still out there.  The leadership of the finance industry is still comprised of the same type of people: greedy, irresponsible, and worst of all immoral.  They don’t seem to care when they rip off some pension fund in Mississippi so long as they make a massive windfall.  The worst part is that they still have the ear of the government and the industry is so powerful as a whole, with incredible lobbying power.   The intersection of finance and politics is a continuous conflict of interest time bomb, especially as people in the industry go and become regulators.  It is a fuck show, and I don’t foresee any real changes.  The government would have to fundamentally change the institutional culture on Wall Street at the top levels, and those guys making the real money are so out of touch with reality anyway that its just not going  to happen.  After all, according to Lloyd Blankfein of Goldman, they are “doing God’s work.”

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6 thoughts on “Great Documentary on the Financial Crisis

  1. I’m still waiting for an explanation of the financial crisis that doesn’t overly simplify the cause as “greed” and a few individuals stealing from everybody else. Shitty government policy is usually what enables people like this. I saw it when I worked in the energy trading business during the California energy crisis. Politicians set up a shitty system and then reacted with phony outrage when the inevitable disaster occurred.

    The financial crisis is truly rooted in the irrational and foolish idea of creating government-sponsored entities to make home ownership more affordable. The collapse and the resulting cries for increased regulations and increased taxes on the top 1% are classic Cloward-Piven strategy at work.

  2. Well I think all of the documentaries/literature place a lot of blame on the government and point out severe de-regulation, lobbying, and conflicts of interest, etc. I’m not entirely sure what you are saying; should they focus more on Fannie Mae and Freddie Mac etc. as the cause? I mean, regardless of government-sponsored entities, it’s still the banks that are recklessly securitizing the loans that are made and spreading the risk. Obviously the government is at fault for allowing them to do this, but I don’t know if the creation of the entities alone enabled the crisis.

    • I read into these economic problems as the fault of the government, but not in the same way as most talking heads do. I don’t believe its a problem of under-regulation or too much regulation; the problem lies in the position the government has taken for almost 100 years now of protecting these corporations and banks from failure. These businesses literally can do no wrong. They know that the government will ultimately bail them out, and with this knowledge they are able to make risky and down right dumb decisions. This isn’t an issue that can be solved by more government interference, but one that must be solved by making those businesses accountable for their actions. No one can be “too big to fail.”

      • I completely agree with you and that’s exactly my viewpoint in principal. The problem is, though, that things had already got to the point where the banks were too big to fail. From the point of view of the current administration (having already gotten to this point), is it better to let the banks fail and almost literally destroy the world economy, or is it better to give in and bail them out but save the economy and people’s livelihoods in the process?

        I think what the majority of “Main Street” and the protesters don’t understand is what would have happened without the bailout. The markets would have essentially died and there would be no lending; GDP growth would have been even more negative and unemployment probably much worse. I think undoubtedly that people’s lives would be much worse.

        I actually think the government did an adequate job of getting through the crisis itself. It’s what haven’t done before and after that is just insanely stupid. First, all the deregulation that allowed “too big to fail” exist and turning a blind eye to new products like derivatives and swaps that spread risk across the entire system like a cancer. Even after everything that’s happened, they have not really made reforms or tried to break up “too big to fail” in any way. It’s essentially just business as usual for Wall Street, just with a few more inconveniences for them. The underlying systematic and institutional issues have not been solved whatsoever.

  3. Nothing has changed since the crisis…if anything, the financial system is worse off now than it was then because the US of A won’t be able to step in and save us all when the next crisis hits. There are too many problems with the system to address here but the biggest issue is that the CDS market has not been addressed yet.

    With $200 Trillion (yes, with a T) in outstanding notional amount, the CDS market is bigger than all of the US stock and bond markets combined. A large enough default would trigger a wave of failures across ALL of our financial institutions – especially the “too big to fail” as they hold the majority of CDS contracts. Why was this market allowed to get so big? Because it’s the last unregulated bastion in the financial markets where the big players can make millions, or even billions in some cases, in bonus money and nobody wants it to go away.

    We are all in BIG trouble – it’s just a matter of time.

  4. See, the way I see it is the government has two options. One is to regulate heavily so nothing can get out of control BEFORE any massive CDS and CDO and MBS markets are allowed to develop. Two is to do what all our economists seem to have been hell bent on doing, which is to deregulate as much as possible and let the market “regulate itself.”

    In theory, number two is an interesting idea. Basically, if the market collapses on itself, then the firms that were irresponsible die off and new firms with better leadership and risk taking emerge to take their place. The problem, however, is these firms have gotten so big that a collapse would literally affect the global economy. So BECAUSE of the U.S. government letting these firms get so big and let these markets develop, this essentially wipes out number two as a realistic option since it would lead to global anarchy.

    That means we are left with option one, and it seems like that’s not happening/it’s too late for to happen/the government won’t do it. So, I agree with EC that we are fucked.

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