Above video is from "The Warning, FRONTLINE, PBS Video"
Introduction from the video:
ANNOUNCER: Tonight on FRONTLINE, long before the economic meltdown, the story of one woman who tried to warn about the threat to the financial system.
MANUEL ROIG-FRANZIA, The Washington Post: She saw something that people either had not seen or refused to see. And she tried to sound the warning. Nobody listened.
Rep. SPENCER BACHUS (R), Alabama: What are you trying to protect?
BROOKSLEY BORN, CFTC Chair, 1996-'99: We're trying to protect the money of the American public.
ARTHUR LEVITT, SEC Chairman, 1993-'01: I was told that she was irascible, difficult, stubborn, unreasonable.
NARRATOR: Before the toxic assets poisoned the economy, she warned of their danger.
RON SUSKIND, Author, The Price of Loyalty: And that made her the enemy of a very, very large number of people.
NARRATOR: She would fight an epic battle with one of the most powerful men in Washington.
DAVID WESSEL, Author, In Fed We Trust: He was, as George Bush put it at the time, a rock star.
JOE NOCERA, The New York Times: It got pretty nasty pretty quickly.
MICHAEL GREENBERGER, CFTC Director, 1997-'99: Greenspan turns to her, she turns to him, his face is red and he's clearly quite upset.
On Alan Greenspan: After several decades of policy making this statement reflects Alan Greenspan's years of 'public' service "Testifying before Congress on the financial crisis, Greenspan admits that his premise that markets could be trusted to regulate themselves was wrong."
1. 29 minutes 10 seconds- "this deregulated market is part of the reason we are having this boom" - Alan Greenspan supports the boom bust cycle.
2. 38 mins - Math geniuses thought they had a full proof money making system and this group included people who had won the Nobel Prize. - The foundations of math are based on assumptions or in other words, just because a mathematical model has results that could mean there are other worlds existing right next to us, doesn't make it so (such as multiverse model or the many worlds theory). [ Math has a practical function and a purely theoretical function as every field of knowledge. ] .
3. 39 - 40 mins - 'Many banks had invested in the derivatives believing they were the only ones' i.e. This is like having 15 owners for the same house - basic fraud or scamming being done by a gambling model based on statistical averages of historical financial market fluctuations.
4. 45 mins 20 seconds - 'you keep seeing these regulators saying the market knows best how to regulate' thereby leaving banks free to take on riskier assets (while ignoring the warnings of watchdogs)= Results 45 mins and 36 seconds - 'by 2007 the OTC market was at over 500 trillion dollars and consisted of most, if not all, of a 'boom' - In other words, a recession had begun and was being propped up by over leveraging assets/derivatives (selling one house to 15 people, in full) - followed by a TARP bailout with huge bonuses... wow!
More about how the Bail out money was used:
The big banks make money by taking the bailout money we gave them and lending it back to the government with interest.
Case Study (videos and links) using this Time Line from PBS:
The new Fed chairman, Alan Greenspan, is a believer in Ayn Rand's philosophy -- free-market capitalism means no regulations, no government intervention. Read more
(Relevant: Laissez-Faire Capitalism )
The country's best-known financier, Robert Rubin, joins forces with Greenspan. Both men believe the less regulation on the market, the better.Read more.
So far, only regulation allows market transparency(according to our economic structure), therefore...
A Major Derivatives Scandal Surfaces
Procter & Gamble sues Bankers Trust claiming the bank's derivatives deals has cost P&G millions. The lawsuit reveals what's really going on in the completely dark and unregulated derivatives market. Read more
Approx 1 minute - Goldman Sacks uses a monetary device called a 'currency swap' and another 'credit default swaps'. A financial mess created by elite business men in the United States which is not regulated and therefore there is no transparency or accountability.[Dealing with this problem earlier would not have created the need for radical solutions in such a short period of time, such as raising the retirement age etc.]
One Regulator Is Closely Eyeing Derivatives
The new chairperson of the CFTC, Brooksley Born, sees systemic risk in the virtually unregulated, high-stakes derivatives market. She starts a campaign to regulate the secretive, multitrillion-dollar market. Read more.
Another Watchdog Ignored:
A Meltdown Begins at Long-Term Capital Management
This hedge fund invented complex mathematical formulas and placed bets using derivatives -- all of it done in secret. LTCM's crisis also reveals how the world has become financially interconnected.Read more.
No to Born; No to Regulation
Despite LTCM's near-collapse, Congress and top regulators resoundingly reject Brooksley Born's push to regulate derivatives. Read more.
"Because of our inability to regulate financial markets, we have no idea who has the credit default swaps"...
The Banking Laws Are Changed
For decades big banks pressed Congress to repeal the 1933 Glass-Steagall Act and allow investment banks and commercial banks to merge. It finally happens. The new superbanks are free to make riskier investments. Read more.
Tech Bubble Bursts in Late '90s
It had been fueled by the notion that old rules no longer applied (such as, businesses needed to make a profit). Investors and the SEC smell a rat in the way investment banks handled those IPO deals.Read more.
Two Boston financial analysts figure out Bernard Madoff probably is running a Ponzi scheme.Read more
Housing Prices Can Only Go Up!
After the Internet bust, and then 9/11, Alan Greenspan lowers interest rates. It fuels a massive housing boom. But by 2007, the party's over. Read more
The lower interest rates, over long periods of time, combined with the above policies hit the housing market together
Note: 3 mins and 30 secs - Says 'we didn't realize housing doesn't go up forever' yet the excuse for the derivatives housing nonsense (triple AAA rated toxic assets) is 'this is the normal financial crises that occurs every 5-7 years'.
Alan Greenspan retires, replaced by Ben Bernanke. Before leaving office, Greenspan receives the Presidential Medal of Freedom, the country's highest honor. Read more.
Bears Stearn Freefall
Rumors fly about Bear's huge exposure in subprime mortgages -- soon to be dubbed "toxic assets." Investors rush to pull their money out of the investment bank. Read more.
Sept. 7, 2008
The U.S. Nationalizes Fannie and Freddie
The crisis is spreading. And the two mortgage giants with $5 trillion in assets, are the definition of "systemic risk." Read more.
1. 2 institutions owned 50% of the mortgage market.
2. Not backed by capital
3. Double dealing with wall street and congress - Mentality: Boom and Bust - Trying to score big off a gamble, very casino movie kinda game play.
4. "Profits get privatized and losses get socialized"
5. Over-subsidy on housing also presented people to own half an 'American Dream' (the other half being hard work to deserve what you get) - Combined with a shrinking public sector job market and consolidation of private firms into conglomerates (reducing private sector job market)- squeezed the job market on two sides.
6. Useful to prevent companies from becoming 'too big to fail' in the first place.
Sept. 12-14, 2008
Lehman Brothers Nears Collapse
But Treasury Secretary Paulson, a free marketer, refuses to have the government bail out Lehman. For him, moral hazard trumps systemic risk.Read more.
Sept. 13, 2008
A Secret Deal
As Lehman melts down, it appears Merrill Lynch, the second-largest investment bank, could be next. Paulson, Ken Lewis, John Thain secretly cut a deal: Bank of America will buy Merrill. Read more.
Sept. 15-16, 2008
Markets Crash, Credit Freezes
The Merrill deal can't stop the meltdown; Lehman was more interconnected than anyone realized. Read more.
AIG had sold credit default swaps -- a type of insurance -- against the collapse of Lehman, assuming it could never happen. Read more.
Sept. 18, 2008
Government Asks for $700 Billion
The Paulson Three-Pager Requesting $700 Billion Economist Simon Johnson's opinion on the document Paulson sent Congress Sept. 18, 2008 asking for the money. Read more.
"As close to a blank check as you can get without asking for a blank check"...
(see 1 minute 30 seconds into video: Paulson requires no oversight or accountability)
...and its all given to all the institutions. Then Congress did some grandstanding while they didn't even attach requirements to the money they gave in the bail outs...
Oct. 13, 2008
Top Bankers Summoned to Washington
To boost the nation's confidence in the banks and get them lending again, Paulson tells nine CEOs each of their banks will get tens of billions; the government will become a major stakeholder. Read more.
Oct. 23, 2008
Testifying before Congress on the financial crisis, Greenspan admits that his premise that markets could be trusted to regulate themselves was wrong.Read more.
Bernard Madoff, head of a prominent Wall Street trading firm -- and an unlicensed investment adviser -- confesses to a Ponzi scheme that's cost investors $65 billion. Read more.
Government's Message to Bank of America
Bernanke and Paulson tell Ken Lewis: "You cannot pull out of the Merrill deal" -- even though BofA is facing $15 billion in losses on Merrill's balance sheets. Read more.
The New President's Challenges
Credit markets are frozen, there's rising unemployment and housing foreclosures, two wars -- plus a growing national debt. Read more.
Will OTC Derivatives Be Regulated?
New rules have been proposed, but the financial lobby is fighting back. And Brooksley Born is offering another warning.Read more
More reporting on the history of the financial crisis...
(Notice how the corporations see their clients i.e. us... clear contradiction of interest!)
Above Interview is of the authors of the book: All The Devils Are Here