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"Inside the Meltdown" [PBS Video and Explications]

Business  (tags: business, americans, Wall Street Crisis, money, finance )

- 3683 days ago -
Thursday, Sept. 18, 2008, the astonished leadership of the U.S. Congress was told in a private session by the chairman of the Federal Reserve that the American economy was in grave danger of a complete meltdown within a matter of days...


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Janet Solomon (231)
Saturday February 21, 2009, 2:37 pm
"As the housing bubble burst and trillions of dollars' worth of toxic mortgages began to go bad in 2007, fear spread through the massive firms that form the heart of Wall Street. By the spring of 2008, burdened by billions of dollars of bad mortgages, the investment bank Bear Stearns was the subject of rumors that it would soon fail.
"Rumors are such that they can just plain put you out of business," Bear Stearns' former CEO Alan "Ace" Greenberg tells FRONTLINE.

The company's stock had dropped from $171 to $57 a share, and it was hours from declaring bankruptcy. Federal Reserve Chairman Ben Bernanke acted. "It was clear that this had to be contained. There was no doubt in his mind," says Bernanke's colleague, economist Mark Gertler.

Bernanke, a former economics professor from Princeton, specialized in studying the Great Depression. "He more than anybody else appreciated what would happen if it got out of control," Gertler explains.

To stabilize the markets, Bernanke engineered a shotgun marriage between Bear Sterns and the commercial bank JPMorgan, with a promise that the federal government would use $30 billion to cover Bear Stearns' questionable assets tied to toxic mortgages. It was an unprecedented effort to stop the contagion of fear that seemed to be threatening the rest of Wall Street.

While publicly supportive of the deal, Treasury Secretary Henry Paulson, a former Wall Street executive with Goldman Sachs, was uncomfortable with government interference in the markets. That summer, he issued a warning to his former colleagues not to expect future government bailouts, saying he was concerned about a legal concept known as moral hazard.

Within months, however, Paulson would witness the virtual collapse of the giant mortgage companies Fannie Mae and Freddie Mac and preside over their takeover by the federal government.

The episode sent shockwaves through the economy as confidence in Wall Street began to evaporate. Within days, in September 2008, another investment bank, Lehman Brothers, was on the brink of collapse. Once again, there were calls for Bernanke and Paulson to bail out the Wall Street giant. But Paulson was under intense political pressure from conservative Republicans in Washington to invoke moral hazard and let the company fail.

"You had a conservative secretary of the Treasury and conservative administration. There was right-wing criticism over Bear Stearns," says Congressman Barney Frank (D-Mass.), chairman of the House Financial Services Committee.

Paulson pushed Lehman's CEO Dick Fuld to find a buyer for his ailing company. But no company would buy Lehman unless the government offered a deal similar to the one Bear Stearns had received. Paulson refused, and Lehman Brothers declared bankruptcy.

FRONTLINE then chronicles the disaster that followed. Within 24 hours, the stock market crashed, and credit markets around the world froze. "We're no longer talking about mortgages," says economist Gertler. "We're talking about car loans, loans to small businesses, commercial paper borrowing by large banks. This is like a disease spreading."

"I think that the secretary of the Treasury could not fully comprehend what that linkage was and the extent to which this would materialize into problems," says former Lehman board member Henry Kaufman.

Paulson was thunderstruck. "This is the utter nightmare of an economic policy-maker," Nobel Prize-winning economist Paul Krugman tells FRONTLINE. "You may have just made the decision that destroyed the world. Absolutely terrifying moment."

In response, Paulson and Bernanke would propose -- and Congress would eventually pass -- a $700 billion bailout plan. FRONTLINE goes inside the deliberations surrounding the passage of the legislation and examines its unsuccessful implementation.

"Many Americans still don't understand what has happened to the economy," FRONTLINE producer/director Michael Kirk says. "How did it all go so bad so quickly? Who is responsible? How effective has the response from Washington and Wall Street been? Those are the questions at the heart of Inside the Meltdown."
Please watch the video at site.....Thank you & Namaste!

Blue Bunting (855)
Saturday February 21, 2009, 3:14 pm
Uh oh

Did anyone else noticing Bush, at his last press conference, saying this?

"Now, obviously these are very difficult economic times. When people analyze the situation, there will be -- this problem started before my presidency, it obviously took place during my presidency. The question facing a President is not when the problem started, but what did you do about it when you recognized the problem. And I readily concede I chunked aside some of my free market principles when I was told by [my] chief economic advisors that the situation we were facing could be worse than the Great Depression.

"So I've told some of my friends who said -- you know, who have taken an ideological position on this issue -- why did you do what you did? I said, well, if you were sitting there and heard that the depression could be greater than the Great Depression, I hope you would act too, which I did. And we've taken extraordinary measures to deal with the frozen credit markets, which have affected the economy."

The corporate press was interested in their own story, so they didn't seem to notice it, but Tom Engelhardt did, and it didn't make him feel good:

Stop for a minute and consider what Bush actually told us. It's a staggering thought. Who even knows what it might mean? In the United States, for example, the unemployment rate in the decade of the Great Depression never fell below 14%. In cities like Chicago and Detroit in the early 1930s, it approached 50%. So, worse than that? And yet in the privacy of the Oval Office, that was evidently a majority view, unbeknownst to the rest of us.

And that's just one thing. There's more.

(The reason there's no link to the Bush quote is that Tom's link goes to the White House site, which gave me a 404 messages saying, "The page you requested wasn't found at this location. The Obama Administration has created a brand new White House website, and it's possible that the page you were looking for has been moved." So the net-savvy Obama administration has just killed all of our existing links to the official history of the Bush administration. Dammit!)

Via Suburban Guerrilla, where there are also gloomy thoughts. But shorter.

Blue Bunting (855)
Saturday February 21, 2009, 3:18 pm
Hmmm ... who helped to engineer "the biggest wealth transfer in history" in the U$A?

PERRspectives Blog: UBS, the IRS and RepubliCON Phil Gramm

Dick Cheney, as Vice Pre$ident of the U$A bet again$t the dollar and tran$ferred all his money offshore.

UBS: American Investors' Identities To Be Revealed By Swiss Banks
The deal could mark the end of Swiss banking as we know it, ... The curtain is being peeled back on the infamous secrecy of Swiss banks.
...revealing names of those whom the authorities suspect of using offshore accounts to evade taxes. News that the Justice Department has filed a lawsuit against Swiss banking giant UBS
is just the latest chapter in the curious case of Phil Gramm. Just one
day after UBS agreed to pay a $780 million criminal fine and admitted
to conspiring to defraud the IRS,
the DOJ demanded access to 52,000 accounts as part of its broad tax
evasion probe. Which is more than just a little ironic. After all,
before he became a UBS vice-chairman in 2002, then Senator Phil Gramm helped lead the 1990's Republican war to gut the Internal Revenue Service.

Gramm's fingerprints, of course, have been all over the financial
meltdown and steep downturn gripping the U.S. economy over the past
year. In his role as an adviser to John McCain's presidential campaign,
Gramm famously decried the "mental recession" and mocked the United
States as a "nation of whiners." And the Texas Senator's machinations in the Senate to create the 1999 Gramm-Leach-Bliley Act which helped lead to catastrophic losses at UBS in subprime mortgages during his tenure there.

But it was Gramm's role over 10 years ago in decapitating the IRS' ability to enforce tax laws against wealthiest Americans may well have UBS's schemes possible.

Janet Solomon (231)
Saturday February 21, 2009, 3:36 pm
It's a BAD system of economics for this age--has been for a LONG time.And war is used as the stimulus for economic growth--and EVERY effin' time [since WWII], it has left a BIGGER debt that we have needed to crawl on our bellies to get out of. The illusion is the fantastic stuff "we've" come up with distract te atttention of the populace. It's a carnival ride here,folks, and too bad we got stuck on the roller coaster...and everybody afraid to jump off...
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