Attempting to either critique or synopsize the four-hour production in any meaningful way would be far too difficult, so what I thought I’d do was focus on a few things that stood out to me.  Predictably, any of the opinion pieces about it I’ve read, and to an even greater degree, the comments below the posts, have been all over the map, and showed how predisposed people were see what was presented in terms of their biases or knowledge.  It seemed the biases were far more political than economic or legal, and often showed utter disregard for the consequences to regular Americans from the choices Paulson, Bernanke, Geithner and Obama made during the meltdown.

I didn’t see all of the first two hours, but the parts I did see seemed pretty industry-friendly and it was noticeable that  the most damning  parts of the interviews they recycled from The Warning. They concerned the Clinton-era narrative of the complete trashing of Brooksley Born of the CFTC who seriously fought against deregulating the commodities market were absent (may Greenspan, Summers, Rubin, Paulson rot in the hell I don’t believe in, by the way).

All four episodes are here at the PBS website; I’ll jam together Zero Hedge’s single-sentence descriptions of each chapter in the first two episodes; these can be seen individually at ZH’s website so that you might see the depth and timeline of the piece, at least.  Additional interviews are available here.   (You can easily blow right by the green episode info; I thought you might want to watch select ones.)

Episode 1Chapter 1 – A Brave New World of Banking: A group of young bankers make history with the creation of the credit default swap market.  Chapter 2: Funding The American Dream: The Wall Street and mortgage lobbies successfully defeat attempts to regulate derivatives.  Chapter 3: Marching Towards The Cliff: JPMorgan reassesses, pulls back from the mortgage market but other banks can’t get enough.  Chapter 4: The Unraveling Begins: When the housing bubble burst, CDS bring the global economy to its knees

Episode 2Chapter 1 – Systemic Risk: Bear Stearns collapses; regulators fear its effects on the financial system.  Chapter 2 – The Summer Of Assurances: The financial crisis becomes increasingly obvious, but there’s no decisive action.  Chapter 3 – The Decision To Let Lehman Fail: Paulson bet the markets would take care of themselves but would soon learn he was wrong.  Chapter 4 – AIG Gets A Bailout: A decision by Geithner means billions of US Government dollars flows to Wall Street.  Chapter 5 – A Turning Point?:  Paulson decides on a dramatic use of the TARP money: capital injections to the banks.

(Individual chapters of #3 and #4 can be seen here at ZeroHedge)

Episode 3: Chapter 1 – Obama Inherits A Crisis: The president-elect faces a key decision: Who would serve on his economics team?  Chapter 2 – A Financial Stability Plan: Geithner’s team decides on stress tests, but his speech announcing the plan is a disaster.  Chapter 3 – A Showdown At The White House: Economic adviser Larry Summers suggests it’s time to break up a ‘too big to fail’ bank.  Chapter 4 – The Stress Tests Revealed: The results are positive – with no mention of billions of Fed loans propping up the banks.  Chapter 5 – Summer ’09 – Anger Boils Over:  Obama revives a campaign to reform Wall Street but utlimately leaves the details to Congress.  Episode 4: Chapter 1 – Everybody Was Making Money: Despite the crisis, nothing seems to have really changed the culture of Wall Street.  Chapter 2 – When Derivatives Deals Go Wrong:  Banks promoted swaps to help cities lower debt payments. But then the markets crashed.  Chapter 3 – Europe Was “Cooking Their Books: In the 1990s bankers offered derivatives to countries bidding to join the EU. Chapter 4 – Can The System Be Reformed?: While Occupy Wall Street takes to the streets, another battle is being fought in D.C.

There were surprises, new information, revisionism, and clarifications of terms that seem worth mentioning; please feel free to weigh in with your own takes and opinions of the series; you may know than I do: I’m not a real doctor.  ;o)

The portions I saw of the first two hours seemed remarkably bank-friendly, with a few exceptions.  There was too much reliance on the ‘either bail the banks out’ v. ‘let them fail, kill the economy forever’ binary thinking.  Unless I missed it, the decision for Paulson and Bernanke to arrange a sweet deal (a 93% discount from market share on that day) for JP Morgan (my favorite Jamie Dimon) to ‘buy’ Bear Sterns, compared to the actual reasons Paulson chose to let Lehman Brothers fail, was sketchy, especially as to Paulson’s enmities from his days at Goldman Sachs that was covered it The Warning. This piece claims to be about ‘fact v. myth’, and tells a bit of Dick Fuld’s side of the story.

Sheila Bair was adamant that they should have let Bear fail; it’s interesting to imagine other scenarios if they had, or if they had heeded her warnings on the coming subprime mortgage crisis.  Subprime loan pushes weren’t covered nearly well enough in the story, and they seemed to breeze by AIG’s key role in the massive exposure to credit default swaps counter-parties, and the government takeover that ensued once the housing bubble crashed and burned.  Not mention, if any, of what all this did to American and global pensions, though Tea Party and Occupy Wall Street anger were covered.

This interview with JP Morgan’s Terri Duhon about says everything you need to know about their derivatives creation and the Fed’s active approval of them, Blythe Masters of JP Morgan speaks about how and why derivatives were first created to ‘spread risk’, and how they often went on the road to create markets for them.  Eventually interest rate derivatives were created for nations like Greece and others to be so opaque that they could to make their balance sheets look better in order to be accepted into the EU.  Many cities in the US were also approached by Banks Bearing Interest Derivatives; of course, those who invested in them were hit hard when the bottom fell out of the market; many ended up owing fantastic amounts of interest they were unable to repay the banks.

Employees in the derivatives departments were literally encouraged to find potential markets for swaps, construct them with maximum opacity, then sell them to people too foolhardy to avoid the traps.  I know our school district bought a pile of them, and went through hell in ‘austerity moves’ to get back into sound financial shape; balanced budgets are the law in Colorado, even in the schools.

The story of Obama’s connection to Robert Wolf, Chairman and CEO of UBS’s Group Americas division was new; I assume it’s true, but he makes himself into a bit of a hero of the Obama-to-President story, so…it would be nice to know if it’s so as a matter of history.  He claims that they met at a Soros do, became friends and confidantes in 2007, and that he fed Obama information from the crisis talks Paulson held with the Big Bankers, claiming that his help primed Obama for his Cooper Union speech to bankers concerning the need for regulatory policy to be enacted.  He thought Obama was a real tiger; I thought he paid plenty of homage to the financial industry, but Frontline only aired the ‘get tough on Wall Street’ part.   Wolf would become a member of the President’s Economic Recovery Advisory Board.

Segue now to September of ’08 when John McCain ‘suspended his campaign’ in order to rush back to DeeCee to solve the banking crisis; he even invited Obama along to the meeting.  In Wolf’s and Frontline’s narrative, Obama walked into the room with incredible élan, and ruled the meeting with his knowledge, calm, and resolve, and made an utter fool out of McCain, which was communicated widely to Wall Street; bet the contributions started flowin’ into his coffers right afterward.  Bye-bye John and Sarah.

The next story of interested as far as personal relationships influencing Obama was the one they showed with O and Geithner; according to Frontline, they felt almost like twins separated at birth, sharing much twin bios and natures; love at first sight.  This bond heavily influenced the next mind-boggling story, the one in Episode, Chapter 3: Showdown at the White House in which immediately following Timmeh’s first disastrous speech to the nation (read: bankers) outlining his ‘cure’ of stress-testing the banks, and the DOW falling 400 points…up stepped Larry Summers, another of the MOTUs we love to hate.

And this story has it that: Summer’s advice was that, at least for the optics of it, one of the big, bad, insolvent banks had to be nationalized and unwound. Christine Romer was in his corner, but that’s totally believable, as we know how Obama blasted her apart when she told him that a far larger stimulus package was required to get people back to work and revive the economy.  Bye-bye, Christina; you tried.

But…insiders say that Geithner’s cautious (empty) plan, and warnings that seizing control of a bank could have disastrous complications was appealing to the timid, down-side risk averse Obama.  Damnation.  This is also a good time to mention that veteran William Black, investigator extraordinaire of the S&L crisis whose work helped put 1200 criminal bankers in jail and kept the commercial sides of the banks working as they cleaned them up, was never interviewed for the story. Telling, if you ask me.

There were stark admissions by some former bank CEOs and employees about the ease with which making boatloads of money per year caused twinges to their consciences.  A few of the interviewees did admit they had come-to-Jesus moments when they could no longer allow themselves the luxury of pretending that caveat emptor really covered their sneaky, opaque derivative ‘products’ that they knew would cause financial misery for those whose pensions, houses, and more would be disastrously affected by their creation and sales.

Terms that were used and might need explanations that will help our understanding in the discussions of all of this.

Regulatory arbitrage (sounds badass, doesn’t it): One of the bankers described that the main part of her job was to study any regulatory laws carefully in order to capitalize on loopholes that would permit derivatives to be legal, if not ethical (that was a small Obama joke), using in the words of Investopedia, by a variety of tactics, including restructuring transactions, financial engineering and geographic relocation.” She giggled a little nervously talking about it, and eventually did leave the bank; she declined to say what her pay packages amounted too per year.

Moral hazard: a term we often hear, but whose actual meaning is upside-down from what it should mean, at least to me.  If banks or their products represent moral hazard, it is because the risk they engage in is greater due to the fact that there is either an explicit or implicit expectation that they will be bailed out by taxpayer dollars, or seen as: Too Big to Fail, which generally may mean that their counterparties are vast enough to be infected by their failure, or their products failures.  For an almost hilarious definition of moral hazard as per the Austrian School of Economics, read here.  Asymmetrical information between buyers and sellers?  Fuck yourself; idiocy is no excuse. ;o)


(courtesy of matthewnstoller via

Proprietary trading: there were a couple conversations about Old School banking in which banks served their communities, lent money for houses, new businesses, highway projects..things that aided the common interest.  But when banks got wild to make money for themselves, bankers became the Young Gods and Rock Stars of the ‘society’ by  engage in proprietary trading, The People became, instead, marks for whom capitalcould be extracted and thrust into their vast pockets.

As to the promise that Frontline made to answer the question “Has anything changed?”, at least they were honest about it.  NO.  But as I remember it, the implication was it was all the fault of the lobbyists for banking.  They even mentioned one of my current faves: that the SEC regulators were about to name a certain top figure of notional worth a bank can hold and escape strict rules on capitalization, etc., and that once the banks weighed in, that number increase by 7,999%, meaning that 70% of the investment banks wil be…exempt from The Rulez.

The writers and producers seemed to forget that the Obama administration fought any truly meaningful regulations, and signed Dodd-Frank essentially…unwritten.  Ha!  Guess he told us whose interests he serves.

There were dozens of great quotes from the interviewees, but I liked this one from Cathy O’Neil, a former math whiz quant who worked as a quant for analyst for the hedge fund D.E. Shaw & Co. especially well:

“Yeah. You know, Occupy Wall Street from the very beginning was being criticized. The people in Zuccotti Park, the occupiers were being criticized for not really knowing how the system works. And what I realized was, you know what? Nobody knows how the system works. Even the people in finance don’t understand the system.”

O’Neil has since helped create an Alternative Banking working group at OWSNY’s General Assembly; they update it regularly.  Cathy O’neil created a website called Mathbabe to explain financial terms.

You go, girl!

Can  the system be reformed?  Most said yes; but the will to do it must be there; and that may not happen until the next meltdown, which…is surely comin’ down the track.

[Update]: I failed to report that there were many strong indictments of the Lemon Socialism/moral hazard policies allowing the casino gambling to flourish; I apologize, and wish I could have brought a couple of those videos here.

David Graeber has a piece up at NC telling of the apparently emerging tactic of sexual assaults by police in NYC.  A friend’s wrist was broken while she was screaming bloody murder following a cop assaulting her breasts.  Graeber and many commenters believe that this may be one of the new components of the ‘smash and grab’ tactics police are turning to in lieu of mass arrests.  Do broadcast his report as widely as possible; if this is indeed a trend, it’s seriously sick.