Frontline aired the first two parts of their 4-episode documentary “Money, Power & Wall Street” last night.The documentary explores the causes and effects of the 2008 subprime mortgage crisis, tracing the creation of the credit default swap, its application to the mortgage market, the de-regulation of Wall Street and the months leading up to the height of the crisis.
Featuring an all-star list of experts, including journalists, economists, government officials and banking executives, the documentary provides a good review of all that has been said and studied on the financial crisis.
And in case you missed it, we picked out some of the best things that were said.
'They were going to look for ways to enable financial institutions to pass risk between them. One way to do that was to sell loans. Another way, though, was to separate out the risk of a loan going bad from the loan itself. and out of that came this drive to develop credit default swaps.'
'Bankers borrowed one set of ideas that had been developed in the commodities market and applied it to loans for the first time. this idea was essentially created under the banner of making the financial s esteem safer.'
- Gillian Tett of the Financial Times, the first journalist to chronicle the development of the CDS
'So there was a lot of very positive reinforcement of the market, and it just grew. It grew very naturally. Once the seed was p planted, there was no stopping it. This was incredibly new stuff.' It was amazing, it was clearly a product that was in need. We had identified a need.'
- Terri Duhon, formerly of JP Morgan, now at B&B Structuring
'It's an insurance product designed not to be regulated as an insurance product, and designed to avoid regulation at all. And one thing we do know is that when a product of any time is designed with minimum regulation, capital and activity move into that area and it expands dramatically.'
- Dennis Kelleher, Chief Counsel to former North Dakota Senator Byron Dorgan
'The Wild West experience in home mortgages was well underway. We were creating mortgages we had never seen before, and they were being created faster and faster…. There was a tremendous growth of mortgages that we knew made no sense financially.'
- Professor Frank Alexander, Emory Law School, commenting on the growth of the housing market in Georgia.
'There's a great set of adages on Wall Street about where risk will flow, and if you ask people they're basically split between two camps. One says that risk will flow to the smartest person… and the other says risk will flow to the dumbest person… At least based on my experience… It's the latter.'
- Frank Partnoy, author of Infectious Greed
'It was in fact a financial shell game where we were manipulating banking results by moving the risk out through one door, but bringing it back into the banking system by another door. The risk was not leaving the banking system.'
- Satyajit Das, Author of 'Traders, Guns and Money'
'…The people that were charged with overseeing our financial system really didn't have a sense of the risk that were embedded in the system. They didn't see the fundamental rotting in the system that had manifested itself for years.'
- Phil Angelides, chair of Financial Crisis Inquiry Commission, on the role of regulators during the financial crisis
'It felt like this was a crisis but not an uncontrollable one. this was something that could be stopped, a finger in the dike would end up working fine.'
- New York Times reporter Peter Baker on how Hank Paulson viewed the beginning of the crisis
'He just can't stop being Dick Fuld, and the whole firm came to be stamped with that with that.'
- NYT reporter Charles Duhigg on former Lehman Brothers CEO Dick Fuld, and his reputation on Wall Street
'He's 47 years old, he looks like he's about 32. Extremely smart, extremely aware of this stuff. Very discreet, controlled.'
- Nobel award winning economist Paul Krugman, on then-NY Fed chief Tim Geithner
Jonathan Alter of Newsweek comments on a meeting at the height of the crisis with then-Presidential candidates John McCain and Barack Obama, President Bush, and other senior members of Congress.
'President Bush whispers to Nancy Pelosi--who is sitting next to him--when McCain was talking, 'You guys are going to miss me.''
When President Bush walks out of the meeting--
'Another Republican at the table joked… 'After this, even we're going to vote for Obama.' That was the level of Obama's dominance in this meeting.'
'They don't have to modify any mortgages, they don't have to put limits on their own salaries… they didn't have to do anything different than they were doing before. They don't even have to agree to major regulatory changes. Basically, they are sitting fat and pretty… and happy.'
- Former labour secretary Robert Reich on what the banks did and did not have to do in order to receive the bailout.
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