Here's What You Missed From Last Night's Excellent Frontline Documentary On The Financial Crisis

Jackie Calmes

Photo: Frontline

Frontline aired the last parts of their 4-episode documentary “Money, Power & Wall Street” last night.Starting where the last week’s episodes ended, the new part explores the American government’s attempts to reform the financial industry following the crisis, the criticism of the culture of Wall Street and how the risks developed by the financial system has spread around the globe. 

Just like last week, the documentary featured an all-star list of experts, including journalists, former Wall Streeters and government officials, allowing the documentary to reflect on the changes since the crisis.

And in case you missed it, we picked out some of the best things that were said.

As the crisis unfolded, then-Presidential nominee Obama started talking regulation before anyone even considered it.

'I actually went down to the Cooper Union speech with him in this car. he was talking bout the idea of making sure that the ethics of Wall Street was pure, and that we were doing the business the way we should be doing.'

'He was sitting in the heart of the World Financial centre, talking about regulation before we started talking about regulation.'

--Robert Wolf, CEO of UBS Americas

Source: Frontline

After Obama won the presidency, his choice of Tim Geithner for Treasury Secretary was met with mixed reviews.

Former labour Secretary Robert Reich gives his doubts on Geithner's effectiveness as a Treasury Secretary to handle the crisis--

'I knew that he was a protege of Bob Rubin, I knew that he was there for, of, and by Bob Rubin.'

'He sees the economy as a practical matter, the way Wall Street sees the economy. And therefore, Tim Geithner is going to reflect what Wall Street ultimately wants.'

Source: Frontline

But Obama chose Geithner because they shared similar views about the world.

'People tell me it was like… men tell me, who know about this--that it was love at first sight. And I got this from both sides. People close to Geithner told me he was 'smitten.''

--Jackie Calmes of the New York Times

'They had an almost immediately mind meld. They'd both grown up partly abroad, they'd both had a parent who worked for the Ford Foundation, and they had a similar world view.'

--Jonathan Alter of Newsweek

Source: Frontline

Even when Geithner couldn't find an immediate way to calm the heightening crisis, Obama stuck to his side.

'President Obama set a high level of expectations. The impression from watching that press conference was tomorrow, my Secretary of the Treasury Tim Geithner is going to tell us what the plan is to save the world... The president said, Tim Geithner is going to come with a plan and that plan is going to contain the magic bullet.'

--Charles Duhigg of the New York Times

In reality, Geithner wasn't ready at all and hadn't even had his speech ready. When he announced the stress tests the next day--which was meant to put confidence back in the markets--the Dow tanked as he was speaking.

Source: Frontline

There were talks of forcing some bank CEOs out of their positions, but Geithner said no.

'Royal Bank of Scotland is almost twice as big as Citigroup, the British government took it over and fired the CEO. Guess what? When we had the problem with the car companies, we went there and fired the CEO. Why did we not fire the CEOs of some of these companies that got into terrible trouble?'

--Ted Kaufman, Democratic senator from Delaware

Source: Frontline

Larry Summers was also not a fan of Geithner's cautious handling of the crisis.

Everything was a mess following the crisis, so much that the Dodd-Frank Act was met with immediate criticisms when it came out.

'The weakness is that in order to get it over legislative hurdles, there were so many i's and t's left undotted and uncrossed that big decisions that are actually of great importance are still being made, and they're being made in a climate where they're not necessarily under public scrutiny, where the lobbyist have a chance to get in and sway things their way. I very much worry that we haven't learned the lessons that this crash should've taught us.'

--Jared Bernstein, former White House economic advisor

Source: Frontline

Meanwhile, as the crisis winded down, even Wall Streeters began to ponder the purpose of their work.

'I just felt like I was doing something immoral. I was taking advantage of people i don't even know whose retirements was in these funds. We all put money in our 401ks, and Wall Street just takes this money and skims off like, a certain percentage every quarter.

--Cathy O'Neil, former quant with D.E. Shaw

Source: Frontline

The culture of excess that Wall Street nurtured was also questioned.

'These are the rockstars of London at the time. People being paid $10, $15 million dollars a year. And you saw them in their expensive shirts in these VIP places, there's like a £500 bottle of vodka and there were all these girls in mini skirts flocking to these VIP rooms, enjoying this once in a lifetime opportunity.'

--Nick Dunbar of Bloomberg Risk said of young bankers in London and New York

Source: Frontline

That's because banks attempted to make money by finding loopholes in the law, and targeted municipalities and countries.

'Regulatory arbitrage, this is a kind of esoteric term. But basically what it means is figuring out a way to get around the law. And Wall Street has gotten very good at regulatory arbitrage. They're very good at figuring out a complicated financial structure that achieves some objective that you couldn't achieve otherwise in a legal way.'

--Frank Partnoy, author of 'Infectious Greed'

Source: Frontline

One of the municipalities was Jefferson County in Alabama, which lost money on interest rate swaps.

'He said with the refinancing, it would hold the rate increases to single digits. And it would also over the long run save the county $300 to $400 million dollars.'

'I think the bankers in New York, with Larry Langford sitting across from them had to stifle the laugh… Because you had a guy here who had no idea about swaps, had no idea about auction rate securities, had no idea about the financial market.'

--Barnett Wright of Birmingham News

Jefferson County filed for the largest municipal bankruptcy in the U.S. last year.

Source: Frontline

Another was Greece, whom Goldman Sachs helped cut debt levels through the largest sovereign derivatives deal in history.

'It was a secret off-balance sheet loan, legal within the rules of the time. But it was an off-balance sheet loan. it's a very expensive form of borrowing for Greece. By going through Goldman, Greece ended up paying 16% a year, it's a bit like a subprime mortgage... it's a crazy borrowing rate, for someone that's desperate to borrow money.'

'You can safely say Goldman earned hundreds of millions on that deal.'

--Nick Dunbar of Bloomberg Risk, who first broke the story of the Goldman-Greece deal.

Source: Frontline

In reflecting back, the documentary ends on a somber note on how little the financial system really changed after the crisis.

'We now somehow sort of believe that finance drives everything. The crisis was an opportunity to change that. To ask question like what is the role of finance in our economy, what is the role of banks? But i suspect it's very hard. Because it's very difficult to change gods, and in the modern age, our god is finance. Except it's turned out to be a very cruel and destructive god.'

--Satyajit Das, Author of 'Traders, Guns and Money'

Source: Frontline

Now check out what happened at Occupy Wall Street yesterday...

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