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cloudboy -> Frontline: Money Power and Wall Street (5/9/2012 8:30:10 AM)
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I just watched the four-hour Frontline special on the Wall Street meltdown. Here are a few of the notable points I gleamed from it:
(1) When Timothy Geithner and Bernake invited the CEOs of the large WS firms to WASH, they wanted to infuse them with capital to help prop them up and to insure liquidity in the credit markets. When the money was forked over to the firms, no conditions were attached.
(2) After the bailout of Bear Stearns to repackage it and sell it to JP Morgan, Regulators in WASH did nothing until Lehman colllapsed five months later. (Its debatable what could have been done, but it seems to me the Timothy Geither "stress tests" could have been run in advance of the meltdown that was coming. In other words, the FEDs could have started reveiwing the books of the WS firms based on what happed to Bear Stearns.)
(3) Somewhat related to (2), regulators and policymakers were making decisions in a crisis mode. Only when the problem became an open, public conflation of did they begin to act. This is part of the reason Congress was served up the following choice: (1) make a muliti-million dollar bailout of the banks or face a world-wide GREAT DEPRESSION.
(4) Credit Default swaps were invented by a team of JP Morgan 20 year olds in Boca Raton FLA as a tool to reduce risks in the banking sector. (2004)
(5) The Credit Default swap market was completely unregulated. It was a black market. This was the core problem AIG had, it owed money to WS Banks if the housing market started to decline.
(6) Apt analogy of a credit default swap: Making a bet on the outcome of the Super Bowl.
(7) Georgia enacted the toughest Anti-Predatory lending law in the USA in 2002, but Banks created an uproar over this "socialist action" and "interference in the free market" and helped oust the Georgia Governor during his reelection. In 2003 the law was gutted. Georgia then went on to suffer massive problems because of the sub prime mortgage crisis.
(8) When McCain called for a suspension of his campaign to go to WASH DC to address the crisis, a meeting was held in DC with regulators, bankers, McCain, Obama, and PRES BUSH. At the meeting, McCain was not well spoken and seemed "in over his head," Obama in contrast had been in constant contact with insiders about the crisis, and he ended up running the meeting. Bush walked out of the meeting because those in attendance could not build a consensus about what to do.
(9) Obama took the advice of Timothy Geithner over Larry Summers -- to go easy on the Banks and to help prop them up and to build market confidence. Summers wanted to nationalize a bank and make some heads roll, and he wanted to reform WS.
(10) Credit Default Swaps remain largely unregulated.
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