The economic crisis was an 'inside job'

The Washington Post ^ | 8/13/10 | Kathleen Parker

[Sakity Yaks]

If you haven't been humming tunes from "Les Misérables," you haven't seen "Inside Job," the new documentary about how our economic crisis evolved.

The most forgiving American will want to seize a pitchfork and march on Wall Street. Or Harvard Square. Or in front of the White House. There are so many despicable parties, it's hard to pick a favorite. Is it time to reconsider the Axis of Evil?

The film, written and directed by Charles Ferguson (and narrated by Matt Damon), will be opening in select cities this week. Although much of the story is familiar, Ferguson manages to weave together decades of bits and pieces into a dramatic narrative that plays like a whodunit. Names have faces, and storytelling combined with graphic illustrations helps explain the complex series of events that led to the global meltdown. Here are a few takeaways:

One, trying to assign blame to either Democrats or Republicans is pointless. Everyone is culpable. From the early 1980s, when Ronald Reagan deregulated banks, through the two Bushes, Bill Clinton and now Barack Obama, each administration has endorsed -- and each Congress has helped tweak -- laws and rules that made systemic abuses and the meltdown not only possible but, looking back, inevitable....

I'm not one to advance class warfare, and most Americans still want to preserve a market system that leaves open the possibility that they, too, can work hard and achieve wealth. But it's clear from "Inside Job" that the game has been rigged so that only a few were in positions to get rich at the expense of the middle class, not just here but globally....

[irish_links]

Since it’s being recommended by a conservative columnist, I would assume that it leans in favor of protecting the free market from this sort of corruption.

Was this sarcasm? Kathleen Parker is no conservative, as demonstrated by the following statement:

“I’m not one to advance class warfare, and most Americans still want to preserve a market system that leaves open the possibility that they, too, can work hard and achieve wealth. But it’s clear from “Inside Job” that the game has been rigged so that only a few were in positions to get rich at the expense of the middle class, not just here but globally....”

This is nothing but left wing conspiracy theorizing. What’s next, 9/11 was an inside job, too? I love the “I’m not one to advance class warfare” ...(but it is justifiable considering that the filthy rich defrauded the world) construction. Come on, Kathleen, this sort of cheap rhetoric is beneath even a pundit as low as you are.

The economic crisis that we now deal with was decades in the making. It cannot be attributed to greed or malfeasance, although these things were evident at times. Bad decisions were made in high and low places, but for the most part they were made in good faith.

I sense a growing populist know-nothing spirit developing on this board. Use you heads my friends or you will lose them to some unscrupulous populist far more dangerous than Mr. Obama.

[Bitsy]

The fraud and dishonesty are so wide and deeply entrenched, that finding an unbiased and incorruptible prosecution would be impossible, in itself

When you take the God factor out of our country, this is the result. There is no moral fabric left. When one thinks he answers to no higher power, or in my case, God, humanism and godlessness rules. There is no depth to the degeneration of mans actions and thoughts left on his own. IMHO.

[OB1kNOb]

Thanks for posting that. I must have missed that thread. The question still remains then as to what catalyst event triggered the panic and meltdown in the financial market that almost brought the whole house of cards crashing down. I don’t recall reading of any other suggested causes. Thoughts?

[Toddsterpatriot]

People thought their banks could fail. Sounds like a good reason to panic.

[VeniVidiVici]

Ah. The Liberals are so predictable. Another Mickey Moore-style movie released in the weeks leading up to the election. And their sycophants in the press, Parker et al., dutifully report every word .. with their lips pressed tightly against the Democrat backside.

[irish_links]

People thought their banks could fail. Sounds like a good reason to panic.

Not merely people, but global financial institutions that had trillions of dollars deposited in or invested in the debt issued by institutions that had appeared to be rock solid the day before but were now quite evidently insolvent. The movement of $500 billion under these circumstances was nothing, despite what the conspiracy theorists on this board suggest.

If you want to point out a triggering event, it was the forced bankruptcy of Lehman Brothers. This triggered a panic among all global financial institutions that overnight did not know who was solvent and who was the next domino to fall.

In hindsight, the Lehman bankruptcy was a policy mistake by the Bush adminstration. But any fool who says that the TARP and the federal government’s efforts to recapitalize the banking system afterward was a mistake, let alone some sort of globalist conspiracy to stick it to the little guy has no idea what he is talking about. Please do not be taken in by this cheap brand of populist know-nothingism. As much as the pitchfork brigade hates banks, often with good reason, the world needs a smooth functioning, well capitalized banking system. These things are frighteningly easy to destroy and immensely difficult to rebuild. Be careful what you wish for populists, you might get it.

[Neverforget01]

Agree. Just didn’t think they would get desperate enough to blame Reagan.

[Madame Dufarge]

Thanks for that clarification!

I should have followed it more closely.

[Toddsterpatriot]

The movement of $500 billion under these circumstances was nothing, despite what the conspiracy theorists on this board suggest.

The movement that didn't even happen. I ran the numbers once, here on FR, and average daily Fed wires were something like $2 trillion a day. I'm sure a lot more during a panic.

[Toddsterpatriot]

No problem. It sounded like a good story, just nothing in the way of facts to back it up.

[TheBattman]

since they knew the liberal judges on the Supreme Court couldn’t hold on much longer

And they arranged, through their friends in the MSM, to have both major candidates to be different versions of idiot liberal - the self-identified Marxist in Obama, and the Center-pretending RINO McCain, who would (in my opinion) have appointed at least semi-liberal judges )all in the name of reaching across the isle).

[TheBattman]

“This video has been removed due to terms of use violation”

[SE Mom]

Wow- I had completely forgotten about that.

Decades from now- maybe it will come to light who was responsible.

[mo]

“the Interest Rate Contracts, which comprise 84% (some $800 TRILLION) of the derivatives market....”

“After all, in 2008 the Credit Default Swap (CDS) market (which incidentally is only 1/10th the size of the interest rate-based derivative market) nearly destroyed the entire financial system. One can only imagine what would happen if the interest rate-based derivative market “

http://www.straightstocks.com/market-commentary/is-your-bank-a-failure-waiting-to-happen/

That whole house of cards is going to grenade...just a matter of exactly when and where....and the longer it takes, the greater the collateral damage.

This is the reason that TARP and the bailouts should never have happened. It just simply isn’t enough to prevent the inevitable-whenever that may be.

[irish_links]

This is the reason that TARP and the bailouts should never have happened. It just simply isn’t enough to prevent the inevitable-whenever that may be.

I sincerely hope you are wrong, for all of our sakes. The global economy and financial system remain under tremendous stress, but the scenario you describe is far from the most probable outcome. It is reasonable to expect that the Fed’s QE efforts will reflate loan collateral asset values and improve corporate cash flows to the degree necessary to improve loan performance and reduce the risk of corporate default. This will go a long way toward easing conerns regarding the interest rate swap and CDS markets, respectively.

After having accomplished the foregoing some sort of new equilibrium can be established that may be more sustainable if the world can mitigate the Chinese over-saving, over-accumulating dollar denominated asset problem. It would be better if wiser hands were on the tiller in Washington and Treasury, but we can’t do much about that. As odious as Geithner is, he is knowledgeable about the relevant issues and is not a bad guy to have calling the shots at this time.

[mo]

I WISH I was wrong...sincerely wish....but do the math.

“So if you assume that only 1% of derivatives are “at risk” (odds are it’s more) and 10% of that “at risk” money is lost, you’ve wiped out nearly 1/3 of the banks’ equity.

If 2% of these derivatives are “at risk” and 10% of those bets go bad, you’ve wiped out $400 billion or nearly HALF of the banks’ equity.

If 4% of derivatives are “at risk” and 10% of those bets go bad, you’ve wiped out ALL OF THESE BANKS’ EQUITY and they go to ZERO.

Remember, I’m only accounting for derivatives here… I’m not even including ON BALANCE sheet risks, mortgage backed securities, and all the other junk floating around.”

http://www.straightstocks.com/market-commentary/is-your-bank-a-failure-waiting-to-happen/

You cannot escape mathematical reality...as much as each of us desires. We’re embarking now on QE2...while the Fed may WANT to inflate...it doesn’t mean it can...especially as that requires co-operation from our creditors...which cannot happen. They will NOT cooperate with the debasement of their investment. In fact one of my personal concerns is that Congress represents our creditors’ concerns far more effectively than those of We the People. If that is true-I doubt any inflation is realistically possible.

[Toddsterpatriot]

So if you assume that only 1% of derivatives are “at risk” (odds are it’s more) and 10% of that “at risk” money is lost, you’ve wiped out nearly 1/3 of the banks’ equity.

What does "at risk" mean?

[Vaduz]

The economic crisis was an inside job,see Obama&Co.

[mo]

Hmmmm..a trick question?

Depends what you want your answer to be....Peter Bernstein, Nicholas Taleb and Karl Denninger all have their thoughts about risk...but I suppose Taleb’s might be the most significant one relative to this issue-if you believe in unanticipated risk....if you’re a cynic, and believe the biggest risk are the several elephants in the room no one wants to discuss, or deal with, why then Denninger’s your man!!

[RowdyFFC]

Yes, I too, have been waiting to hear WHO pulled over $500 BILLION dollars out of US banks in less than two hours on 9/11/2008 that created the kerfuffle of the economic crisis hoax...wasn’t it just convenient that this hoax was pulled in an election year just when McCain/Palin were rising above Obamunist/Billery in the polls?