Financial crisis on Frontline

If you have any interest at all in economics, finance, or the financial crisis, then I highly recommend PBS Frontline’s series on Money, Power and Wall Street, which can be accessed here.  I watched episode two last night on how the 2008 bank bailouts were engineered in 2008.   Then New York Fed president Tim Geithner favored bailouts, following the game plan established by Robert Rubin, Larry Summers and Alan Greenspan during the 1990’s.  While then Treasury Secretary Hank Paulson was initially hesitant because of the moral hazard.  However, he did approve of the bailout of Bear Stearns in March, 2008 where the US Federal Reserve basically gave JP Morgan 30 billion dollars to buy it. Paulson had a total change of heart after he let Lehman Brothers fail in September, 2008.  The credit market seized and he started to panic when even non-financial institutions started to complain that they would have trouble operating because their access to loans had dried up.  This led to the Troubled Asset Relief Program (TARP) where Paulson forced all the major banks to take money without any conditions.  I thought that we should have let the banks fail in 2008.  The US Fed could then temporarily nationalize the failed banks and start anew.  They could even retain most of the lower level staff so institutional knowledge would not be completely lost.   Instead of bolstering insolvent banks, we could have lent to small businesses and homeowners directly.

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2 thoughts on “Financial crisis on Frontline

  1. I didn’t watch the first segment but the second was quite critical of the bailout. I watched part of the third last night and it was very critical of the banks.

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