Question for Discussion: What caused the 2008 Financial Meltdown and how
does the Bank bailout affect America's Future?

Reading:The Corporate Scandal Sheet 2002; Uncle Sam, the Enabler: How the Investment Banks screwed the Government and Taxpayers; What went Wrong?: from The Warning DVD;The Bet That Blew Up Wall Street - 60 Minutes; Watchdog Sees Huge Bill for Banks Bailout (Oct. 2009); 5 Ways the Government used our Money to Save Big Banks and Screw Us

Video: Credit Default Swaps: Fall 2009 60 minutes stories (0:00);
Simon Johnson: Fall 2009 60 minutes stories;
DVD: Inside the Financial Meltdown (0:00)
Kroft: When to give up on accountability - (See Video)
60 Minutes Overtime - CBS
You Tube: Gordon Gekko speaks the truth about the bailout.
Inside Job -- Chapter 8 Goldman testimony
You Tube: William Black on Profits from Fraud ;
You Tube: William Black on Bank Fraud

60 Minutes - Prosecuting Wall Street Fraud At Citigroup

The case against Lehman Brothers - 60 Minutes - CBS News

Market Collapse of 2001-2003?

• Crony Capitalism in the USA:
  the 2002 Tech-Bubble Market Crash (in-class)
  
  
• Krugman: Crony Capitalism, USA (in-class)
  
  
• Shaken Markets: The Tech Bubble Burst (in-class)
  
  
• The Global Cost of Crony Capitalism
  
  
• Crony Capitalism Revisited
  
  
• The Corporate Scandal Sheet (in-class)
  
  
• Worldcom's Crimes (in-class)
  
  
• No Bigger Fish than MCI (in-class)
  
  
• Worldcom's Financial Bomb: The Big Lie (in-class)
  
  
• Worldcom: The Surprising Face of Corporate Evil
  (in-class)
  
  
• Ebbers gets 25 years for Worldcom Fraud
  
  
• The Enron Scandal
  
  
• The Enron Affair (in-class)
  
  
• Tech Bubble: Who Benefitted?
  
  
• Shaken Markets: The Tech Bubble Burst (in-class)
  
  
• Beating the Streets: Accounting Scandal Tricks
  to boost a Company's bottom line. (in-class)
  

 

Market Collapse of 2001-2003?

• Crony Capitalism in the USA: the 2002 Tech-Bubble Market Crash
  
  
• Krugman: Crony Capitalism, USA (in-class)
  
  
• Shaken Markets: The Tech Bubble Burst (in-class)
  
  
• Beating the Streets: Accounting Scandal Tricks
  to boost a Company's bottom line. (in-class):
  
  

  The pressure to show rapid growth increased dramatically, it seems, during the boom 1990's on Wall Street and seems to have influenced the accounting antics at Enron, Global Crossing, Qwest and the like that have made these firms infamous.

  No one's accusing all of corporate America, of course, but in recent years, more and more companies seem to have used more and more gimmicks to boost their reported profits....pushing the envelope of honest accounting.

  
  
• Top 8 Ways Companies Cook The Books:
  

  Every company maneuvers the numbers to a certain extent to achieve budgets and get bonuses. This is nothing new. But sometimes companies take the fact-fudging too far. Factors such as greed, desperation, immorality and bad judgment drive some executives to corporate fraud. Enron, Aldelphia and WorldCom are extreme examples of companies who cooked the books.

• The Global Cost of Crony Capitalism
  
  
• Crony Capitalism Revisited
  
  
• The Corporate Scandal Sheet (in-class)
  
  
• Worldcom's Crimes (in-class)
  
  
• No Bigger Fish than MCI (in-class)
  
  
• Worldcom's Financial Bomb: The Big Lie (in-class)
  
  
• Ebbers gets 25 years for Worldcom Fraud
  
  
• The Enron Scandal
  
  
• The Enron Affair (in-class)
  
  
• Tech Bubble: Who Benefitted?
  
  

What Caused the 2008 Financial Collapse?

• Johnson, Who Caused the Economic Crisis"
  (Look at argument over Bank Fraud):
  
  So what are these three criminal storylines? The first, and the smallest (if you can believe it) at approximately $10 trillion, is the housing crash and the mortgage meltdown. Totally criminal, as its primary cause was banksters stuffing worthless mortgage paper into CDOs [securities known as collateralized debt obligations] and calling them AAA. Criminal at every level, as real estate agents were convincing their buyers to pay more, not less, to "earn" their fees through a winning bid, appraisers were offering non-independent and completely tainted appraisals, mortgage brokers were altering loan documents and changing income data to qualify buyers, bankers were paying rating agencies to call junk paper AAA, and principal investors like pension funds, insurance companies, and sovereign governments failed to perform even the minimum levels of due diligence demanded by their fiduciary duties
  
  
• Goldman Secretly Bet on the Housing Crash
  
  
• Goldman Sachs Faces Lawsuits over Securities
  
  
• Taibbi, Why Isn't Wall Street in Jail:
  
  The rest of them, all of them, got off. Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted. Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley. Most of these firms were directly involved in elaborate fraud and theft. Lehman Brothers hid billions in loans from its investors. Bank of America lied about billions in bonuses. Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling. What's more, many of these companies had corporate chieftains whose actions cost investors billions — from AIG derivatives chief Joe Cassano, who assured investors they would not lose even "one dollar" just months before his unit imploded, to the $263 million in compensation that former Lehman chief Dick "The Gorilla" Fuld conveniently failed to disclose. Yet not one of them has faced time behind bars.
  
  
• Sheer, Too Big to Jail:
  
  

  Those toxic assets and other collateralized debt obligations and credit default swaps were exempted from government regulation by the Commodity Futures Modernization Act, which Rubin helped design while he was treasury secretary and which was turned into law when Rubin protégé Lawrence Summers took over that Cabinet post.

  In arguing that the derivatives market in housing mortgages and other debt obligations required no government oversight, Summers told Congress, "First, the parties to these kinds of contracts are largely sophisticated financial institutions that would appear to be eminently capable of protecting themselves from fraud and counterparty insolvencies. ... Second, given the nature of the underlying assets -- namely supplies of financial exchange and other financial instruments -- there would seem to be little scope for market manipulation. ..."
  
  

• Moral Bankruptcy: Why are we letting Wall Street
  Off So Easilty?
  
  
• How Big Finance Bought Uncle Sam
  
  
• Financial Industry Contributions to Political Parties
  
  
• Letting the Banks Off Easily
  
  
• Thank You, Wall Street. May We Have Another?
  
  
• SEC allows Banks to Commit Fraud Again and Again
  
  
• Scheer, Banks are Allowed to Commit Fraud Again and Again
  
  
• Taibbi, the Next Big Bank Bailout
  
  
• Prins, How Big Banks Fleece You - The Daily Beast
  
  
• Break Up the Big Banks? - Richard A. Posner - Business
  
  
• Leopold, Summary of the Factors that Caused the Finnanciail Collapse
  
  
• Ritzholtz, The Big Lie :
  (What Really caused the Financial crisis: See 10 points)
• Understanding the Lessons of the 2008 Financial Collapse
  
  
• Republicans Want to 'Protect' Wall Street, Levin Says - Businessweek
  

  Republican presidential candidates want to repeal Congress’s Dodd-Frank financial regulation overhaul to “protect the status quo” on Wall Street, said U.S. Senator Carl Levin of Michigan.

  “They’re not willing to take on Wall Street,” Levin, a Democrat, said in an interview on “Political Capital with Al Hunt” airing on Bloomberg Television this weekend.
  
  

• Friendly fire hits Boehner on Dodd-Frank reform law

  :GOP aides and lawmakers acknowledge they are in a “damned if you do, damned if you don’t” dilemma. If they try to move a Dodd-Frank repeal measure on the House and Senate floors, Republicans will attract criticism for seeking to help Wall Street executives and big banks. But seeking legislation that stops short of repeal has exposed them to attacks from White House hopefuls and the right wing for being inconsistent in their rhetoric on eliminating government mandates.
  
  
• Financial Industry Lobbying Money in 2011
  
  
• Total Financial Losses in the 2008 Financial Collapse, page 2 (in-class)
  
  
• The Real Costs of the 2008 Financial Bailout (in-class)
  
  
• Watchdog Sees Huge Bill for Banks Bailout (Oct. 2009)
  
  
• Prins, Real Costs of the Bailout (in-class)
  (See this chart for breakdown of the costs)
  
  
• Graph of Bailout Costs versus the New Deal (in-class)
  
  
• Uncle Sam, the Enabler: How the Investment Banks screwed the Government and Taxpayers (in-class)
  
  
• What went Wrong?: from The Warning DVD (in-class)
  
  
• Who's Behind the Financial Meltdown
  
  
• Dorgan, Reckless Part One
  
  
• 5 Ways the Government used our Money to Save Big Banks and Screw Us
  (in-class)
  
  
• Krugman, "The Madoff Economy" (in-class)
  
  
• Greenspan and the Wisdom of Markets
  
  
• Korten, The Edmunds Fallacy (in-class)
  
  
• What does Korten Mean by Phantom Wealth?
  

Was the Financial Collapse caused by Fraud
and Crinimal Conspiracy

• What are the Larger Lesons we can Learn
  from the 2008 Financial Collapse
  
  
• Scheer, Too Big to Jail (2011)
  
  
• William Black on 2008 Collapse as Bank Fraud (6:00)
  
  
• Economist: US collapse driven by 'fraud';
  Geithner covering up bank insolvency
  
  
• William Black Interview on Bill Moyers
  
  
• William Black Interview Video (2:00)
  
  
• See Paulson on Re-regulating the Financial Markets (You Tube)
  
  
• Paulson On Calculated Risk of Bail Out
  
  
• See Paulson on the Bailout (60 minutes interview)
  
  
• Levitin, Make the Bankers Pay (2011):
  
  

   This wasn’t a freak meteorological event.  It was a man-made disaster: a housing bubble inflated by the deliberate acts of a limited number of financial institutions that profited greatly from bloating the economy with cheap and unsustainable mortgage financing. We witnessed a macro-economic crime in the inflation of the housing bubble and are living with the consequences of it.

  Those who broke the economy should pay to fix it. The federal government bailed out the banks because they are indispensable to the economy as a whole, but that doesn’t mean that the banks shouldn’t have to pay now. Simply put, there needs to be accountability for blowing up the economy. (And someone needs to go to jail, but that’s another matter.)
  
  

• Inside Job (2010
  
  
• William Black, The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L Industry (2005)
  
  
• Simon Johnson and James Kwak, 13 Bankers: The Wall Street Takeover and the Next Financial Meltdow (Jan 11, 2011)
  
  
• Matt Taibb Griftopia: A Story of Bankers, Politicians, and the Most Audacious Power Grab in American Historyi (Sep 6, 2011)
  
  
• Matt Taibi, The Next Big Bank Bailout
  
  

Financial TBTF in 2012

• Wall Street CEOs Personally Lobby Federal Reserve
  to Weaken New Financial Regulations
  
  
• Banks are Still too Big to Fail
  
  
• `Perfect Quarter' at Four U.S. Banks Shows Fed-Fueled Revival
  
  
• Taibbi, Push to End Too Big to Fail Goes Mainstream (2012)
  
  
• Taibbi, B of A: Rising Hurriance of Theft and Fraud (2012)
  
  
• Reich, Still a 1 Percent Recoverty (2012)
  
  
• Choosing the Road to Prosperity:
  Why we must end Too Big to Fail Now (2012)
  
  
• TBTF Explained section of Report (2012)
  
  
• Korten, How to Liberate America from Wall Street (2012)
  
  
• Johnson, 13 Bankers: The Wall Street Takeover
  and the Next Financial Meltdown (Vintage) (2010)
  
  
• Pity the Billionaire: The Hard-Times Swindle
  and the Unlikely Comeback of the Right by Thomas Frank (2012)
  
  

The Events Leading to the 2008 Financial Collapse

• Lewis: What are the Large Causes of the 2008 Financial Collapse
  
  
• Lewis: What are the Larger Lesons we can Learn
  from the 2008 Financial Collapse
• Banking Collapse of 2008 : Three weeks that changed the world ...
  
  
• Timeline of the Economic Collapse
  
  
• JPMorgan to buy Bear for $2 a share -- Signs of the Times News
  
  
• Biggest Mistake of the Financial Crisis: Lehman Bros. Bankruptcy ..
  
  
• Government bails out AIG with $85 billion loan
  
  
• AIG bailout Monies
  
  
• The Bet That Blew Up Wall Street - 60 Minutes - CBS News
  
  
• Credit Default Swaps: The Next Crisis? - TIME
  
  
• How Credit Default Swaps Became a Timebomb | Newsweek Business
  
  
• FIRE (Finance, Insurance, and Real Estate) sector
  
  
• Moral Hazard after LTCM bailout
  
  
• Government bailouts of the Financial Markets 1982-2008 (in-class)
  
  
• The Greenspan Put
  
  
• The Excitement of making lots of money and profits drove the system
  
  
• The More Money they could make, the more they were willing to take huge risks
  
  
• The FIRE sector took these risks because they knew they
  couldn't lose. If they lost their investment, the Federal
  govenment would bail them out
  
  
• Today the U.S. government is guaranteeing their new loans
  to the tune of Trillions of dollars and guaranteeing their bad
  loans to the tune of trillions of dollars
  
  
• Was all this a "Quiet Coup," as Simon Johnson argues?
  
  
• Not really, they all believe that what is good for the FIRE sector
  is good for the entire economy. This is their larger mistake.
  
  
• The people regulating Wall Street are the same Wall Street
  players they are now regulating. This is the revolving door.
  
  
• They thought that what was good for the FIRE sector was good
  for the American economy and society. They believed that
  they were the "center of the universe."
  
  
• You Tube: Falling Dominoes -- model of collapse of
  interconnected global financial system
  
  
• The dominoes fall: a timeline of the squeeze and crash
  
  
• Spitzer, "The Regulatory Charade" (in-class)
  
  
• Does the Financial Collapse prove that our Financial System isn't Working?
  
  
• Simon Johnson, The Quiet Coup (in-class)
  
  
• Bailout Recipients spent Millions on Lobbying (in-class)
  
  
• "The banks lobbied Washinton so they write the rules that got us into this crisis. They then lobbied Washington to get the money to bail them out. And now they are lobbying Washington to write the rules so they get us into the next crisis. It's perfect circularity. I look at it as more a question than an answer: Who owns this process?"
  
  Elizabeth Warren, TARP Congressional Watchdog
  
  
• Robinson, Mad as Hell Tea-Time (2009) (in-class)
  
  
• Banking Collapse of 2008 : Three weeks that changed the world ...
  
  
• Newsweek: New Market Bubble is Brewing (in-class)
  
  
• CIT bankruptcy: 5th largest in U.S.
  
  
• GoldmanSach 's lesson: House always wins
  
  

Are we in a Depression?

• Posner, "We are in a Depression" (in-class)
  
  
• U.S. NATIONAL DEBT CLOCK
  
  
• U.S. NATIONAL DEBT CLOCK FAQ
  
  
• The $10 Trillion Hangover - Paying the Price for Eight Years of Bush
  
  
• Bush's 10 Trillion Borrowing Binge
  
  
• Banking Collapse of 2008 : Three weeks that changed the world ...
  
  
• Gross, "Dumb Money"
  
  
• Government bailouts of the Financial Markets 1982-2008
  
  
• The Problem is that the Federal Government has bailed out Wall Street because it thinks that Finance (the FIRE sector)is at the center of a healthy economy (in-class)
  
  
• The FIRE sector of Wall Street is doing really well
  but the real economy of Main Street is hurting. By 2008,
  Finance was 31 percent of the wealth created every year
  in our GDP
  
  
• Money creating money on Wall Street through the inflation
  of asset bubbles (stocks, housing, bonds, securities, or
  derivatives) does not help the real economy of Main Street
  
  
• The real economy of Main Street involves companies hiring
  workers, producing goods and services, and creating wealth
  for real communities. If Main Street doesn't work, then our
  economy doesn't work.
  
  
• Is it possible that we owe our foreign creditors so much
  money, and depend on their continuing to loan money to
  us, that we can't break up the Banks and reform the financial
  system without really hurting our Arab, Chinese, and Japanese
  creditors? If so, then Friedman is right: The Electronic Herd
  is really calling the shots. This would represent the end of
  any pretense at democracy in the United States. Friedman would
  we right that our politics is just Pepsi or Coke with no other
  alternative choices. This is what Friedman means by TINA:
  There is No Alternative.
  
  
• Korten, Wall Street Markets vs. Main Street Markets
  
  
• Why is the Federal Government bailing out Wall Street
  instead of Main Street?
  
  

Should we bailout Wall Street and the FIRE sector?

• Watchdog Sees Huge Bill for Banks Bailout (Oct. 2009)
  
  
• AIG bailout Monies
  
  
• All That Money You Lost - Where Did It Go? - CBS News
  
  
• Gross, If the economy's stagnant, why are stocks up ?
  
  
• Fernholz, The Myth of too Big to Fail
  
  
• Ritholtz, Bailout Nation: "The obvious solution--put the insolvent banks into FDIC receivership, fire management, liquidate holdings, sell the assets off, wipe out shareholders, and pay the bondholders whatever was left over--was simply unthinkable" (p. 221)
  
  
• This is what the Resolution Trust Corporation did with insolvent S & L's in the late 1980s and early 1990s. They then sold the reconstituted S & L's to new investors. This was not an option for Paulson, though.
  
  
• Bankers went to Jail in the S & L crisis (in-class)
  
  
• Sanders: Break up "too big to fail"
  
  
• Under Attack, Fed Chief Studies Politics
  
  
• G20 finance ministers agree to maintain fiscal support‎ (in-class)
  
  
• Business Aims to Relax Bans on Products Made with Child & Slave Labor
  
  
• Posner, "We are in a Depression"
  
  
• Johnson, Who Caused the Economic Crisis"
  
  
• Johnson, "Fix the Economy"
  
  
• Boone and Johnson, "The Next Financial Crisis"
  
  
• Watchdog Sees Huge Bill for Banks Bailout (Oct. 2009) (in-class)

Should we bailout the Middle Class and Main Street?

• Vanden Heuvel and Schlosser, "America Needs a New New Deal"
  
  
• Chris Lewis, What about a Green New Deal?
  
  
• Andersen, Ending Plutocracy: A 12 Step Program
  
  
• Korten,"12 Point New Economy Agenda"
  
  
• What Else could our Bailout Buy
  
  
• New American Contract
  
  
• The State of the Middle Class
  
  
• How to Save the Middle Class from Extinction
  
  
• Bartels, Growing inequality in the U.S.
  
  
• Top .01 percent's Wealth since 1945
  
  
• Herbert, "Safety Nets for the Rich

How can we fix the Financial System?

• Bank of England Head on reforming Banking System
  
  
• Dallas Federal Reserve: Why we Must End Too Big to Fail Right Now
  
  
• Dallas Fed: Powerpoint Presentation of Too Big to Fail Banks
  
  
• The case against Lehman Brothers - 60 Minutes - CBS News
  
  
• Lehman Brothers Investigator On 60 Minutes: 'They'd Fudged The Numbers
  
  

  Kroft: When to give up on accountability - 60 Minutes Overtime - CBS
  
  

  "It was the scariest time in my lifetime," says Kroft. "I honestly thought we were headed for another Great Depression."

  Kroft remembers thinking, at the time, that heads would roll on Wall Street, most likely resulting in prosecutions and jail time for high-level banking executives.

  As we all know, that never happened.

  So, for the past two years, Kroft followed up with stories on accountability, trying to answer a simple question: why have no high-level banking executives been prosecuted? He and producers James Jacoby and Michael Karzis have looked at three examples: Countrywide, Citigroup, and, Lehman Brothers, which aired on the broadcast this week

• Kroft: When to give up on accountability - (See Video)
  60 Minutes Overtime - CBS
  

• Thnik Progress Economic Charts on Worker Productivity
  
  
• CEO Pay Grew 127 Times Faster Than Worker Pay Over Last 30 Years: Study
  
  
• Inequality in Income -- 1996-2006
  
  
• The 86 million invisible unemployed
  
  
• How might the current financial crisis shape financial sector
  (html version with graphs)
  
  
• How might the current financial crisis shape financial sector
  (pdf version)
  
  
• U.S. Military Spending- 1946-1996
  
  
• U.S. Military Spending, 1946-2008 (in-class)
  
  
• In Context: US Military Spending Versus Rest of the World (in-class)
  
  
• Reich, "Why Wall Sreet Reform is Stuck in Reverse"
  
  
• Naomi Klein: Wall St . Crisis Should Be for Neoliberalism
  What Fall of Berlin Wall was for Communism
  
  
• Alperovitz, Taking the Offensive on Wealth
  
  
• Stiglitz, "How to Prevent the Next Wall Street Crisis"
  
  
• Schwenninger, "Democratizing Capital"
  
  
• Vanden Heuvel and Schlosser, "America Needs a New New Deal"
  
  
• Chris Lewis, What about a Green New Deal?
  
  
• Andersen, Ending Plutocracy: A 12 Step Program
  
  
• Korten,"12 Point New Economy Agenda"
  
  
• What Else could our Bailout Buy
  
  
• Economists for an Imaginary World
  
  
• Gross, "Dumb Money"
  

 

 

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Sewall Academic Program; University of Colorado at Boulder
Created 1 June 2000:  Last Modified: 4 May, 2012
E-mail: cclewis@spot.colorado.edu
URL:    http://www.colorado.edu/AmStudies/lewis/1025/index.htm

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