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Frontline’s Astonishing Whitewash of the Crisis

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Several of my savviest readers wrote expressing disappointment and consternation with the Frontline series on the crisis, “Money, Power, and Wall Street.” The first two parts of the four part series have been released, and it’s probably safe to say that this program is far enough along to be beyond redemption.

It’s a recitation of conventional wisdom, with just enough focus on some of the numerous things the banks and the authorities did wrong so as to make it seem daring for mainstream TV. But anyone who has been on this beat will find the first two segments cringe-making (one advantage I had was that of reading the transcripts, which makes it much easier to parse the construction). Despite the obligatory shots of Occupy Wall Street protestors, displaced homeowners, and stymied officials, much of the story line is remarkably bank-friendly.

The first segment is particularly troubling. It heavily cribs from the Gillian Tett book Fool’s Gold, which to be blunt was not very well received by reviewers. Fool’s Gold discussed the development of the credit default swaps market from the perspective of JP Morgan executives and staffers, with the result that it verged on hagiography. Oh, those great, intrepid, innovative bankers who just wanted to make the world better, and maybe make a buck or two in the process.

The book at least explained that the reason for the creation of the CDS was to solve a rather big problem for JP Morgan, that it was carrying a ton of loan risk and could use a way to lay it off (the broadcast, by contrast, made it sound like this was a market just waiting to happen, as opposed to one JP Morgan, and later its competitors, cultivated).

And no one clearly explains that CDS, as currently used, are certain to produce periodic blowups of undercapitalized guarantors (the monolines and AIG are prototypical). Tett and pretty much everyone in the segment perpetuates the industry PR that CDS are derivatives. A derivative is an instrument whose price “derives” from an actively traded underlying instrument. CDS, by contrast, are the economic equivalent of unregulated insurance contracts. The pernicious feature of CDS is that the CDS protection writers (the guarantors) aren’t regulated for capital adequacy, the way other insurers are. They instead are required to post collateral to reflect the current value of the contract. But that is no guarantee that the CDS protection writer will be able to pay out. When a default or other credit event occurs, the price of the CDS spikes up, and the guarantor may not be able to make good on the new, higher collateral posting. And requiring CDS protection writers to put up enough margin to allow for “jump to default” risk would make the product uneconomical.

But none of this is explained. Tellingly, there are clips of Brooksley Born, but no mention of her failed effort to regulate CDS. It is instead presented as a benign product that JP Morgan understood (did they sponsor this broadcast? Blythe Masters gets a big promo) and no one else did:

MARTIN SMITH: Did top management at JP Morgan understand credit derivatives?

TERRI DUHON: Yes, they did. Absolutely, they did.

MARTIN SMITH: Did they at other banks?

TERRI DUHON: No, not all other banks. Certainly not.

It’s more accurate to say JP Morgan was once burned, twice shy. It took significant losses in the first test of the corporate CDS market, the bankruptcy of Delphi in 2005. That led it to pull its oars in just as the market for asset backed securities CDS was taking off. Fool’s Gold makes a great deal of noise about how JP Morgan couldn’t figure out how other banks were modeling the risks on mortgage-related CDS and presents that as the reason they were largely out of that market. That may be narrowly true, but I wonder if that sort of caution would have reigned had they not had to reassess the adequacy of their risk metrics in the wake of Delphi.

Similarly, the account hews to conventional lines in making Goldman out to be the poster villain in the CDO market, yet merely in passing, has Deutsche Bank CEO Joseph Ackermann admitting to being one of the banks that stuffed Landesbanken like IKB full of toxic debt. Crisis junkies know that Deutsche Bank trader Greg Lippmann was the most aggressive middleman in helping subprime shorts like John Paulson create and sell CDOs designed to fail (and they had their own program, Start, which was a synthetic CDO series just like Goldman’s better known Abacus trades).

Typical of the program’s attention to fine points, it manages to work in a reference to the formal dismantling of Glass Steagall without saying why it was important (answer: it wan’t, but the gutting of the rule over the preceding decade and a half was). There is also some interview material that is flat out wrong on product spreads and CDO structures. The segment provides anecdotes of the crazed subprime lending, but fails to explain how mortgage backed securities and CDOs were linked to lending (or most important, that CDOs came to drive demand for RMBS, which in turn drove demand to the worst loans). Here, Inside Job was vastly better in covering technical material (with one lapse, in confused RMBS and CDOs) and providing data in an accessible manner.

The next segment is even more troubling. It treats the crisis as if it started with the failure of Bear Stearns, when that was the third of four acute phases, and was in full There Was No Alternative mode. It repeated the thesis I believe, but I’ve never seen confirmed, that it was concern over Bear’s CDS exposures that led to the bailout. It also says that Hank Paulson thought Bear was an isolated case, which would explain why the officialdom went into Mission Accomplished mode rather than trying to get to the bottom of the CDS exposures, pronto (We pointed out in March 2008 that Lehman, Merrill, and UBS were next on the list. If we could see that, that meant it was bloomin’ obvious). But it ignores the fact that the Fed first offered a 28 day loan, which it then changed to overnight and the original loan also would have tided Bear over into having access to a new Fed facility. I’m not convinced that Bear would not have made it, and no one has ever explained why the Fed retraded the deal.

Incredibly, this segment also presents the idea that Obama was seriously interested in and campaigning on the economy. Huh? Obama was stumping on the issues of 2006. It also presents other pro-Obama propaganda in the form of the meeting McCain called to discuss the financial implosion-in-progress, which Obama wound up dominating. This has just about zero relevance in explaining the crisis, and strongly suggests that there were multiple agendas in producing this series.

But worse is the Lehman-AIG meltdown. The markets were tanking! The world was about to come to an end! The authorities had to Do Something! No mention of the Fed’s zillions of special facilities (or previous interest rate cuts). Instead we get the TARP, and the story makes much of Congresscritters sounding miffed at being asked to act over a weekend (as opposed to sign off on a soi disant bill that was all of three pages demanding $700 billion while putting the Treasury Secretary above the law). It also fails to mention the Treasury bait and switch, that while the bill did give the Treasury remarkable latitude, it was sold as being used to buy toxic assets (which we said at the time would never work under the parameters Treasury set forth), not a direct bailout to the banks.

We also get the lame excuse for Doing Nothing after Bear (“we lacked the authority”) when the officialdom had no compunction about bringing the banks to heel in October 2008 (note that there are several layers of kabuki here: as we described at the time, Paulson threatened the banks to take the TARP before revealing the terms, and the banks were quietly pleased when they learned how favorable the deal was. So the “forcing” was theater so the ones who wanted to pretend they didn’t need it could keep that story up. But even if this wasn’t a lot of play acting, this threat illustrates the sort of thing regulators have at their disposal but have become timid about using).

DICK KOVACEVICH, Chmn., Wells Fargo, 2005-09: I don’t know how much further we went before I was interrupted by Hank, who said, “Your regulator is sitting right next to me. And if you don’t take this money, on Monday morning, you will be declared capital-deficient.” I was stunned.

Aside: I also wondered if Wells Fargo sponsored this program. There was gratuitous statements by Wells that they were better lenders (not true if you limit it to banks, we’ve commented often on Wells’ sanctimoniousness).

The show defended the false dichotomy of bailout or disaster, when there were other options. Comments like these were throwaways, not taken up in a serious way:

SHEILA BAIR, Chair, FDIC, 2006-11: If the government hadn’t intervened, those counterparties would have taken huge losses, so there was some leverage there. At least tell them, you know, “You’re going to take 10 percent.” That just— that would have helped. But there was just willingness to kind of throw lots of money at the problem. And I don’t— I think we threw more money at the problem than we needed to. Absolutely….

ROBERT REICH, Secretary of Labor, 1993-97: They don’t have to modify any mortgages. They don’t have to put limits on their own salaries or their own compensation or their own bonuses. They don’t have to do anything differently than they were doing before. They don’t even have to agree to major regulatory changes. Basically, they are sitting fat and pretty and happy.

So thus far, we have some populist decorating of a profoundly pro-Establishment account. Yes, the system got really out of control, but whocoulddanode? It just got SOOO complicated no one could understand it, not even those super well paid top Wall Street executives. There isn’t a single mention of ideas like looting, bogus accounting (remember the fictitious Lehman balance sheet, or Merrill’s CDO-hiding Pyxis, or the $40 billion of Citi CDOs that appeared out of nowhere?) or abuses in other areas (like swaps sold to municipalities all over the world, or rapacious privatizations, the auction rate securities blow up, or chain of title abuses). Nah, it’s just a bunch of fundamentally good ideas taken too far. And they really expect you to believe that.

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146 comments

  1. YankeeFrank

    Yep. I watched this garbage too. Those intrepid banksters, trying to help the world and they just took it too far. I love those guys. They care.

    Frontline should go out and shoot itself. And that dude they get to narrate with that deep and authority-laden voice, he should blow his head off with two barrels blazing.

    1. BFPierce

      That “that dude they get to narrate with that deep and authority-laden voice” is David Ogden-Stiers who played Winchester on MASH. I’m sure he makes more money from his voice-overs than you are capable with your voice but “blow his head off with two barrels blazing” if you must, I’m sure that will solve a lot.

      1. Hot Lips

        “Charles” isn’t the Frontline Guy, Will Lyman is. He’s lent his credibility to Dos Equis, which helps showcase his comedic abilities on Frontline.

      2. Synopticist

        Maybe i’m a big cynic, but i would file this under “corporate media shills for crooked bankers, what a shock” number 2,476.

      3. Michael Roberts

        Clever name, BFPierce. But do you really think that the money someone is paid justifies anything he does? What an impoverished world you inhabit. More to the point, that’s a sort of reverse ad-hominem argument that won’t fly around here.

      4. Up the Ante

        “.. is David Ogden-Stiers who played Winchester on MASH. I’m sure he makes more money from his voice-overs than you are capable with your voice but “blow his head off with two barrels blazing” if you must, I’m sure that will solve a lot. ”

        It will solve the problem of conveyers of false dignity, a process Frontline is intimating it has mastered, D.O-S. serving as a bolded exclamation point to the weak-willed that a “skullfucking” is being attempted. That would be your skull if you neglect to tell David that his voice is over, and of course, out.

        1. BFPierce

          Really? You want to shoot the messenger by “blowing his head off with two barrels blazing” ? Really? As if that solves the problem? So what. The problem goes far, far beyond the narrator you dopes. We can only wish changing the narration can solve the problem. Go ahead and wish the death upon the narrator without any retribution. In contrast, if I said we should begin cleaning up the problem by locating Wall Street Jews and “blowing their heads off with two barrels blazing” – This site would howl, scream, whine, yell, cry and demand immediate release of my IP address and my indefinite incarceration. Your Howard Stern like sophomoric ‘humor’ about the death of the narrator is proof that stupidity reigns in this country. I personally can’t wait for total economic anarchy. This is the sole reason I own firearms. You think you’re above the sheeple but you’re comments telegraph a different story.

          1. Up the Ante

            Seeing as YankeeFrank coining has vexed you so, I’ll re-quote it, lol,

            “And that dude they get to narrate with that deep and authority-laden voice, he should blow his head off with two barrels blazing. ”

            Now on to yourself,
            “Really? .. ? Really? ”
            Yes. REALLY.

            I’m sure David thinks his voice is a real fetch, too, but as I schooled you you mustn’t neglect to tell him his voice is over as in out.

            David, the 1%’rs ventriloquist dummy feels to intone to me that he’d like to use me as a blow-up doll and I’m not supposed to feel justified in telling him & Frontline to go fuck themselves ?

            lmao

            “two barrels blazing. ” was and will remain the word for David’s ilk, lol.

            There is some hope as long as you possess firearms, BF.

    2. mary

      Just to pick up on Yves’ worry about
      Gillian Tett. Tett mystifies me too.
      Herebelow is a link to Tett’s C-span
      After Words interview of Sebastian
      Mallaby on his book about hedge funds
      “More Money Than God”. Tett has
      recourse to the old chestnut “the
      American Dream” no less than four times
      in one hour.

      http://www.booktv.org/Watch/11739/After+Words+Sebastian+Mallaby+More+Money+than+God+interviewed+by+Gillian+Tett+FT.aspx

      You really have to see it to believe it,
      Tett is perfectly content classifying
      people as nerds and techies etc.

      If you want to see worse try Nicole
      Gelinas interviewing Harry Markopolis
      about his book “No one would listen”.

      Why does no one ever mention the film
      “American Casino” by the Cockburns?

      1. JamesW

        “..Sebastian Mallaby on his book about hedge funds
        “More Money Than God”.”

        I just have to comment on Mallaby’s godawful book, which could have been summed up in exactly two sentences:

        Deregulate everything! and

        Gov’t should support hedge funds!

        What a complete stooge that Mallaby is, and Tett’s book is really nothing but an advert for JPMorgan Chase et al.

  2. vlade

    The best TV programme on the crisis is still BBF’s Silly Money and The Last Show Before the Recovery.

  3. Greg R

    “But anyone who has been on this beat…”
    I am less concerned about the show’s impact on that audience than the impact on the ham-and-eggers in the trenches. I’ll have to wait until the final episode, but if they come away with one thought – THIS WAS NO ACCIDENT – I’ll be satisfied.

    1. CaitlinO

      I think there are some signs for hope. CNBC online featured an article all day titled “Economy’s Biggest Drag Right Now Is Government” (http://www.cnbc.com/id/47205997).

      In the years before the Crash, this would have been cheered long and hard by CNBC commenters; today it was universally panned by commenters who pointed out that austerity has been a disaster and that growth can only come from government spending right now.

      Jeez, they even dumped on Reagan.

  4. Dan Friedman

    That just saved me from wasting precious time watching Frontline’s Money, Power & Wall Street.

  5. Mike M

    Let’s look at it from another angle. Where else in the Big Media that the 99% watch (who reads anymore?) has there been any sort of coverage like this? How often have you seen such reporting of what happened back then on your flat screen, outside of the financial networks? Do ya think, maybe, this was a good start for, maybe, a few hundred thousand people out there who have been fed the utter garbage that poor people brought us down and, if we all just avoid regulation and taxes, we’ll all be taking out six figure home equity loans again? I know, I know, there are serious problems with this series’ coverage, but, I’m heartened that somebody made an effort to expose some of the filth that went down, and, in the end, told us that nothing really has changed since then. A lot more people watch PBS than read this blog, you know.

    1. PhilK

      Naive and gullible teevee-watchers aren’t going to take this as a “good start” – they’re going to take it as the absolute final say on the subject, and an excuse to hit the snooze button one more time.

      1. Mike M

        Well, I know that many here are just so much smarter than the average naive and gullible tv watcher, but, believe it or not, many of them are capable of a little critical thinking. Maybe they don’t take all thy see and hear as gospel. Where’d you start?

        Look, if you want things to change, you’re going to need some of those voters. Well, unless you’re planning a violent revolution or something.

        1. yugan

          ‘Many’ is probably a little exaggeration. If that were true we wouldn’t have Speaker Boehner or the current version of Mitt Romney running in the wild.

          1. PL

            I agree that something is better than nothing, even though PBS goes easy on the malfeasors. It’s a start. I choose to believe that some people are capable of understanding what went down if the MSM provides some critical information. Not ready to give up on people yet, despite some evidence to the contrary like the politicians you mention.

        2. SubjectivObject

          I’m with Phil here. Over the years I’ve talked to many. Have introduced the alternative realities cited on NC and others. Respondents consistently exhibit variant characteristic forms of defensiveness. The realization being they certainly do want an authoritative summary requiring no obligation to action on their part as may disturb them in the trappins of their complacency. Which behaviour avoidance is what the maintainers of the status quo use to full advantage.

        3. PaulArt

          I just watched it. Why Yves would take the trouble to write a review is beyond me. Its typical PBS. Yves mentions Brooksley Born and how her attempt to regulate the market was trampled underfoot by Greenspan, Rubin and Arthur Levitt – they have some kind of popups/captions going on when she is on screen in the first segment – the idea being if you want more information on Born’s regulation attempt we have to click on that caption or something. The trick here employed by PBS is to fail to mention what happened to Born when she tried to regulate them – they simply run a small segment of the Senate hearings where she categorically states how dangerous CDSs are and Greenspan reciting from Ayn Rand – the watcher is assumed to be well informed enough to put the pieces together. Its definitely shameful but thats PBS and one should not expect anything less from them. Earlier this week on Morning Edition on NPR we had the spectacle of Renee Montaigne asking a reporter why Iceland would prosecute a politician just because he was doing a ‘bad job’. These people are all self serving parasites and leaches in Washington.

    2. Doug Terpstra

      No this is not a good start. It qualifies as the worst of insidious propaganda, where the really big lie is Mickeyed with just enough palatable truth to be swallowed whole. It is a perception-management sedative worthy of Ronnie Raygun.

      1. enouf

        Yes indeed;
        The best lies are those laced/sprinkled with just the right amount of truth.

        BTW; haven’t been here in a bit, and haven’t read all the comments yet, but i’m guessing nobody has posted this critique of the frontline farce;

        http://prn.fm/2012/04/27/wake-call-042712/

        p.s. I still don’t believe in this entire debt-based monetary system one iota; everything is monetized; giving a certain few the power to create ‘wealth’ out of thin air is more than assinine, and realization of our own individual Sovereignty is the only way forward, IMNSHO

        Love

  6. JefeMT

    Pereception, filters are everything. My takeaway was a pro-Obama 2012 advertorial, with a bit of dramatic foreshadowing that Barry-O and his Dream Team might have a bit of poo on their shoe. It wasn’t perfect, but my takeaway was that the bankers, the whiz-kid innovators, and Paulson and Geithner were culpable, irresponsible, and hardly heroic. Its a complicated picture, it STILL is unravelling, we are not out of the woods, and the consequences (the bubble effect of all that dough sloshing around) is still playing out. Lets see what the next two episodes bring, and judge at that time? Better coverage than CNBC? At least someone tried to tell some of the story?

    1. chitown2020

      CNBC has revealed a lot. They have had a lot of great documentaries like House of Cards and American Greed. They revealed the Illuminati crashed the stockmarket (the video is on you tube) and Wall Street made 60 trillion from derivatives in 1999. They aren’t all bad.

        1. Carl Miller

          Derivatives have ballooned beyond most countries GDP, what’s the global derivatives bubble at right now 700+ trillion worldwide?

        2. Mark P.

          “Except that total world GDP in 1999 was $40.7T according to the IMF …so, clearly, there could not possibly have been 60 trillion in Wall Street derivatives alone.”

          Uh. Yes, there could. That’s the point.

          Some estimates of global derivative trading in 2010 go all the way to $700 trillion.

        3. chitown2020

          Hi Caitlin…that is what they reported. I write everything down. The VENTS and rants are going to get worse as more and more of the truth is revealed about how badly we were screwed…..Have you watched any of Matt Weidners videos lately? That man is pissed…..Now the truth about Lehman and the 700 million dollar bonuses to their top 50 execs before their so called collapse. They all need their overseas bank accounts seized and they need to go to prison….

  7. jsmith

    Um, if anyone remembers the Frontline about 9/11 then there should be no surprise as to how much this show factors into the propaganda matrix.

    It’s basically like the TV version of NPR.

    Just because they have a “serious” sounding narrator it must be true, right?

    I brought this up yesterday in another post because it amazed me that I had never really heard about until I had done my own review.

    No one remembers that multiple undetonated bombs were found inside the Murrah building in OKC.

    Here is one video among many which shows that this was a commonly reported fact on that day.

    http://www.youtube.com/watch?v=NWwrEEP8EBk

    Today, the only story is that McVeigh blew the building alone w/ a fertilizer truck.

    In addition, I recently discovered that Controlled Demolition, Inc. was in charge of the cleanup for both the Murrah Building and the WTC in 2001.

    Finally, the same person was put in charge of investigating the “collapse” of both buildings – Murrah and WTC – and his name is Gene Corley.

    http://en.wikipedia.org/wiki/W._Gene_Corley

    I bring all of this up because it clearly shows how our propaganda system methodically works to rewrite history in front of our very eyes.

    The Frontline whitewash of the financial crisis is just the the next step in the elite’s recreation of history.

    Slowly, other sources will be forgotten, disappeared, destroyed over time until this new narrative – one which just happens to not include facts that would paint the crisis in an “unfavorable” light as concerns the perpetrators – will be the only one left.

    Again, this is not to entirely convince us, living now. It’s meant to whitewash the record for generations AFTER us.

    The elite play a long game as well as a short one.

    1. chitown2020

      Then there is the connection to China’s gold and 9/11. After I heard the story on you tube I remembered after 9/11 happened Anderson Cooper talking about how there was tons of gold missing from the basement of the World Trade Center and pondering about if it could have melted from the fires way down below. The conclusion was no. The same group are behind this manufactured financial crisis. Then there is the matter being circulated on the web of a nuke being planted on the ocean floor near Japan that was supposed to have been put there by them and detonated by them and caused the earthquake and tsunami.

    2. Susan the other

      I agree they are busy manufacturing their own account of the Great Crash. I like to think that it is a little different now because of the internet. Most of the people I know are skeptical of everything they hear and read. I too read some stuff on Oklahoma back in the 90s and I was horrified to see the information on how the building was wired to blow up. And talk about a cover-up. Also, McVeigh’s trial was very peculiar. The difference between now and then is that, although we are being prevented from dealing with the situation as a crime wave, we do have information on the net, from people like Yves, who can clearly communicate the facts. No one could do that before. And the effects of the Great Crash hit everyone so people are interested and angry. Everyone’s savings; everyone’s property title; everyone’s trust in our financial institutions. So even though the public accounts are intentionally inadequate, it is still the beginning of the end of sociopathic finance.

    3. Nuts

      Why the bizarre obsession with collapse or demolition?
      A newer DSM is going to classify some new kind of disorder in the OCD spectrum: architectural spectrum paranoia.
      Yes, there was/is a conspiracy, they are many unanswered questions, it did happen, it was horrible.
      “But metal doesn’t MELT!!!” Yes, of course it doesn’t, you’re right, there there now, take it easy.

        1. chitown2020

          I don’t think its an obsession with collapse or molten metal or the Internet. This is more about ….You can fool some of the people some of the time but you cant fool all of the people all of the time. Things just dont add up. They really thought millions of people were either completely brainwashed or totally stupid and would believe everything they were told? They are so arrogant that they thought we would never question the facts and millions wouldn’t mind handing over our Constitution, our Bill of Rights, our wealth, our livelihoods, our businesses, our property over to them, no questions asked? For me it was the denial of the loan mod at “the last minute” by the U.S. TREASURY DEPT. I knew that I qualified. That was my wake up call. …Basically they screwed way too many people and as a result of that no one trusts or believes any of them anymore. I like RT NEWS motto…QUESTION MORE.

          1. Arab Fanaticism

            RT is entertaining. However, the motto should be “Question More, To A Point”, but then back off so no one’s bored. Seriously, they have folks on from Heritage, ex-Military, various clandestine types from obscure PACs, jail wardens in addition to the apparent leftist, libertarians including Paul Craig Roberts and that ridiculous Alex Jones from Austin. It’s not credibility as much as infotainment – the only thing that appears to be completely objective is the stunning physical appearance of the hosts. Domestic reporting on Russia itself is fairly pro-state worthless.

          2. enouf

            @Arab Fanaticism

            (I had to post de-threaded — since i suppose the moderator sees this subthread skewing way offtopic).

            I doubt the “max keiser report” falls into any of your criticisms of RT, and if you want to see/hear cynical and truth (insolvency and ponzi scheme and global financial terrorism), i suggest you check it out.

            Love

      1. jsmith

        Yeah, you’re right, we should just sweep the largest domestic terror incidents under the rug, huh?

        No need to talk about THAT sh*t again, it’s ancient history!

        And let’s not try and see a pattern in the major crimes/disasters that have plagued this nation over the last 3 decades, right?

        In addition, thanks for the time-honored troll accusation of mental illness.

        Let’s see, the mainstream media is whitewashing – yet again – one of the worse (financial, this time) crimes in world history, promulgating a story that flies in the face of reason and fact and yet people like you would have us basically believe – just like the crimes I mentioned – 1) no one could have seen it coming 2) people were only guilty of incompetence and 3) we’ve taken measures so that this never happens again – despite factual evidence to the contrary.

        Wow, that sure seems like the story the elite would want disseminated, doesn’t it?

        What a patriot you are!!

        Again, I mention other major crimes that the MSM has utilized the exact same whitewashing techinques, even down to mentioning the exact same show which we’re are currently commenting on and you cry, “Crazy!”

        I guess being told the rules of physics don’t apply is different than being told the rules of economics and finance law don’t apply somehow, huh?

        Lastly, you can tell a lot about people who think the DSM and people who legitimately suffer from mental illness are fodder for ridicule and jest.

        They are intellectually small and fearful people, willing to accept what they’ve been told by others without thought or reflection such as what constitutes the “truth” and who should be considered “sane”.

        Frontline would have us consider the very criminals who caused the financial crisis “sane”.

        In their book, Yves would be considered “insane” for pointing to facts that defy their explanation.

        Do you see where this is headed?

        Probably not, you sad, sad person.

        Oh well.

        1. chitown2020

          This is a conspiracy so vast it almost defies human comprehension that there could be this much evil in the world. J.F.K., in his speech about Secret Societies described it as a monolithic conspiracy. They hid that speech from us for decades. I believe because of that cover up alone, it is now our duty as American patriots to alert the people.

          1. Thermite Anxiety

            The DSM is more a political document than a scientific one.
            As for alleged mental disorders, they’ve been used for centuries as a pretense for harm. Just imagine, Bank of America funding research to determine bad credit, and the inability to pay a so-called debt, is in fact, a biological condition that needs medical attention. The road to hell is paved with the most humane intentions. Placebo profits soar in the face of homelessness! Whitewash your brains!

        2. Up the Ante

          “In addition, thanks for the time-honored troll accusation of mental illness. ”

          And the types, have they yet devised a way to include self-concious thinking, that if they consider conspiracies they must needs be include the Official Conspiracy.

          I realize these ‘think tanks’ have been handed a false bill of goods, a garbage barge, inspiration in short supply is a fitting description of the serving of bureaucracies. It’s ruled out. Cue them for a better offering and the response is like talking to a computer. Flatlined think tanks.

  8. Tom Crowl

    wells Fargo’s moralizing about their own saintliness was especially galling…

    They seem to have no problem being deeply involved in the Payday Loan Business as well as the financing of our new tragically thriving private prison business.

    Then again prisoners and those forced into perpetual dependency on Payday Loans (the ‘company store’ is a perfect parallel to the association between low wages and high-interest loans… a ‘financial/political model’ coming for all of us soon if we don’t wake up!)

  9. Bruce Johnson

    The CDS market is nothing other than taxpayer backed gambling insurance. It serves no purpose other than to encourage large bets on financial futures. It is toxic to the financial health of taxpayers and should be banned by the EPA which is impossible, given congressional opposition to any reasonable regulation.

    Give up the fiction of a free market which doesn’t exist. We only have a manipulated market equivalent to each competitor useing loaded dice and finding a sucker to cover the bet.That sucker is us.

  10. Mcmike

    PBS has been long ago captured. Like the dems compared to the gop, pbs only looks usefull when compared to the thoroughly rotten alternative to its right.

    Right now, pbs is also running a “documentary” on the food industry that is funded by monsanto…

    It is classic propaganda, co-op dissent by acknowledging just enough of the critique to capture and divert it.

    1. Up the Ante

      “It is classic propaganda, co-op dissent by acknowledging just enough of the critique to capture and divert it. ”

      The real thing to do is to ascertain where the dissent is hesitant to go, discern the essential being hidden.

      Then you know who has the real stones.

    2. Dirk77

      My favorite Frontline was “Why war with Iraq is inevitable” from 2002. I wonder if PBS sells DVDs of that?

      1. falun bong

        Not that long ago we could rely on PBS to at least question the powers that be and the MSM. And we could rely on National Geographic for shows about nature, travel, and indigenous cultures. Now that NatGeo is 40% owned by Fox, every other show is about a cool new tank or missile system. And now PBS is insidiously bending what used to be the Left into the mainstream. That mainstream is now so far Right of Center it’s not even funny. Obomba is to the right of Nixon, and if Ronald Reagan had been on the stage with the Repub candidates he’d be called a wacko Leftie.

        Monsanto recently patented certain genes in pigs that control the characteristics that farmers want (that make them put on weight quickly, etc.) and are now running around telling farmers their pigs are now Monsanto’s property. Monsanto is a big PBS donor, so look for some “hard-hitting” stories about how they’re blazing the trail to the agriculture of the future, blah blah.

    1. Jill

      joecostello and others,

      I agree. This is propaganda. Much of what I hear is exactly like this program.

      Today on BBC they began the newz hour speaking about Obama’s knight on the white horse effort to provide birth control to women verses the Catholic hierarchy. We then got “history” and theology lectures as 1. fillers to grab the intellectuals and 2. ideology presenting Obama as Jesus like.

      The thing is, Obama is a right wing christian who said he would like to about the kingdom of god on earth. Normally when people say things like this, it is seen as disturbing. But to good christian liberals this is now O.K. because Obama said it (unlike if Romney said it). And Obama is fighting off the Catholic hierarchy by providing universal, single payer health care! Right?!!!

      Every story works in the same manner. The Frontline financial fictional tale leads back to the greatness of Obama. It’s a slick marketing campaign aimed at educated liberals, nothing more.

      I believe it was the book: “Life Inc.” which explored how the electorate has been sliced into ever smaller pieces for marketing of candidates/conveying ideology. Frontline appeals to a certain demographic. As such it markets Obama and ruling class ideology in a way that can fool it’s audience by use of some truths and much pseudo intellectualism.

      It’s important to have articles like this where the lies are pointed out and dissected. In order to combat this level of propaganda we all need to point it out when we see it. It is pervasive and that is, IMO, the best way of undermining its power–knowledge!

      1. rotter

        The Birth control issue has nothing to do with “Theology”, except that both sides are pushing that angle because they feel its an more “pure’ motive i guess that the real one. The Catholc Church is one of the Largest Payers in the US. They are following the same path as any of the others, all of who are looking for every excuse they can find to NOT pay for health care..which is what they are supposed to do…..Thats how finance capitalism works. Its merely extractive and provides no real benefit to anyone – except the very very few exploitative timmy-geitner bastards who benefit monstrously from it, at the expense of all humanity and the rest of the planet.

  11. used to love pbs/npr

    not surprised. PBS has become extremely conservative (not in the political sense) when it comes to programming, sticking to inoffensive/non-controversial topics.

    Unsurprisingly the management at PBS probably doesn’t want to get smeared with the same astro-turfing that’s hobbled NPR.

    PBS has completely become eclipsed by the BBC when it comes to documentary programming.

    1. jawbone

      When PBS became ever more dependent on corporate donations and underwriting it lost its independence.

      It cannot, dare not, offend its corporate masters.

      1. bob

        Seconded. The “sponsor list” that leads and follows the TV shows is a who’s who of corporate FIRE, and “foundations” who’s sole purpose seems to be to fund tax exempt corporate propaganda.

      2. bob

        I would also point out that this is now “goverment subsidized” corporate propangada.

        gov covers the overhead, Inc gets to fund, and therefore choose the programming.

    2. Crazy Horse

      Ironic isn’t it— in order to find intelligent news reporting in the land of the free market and the free press– our Homeland USA, you have to turn to RT. That’s R as in Russia and T as in Today.

      About that word Homeland, it would be interesting to know if the speechwriters who put it in George bush’s mouth chose it specifically for its derivation from der Faterland and its connotations of Aryan racial superiority, or were they merely insensitive?

  12. Brooklin Bridge

    If it comes out of PBS or NPR, it’s drivel.

    You can fool all of the people some of the time and some of the people all of the time but you can’t fool all of the people all of the time

    Perhaps, but as Obama and his merry band of owner moaners is proving, you can fool enough of the people enough of the time to run a permanent scam on them.

    1. Up the Ante

      “but as Obama and his merry band of owner moaners is proving, you can fool enough of the people enough of the time to run a permanent scam on them. ”

      They have noted that the peoples’ disaffect is the note of the day.

    2. bulfinch

      Less about fooling people and more about distracting them or keeping them just desperate enough that they spend a disproportionate amount of their time seeking relief as opposed to illumination.

  13. chitown2020

    Max Keiser revealed Blythe Masters introduced the derivatives scheme to J.P. MORGAN. CNBC recently interviewed her and sounds like she is busy nowadays manipulating the commodities markets for J.P. MORGAN.

    1. Rex

      One thing I got out of the Frontline show is that I was unaware of JP Morgan’s Blythe Masters role in driving her portion of the debacle. If I was to enounter that name in a fictional book, I’d think, oh come on now, isn’t that a bit much.

      I guess her life’s work was predestined.

  14. Brooklin Bridge

    If it has three intersecting sides, it’s a triangle; if it comes out of PBS or NPR, it’s drivel.

  15. Richard F. Kessler

    I agree that the program failed to distinguish between CDO’s and credit default swaps. It did show how CDOs were issued without the financial resources required to pay off if required. Reference was also made to the problem of leveraging and the use of derivatives and cdos for speculation in transactions where the parties had no stake in what was being hedged or insured. If one did not have a thorough grounding in the area, one may well have missed these points.
    However, the first two episodes sought to portray what happened under the Bush Administration. The next two episodes supposedly will deal with the story after the election of President Obama. The multi trillion dollar bank bailout took place principally under Obama not Bush. Obama presided over the greatest transfer of wealth from Main Street to Wall Street in history. I will suspend judgment until I see how Frontline handles these events.

    1. Mark P.

      “I will suspend judgment until I see how Frontline handles these events.”

      Very fair-minded of you, but I wouldn’t bother.

      I only watched twenty minutes of this thing at a TV-watching friend’s insistence and wasn’t expecting anything useful. I was still appalled at the endless recourse to “hoocoodanode”-ism and the unquestioning deference the program gave to the financial industry’s massively dishonest account of things.

      My only question is why, as someone else has commented here, Yves has even bothered to turn her intellectual firepower on this bilge.

  16. Cheyenne

    The first 45 minutes is nauseous JPM PR: one sunny day in Florida, Blanche and her young beautiful JPM acolytes got drunk by a pool and happened upon the Rosetta Stone of banking–how to eliminate risk. The rest of the financial world misunderstood these towering geniuses, and got into Deep Trouble.

    Goldman, the program’s hockey-mask-sporting monster, doesn’t show up until minute 46. Blanche et al. look on, appalled, as GS uses CDO’s to inject its own customers full of toxic subprime debt.

    The whole opera, though ridiculous, was enough to break Blankfein’s two-year TV hiatus with not 1 but 2 appearances the very next day.

    1. JTFaraday

      Well, if the bankster mob should ever find itself in the position of needing to scapegoat one mob family for the entire crisis, it is true that there is one mob family already way out in front.

    2. propertius

      The first 45 minutes is nauseous JPM PR

      Thank you so much for using the word “nauseous” correctly. One rarely sees that in these degenerate times.

    3. Mel

      Is there an echo in here? I heard, really heard, George “Adam Smith” Goodman all over again from 1976:

      “My solution to the current market,” the Great Winfield said. “Kids This is a kid’s market. This is Billy the Kid, Johnny the Kid, and Sheldon the Kid.” [ ... ] “The strength of my kids is that they are too young to remember anything bad, and they are making so much money they feel invincible,” said the Great Winfield. “Now you know, and I know that one day the orchestra will stop playing and the wind will rattle through the broken window panes, and the anticipation of this freezes us. All of the kids but one will be broke, and that one will be the Arthur Rock of the new generation. There is always one, and we will find him.”
      (_The Money Game_)

      Until there isn’t one. And so it goes.

  17. DP

    I watched about an hour of Part 1 and between the portrayal of the JPM bankers as good guys, allowing Dick Kovacevich to pretend Wells Fargo didn’t participate in any of this bad stuff, the participation of the pathetic banker shill Andrew Ross Sorkin and a complete lack of any new information or angles I cut it off. I didn’t even know there was more than one part, not that it would have made any difference.

  18. Willy Lieman

    Step outa line, we rip your funding. Nothing astonishing here.
    Doesn’t anyone notice Koch, Chevron and other underwriters?
    Didga’ see the appalling Iraq decoy?

    1. Mel

      Well, there it is. Tough economic times cut away their donor base, and there they are … scrambling to keep the lights on.

  19. Max424

    YS: “There isn’t a single mention of ideas like looting, bogus accounting (remember the fictitious Lehman balance sheet, or Merrill’s CDO-hiding Pyxis, or the $40 billion of Citi CDOs that appeared out of nowhere?) or abuses in other areas (like swaps sold to municipalities all over the world, or rapacious privatizations, the auction rate securities blow up, or chain of title abuses).”

    They seem to have quite a bit, like pretty much everything.

    It strikes me, if you’re not discussing almost completely irrelevant matters, you’re not going to get any serious face time in this country.

  20. Manufacturing Consent

    Here comes CISPA, thanks Democans. Remember, it’s an election year, and president Jamie Barack Kimmel will only display veto, until the light goes green.

  21. Fat of the Calf

    Is ‘America’s Test Kitchen’ another method to drive people insane? How many repulsive hours of dreck and non-stop dated MTV-esque warped self promotion and… oh the heck with it.
    If you have free time, don’t go there, just don’t do it, get some exercise, enjoy the weather.

    1. Concerned Citizen

      You know, that show ain’t half bad. Sure, it’s schilling coroporate products, but it is a somewhat acceptable alternative to glitzy cooking reality shows.

  22. indio007

    I simply refuse to watch it. The did a program about a year ago about the “financial crisis” which was a straight up demonstration of social conditioning.

    The CSI expose they did the week before was pretty good though.

    When taken together these programs show the court system is a big fraud civilly or criminally.

    1. rps

      “straight up demonstration of social conditioning”

      If Huxley’s Brave New World (1932) was written during the 50′s, he would’ve replaced “soma” with television. Television the drug of choice of the masses; and the Pavlov conditioning of the semi-educated/literate masses.

      Ever wonder why the television ‘information programs’ (as if separating themselves from fiction) and the CSI’s/violence/death (conditioned fear) are shown at nighttime? Fatigue increases suggestibility. Informative fear layered in a pleasing format. Why night-time? Daytime:”Man’s will power revolts with highest energy against any attempt at being forced under another’s will and another’s opinion.” However,”In the evening they succumb more easily to the dominating force of stronger will.”Brave New World Revisited.

      1. LeonovaBalletRusse

        Huxley’s “Soma” is Prozac, etc. (Smiley Face Gov. of Florida, remember?)

  23. rich

    They need to rewrite history for all the geniuses…

    For He’s a Jolly Good Scoundrel
    http://www.truthdig.com/report/item/for_hes_a_jolly_good_swindler_20120418/
    Posted on Apr 18, 2012

    By Robert Scheer

    How evil is this? At a time when two-thirds of U.S. homeowners are
    drowning in mortgage debt and the American dream has crashed for tens
    of millions more, Sanford Weill, the banker most responsible for the
    nation’s economic collapse, has been elected to the American Academy
    of Arts & Sciences.

    So much for the academy’s proclaimed “230-plus year history of
    recognizing some of the world’s most accomplished scholars,
    scientists, writers, artists, and civic, corporate, and philanthropic
    leaders.” George Washington, Ralph Waldo Emerson and Albert Einstein
    must be rolling in their graves at the news that Weill,
    “philanthropist and retired Citigroup Chairman,” has joined their
    ranks.

    Weill is the Wall Street hustler who led the successful lobbying to
    reverse the Glass-Steagall law, which long had been a barrier between
    investment and commercial banks. That 1999 reversal permitted the
    merger of Travelers and Citibank, thereby creating Citigroup as the
    largest of the “too big to fail” banks eventually bailed out by
    taxpayers. Weill was instrumental in getting then-President Bill
    Clinton to sign off on the Republican-sponsored legislation that
    upended the sensible restraints on finance capital that had worked
    splendidly since the Great Depression.

    http://www.truthdig.com/report/print/for_hes_a_jolly_good_swindler_20120418/

    1. JTFaraday

      So… are you telling me my campaign to remove Robert Rubin from the Board at Harvard is doomed to failure?

    2. rps

      Don’t forget Svengaliesque Robert Rubin:
      “Just days after the administration agrees to support the repeal, Treasury Secretary Robert Rubin, the former co-chairman of Goldman Sachs, raises eyebrows by accepting a top job at Citigroup as Weill’s chief lieutenant. The previous year, Weill had called Secretary Rubin to give him advance notice of the upcoming merger announcement. When Weill told Rubin he had some important news, the secretary reportedly quipped, “You’re buying the government?” Ahem…a Frontline report with a semblance of integrity in the good ole days.

    3. LeonovaBalletRusse

      rich, this really is “shocking.” Really. Is this not proof of the cabal’s intent to defraud, and defraud, and defraud, and defraud? This is a contemptible mockery of the Academy and all it was meant to stand for.

      Not one black ball? Please, someone, publish the names of every member of the now permanently besmirched Academy who brought this to pass. May they forever live in shame and disgrace–as the worms they have shown themselves to be, by their abdication of their positions of honor and solemn responsibility, and by their cowardice in the line of duty.

      This last act of fraud is a TELL: The 1% intend to complete the Ultraconservative “NOBILITY” coup d’Etat, ruining legitimate government, governance, and very reason, no matter what it takes.

      “Frere Jacques, dormez-vous?” Citizens?

  24. michael hudson

    Well, Yves, I know it was a hassle having to sit through the PBS blather. But it was worth it to get your good report. For a program that’s put forth as almost the “official” view, it needed a corrective sense of proportion.
    Thanks.

  25. Uncle Bob

    Thanks for this..Coincidentally, PBS also aired on “American Experience” this past week, “The Crash of 1929″ With “Tivo”, I was able to watch this and then Frontline. It was a night all about GREED .

  26. Up the Ante

    Yves, your reply to the Frontline piece should begin and end with your “Huh?”.

    “[Frontline's] program is far enough along to be beyond redemption. ” It is, in fact, insulting enough to be called a Crock of Horsespittle.

    As Karl Denninger would say, they’ve attempted to “skullfuck” us.

    FAIL

    lol

    1. sunny129

      When a Corporation is a ‘Citizen’ and Money is ‘free speech’ John Q Public is virtually powerless. Add to this fragmentation and polarization of views/issues and the solutions sought out, which are at add with each other, the top elite 1% know this and are able to ‘brain wash’ the most of the functionally illiterate and misinformed/confused masses! There are multi-million earning whores in MSM doing the job for 1%. Look what Robert Murdoch has done to UK and doing in USA!

      Unless there is meaningful reform of campaign contribution in the political process,democracy will remain subservient to Corporatocracy ( Fascism & Feudalism)!

  27. rotter

    This is what its like to live in a bannana republic..Remember East Germany and The Iron Curtain and all those “unfree” countries we were allegedly superior to? Its pretty obvious thats where we are. In a capitalist society money is force. The money has accumulated into a very concentrated pile in the finance capital sector and so has the force. We were warned, for years, what it would be like if that ever happened and its even worse.

    1. Bam_Man

      Spot on.
      Do you remember when we used to hear about “how dangerous it would be to have media control concentrated in only a few corporate hands”? Funny, we don’t hear that anymore. Now with its government funding having been eviscerated, even PBS is a corporate/Wall Street mouthpiece. Brave New World indeed.

  28. Hugh

    Frontline should go out and shoot itself
    –YankeeFrank

    It is classic propaganda, co-op dissent by acknowledging just enough of the critique to capture and divert it.
    –Mcmike

    Great comments. This kind of cooptation of dissent is a particular feature of propaganda aimed at liberals. We were talking about this yesterday with regard to Krugman. Basically, you have opinion makers and leaders declaring themselves on the liberal side, the side of the 99%, allies, etc., but when all is said and done, they manage to end up still supporting the institutions and powers that are writing their paychecks and screwing us. Indeed hoocoudanode?

  29. LeonovaBalletRusse

    Yves, you’ve been nailing those 99 theses to the door of justice in Economics for a long time now, so you are eminently qualified to critique the Great Whitewash.

    The name of the “sharpie” inventor of the toxic dump mechanism for JPMorgue is a Louisiana name! – “Duhon” is the name, and the colloquial Cajun pronunciation, “Du-yon,” is the TELL. Nobody does politics by any name better than a Louisiana sharpie, but “la politique de Richelieu” still defines the mendacity, the duplicity, the “cleverness” of it, the profit of the scheme for the insiders at the expense of the outsiders (tip o’ the hat to Michael Hudson for reminding us what a classic “sharpie” is on Max Keiser interview).

    Will Yves Smith have the effect of Martin Luther in his day? Stay tuned.

  30. Pat

    Gillian Tett’s Fools Gold would serve as a perfect blueprint for the defense, if the big banks were ever sued for fraud, RICO, or even simple negligence.

    Tett maintains that the bank CEOs relied on their Risk Departments, and the Risk Departments tried to do the right thing and employed all sorts of empirical quasi-scientific models and formulas but were thrown off but unforeseen and and unforeseeable events, which made the models and formulas not function properly. And even if the bank officers did not monitor the Risk Departments closely enough, well, it doesn’t matter, because all the other big banks were doing the same thing, so this was standard practice in the industry. Hence no fraud, or even negligence.

    The general public doesn’t read books like Tett’s, so what better way to spread her whitewash than through Frontline?
    The vast majority of upper middle class America (Obama’s target audience) accepts anything they see on Frontline (and most of PBS) as the gospel truth.

  31. Doug Terpstra

    I was hoping you would review this [P]BS piece, Yves. Glad you have a strong stomach. I joined in progress and lasted about ten minutes before receiving an urgent call to prayer at the porcelain throne — coincidentally about the time the dark lord criminal warmonger made his gratuitous appearance as gracious messiah — after which I underwent emergency anger-management therapy.

    “It also says that Hank Paulson thought Bear was an isolated case.” Well, I have to say, it’s better to be portrayed as a clueless idiot rather than criminal coconspirator—while laughing all the way to the bank. Of course, former GS CEO Paulson has that clueless Homer Simpson look and mannerisms down pat.

    “we lacked the authority” reminds me of a frequent line by Valmont (John Malkovich) in “Dangerous Liaisons”, a master of Machiavellian machinations: “It’s beyond my control”. The line was trotted out by Senator-lobbyist Chris Dodd and the white house too, when it came to protecting the obscene bonuses of AIG and other bankrupt banksters on government welfare. After first caught lying outright in denying any role, both Sen-lobbyist Dodd and Timmy then declared that the “sanctity of contracts” was somehow inviolate WRT bonuses — even while the taxpayers were being mercilessly reamed in a manner that made ancient Sodomites appear righteous. Like [N]PR, [P]BS has, to its shame, clearly joined the MSM propaganda mill.

    Oh well, at least we can all agree that mistakes were made, and hey, we’ve all made them after all; but now is not the time to point fingers; let’s look forward, not backward.

  32. LeonovaBalletRusse

    “THE FALL OF THE DYNASTIES: The Collapse of the Old Order, 1905-1922″ by Edmond Taylor.

  33. Son

    re: “the industry PR that CDS are derivatives….”

    So let’s say I buy a Spanish 10 year bond and also a CDS on it. (I guess I could have just gone ‘naked’ and bought the CDS.) If the price of the 10 year bond goes up won’t the cost of buying a CDS go up? And if I can sell my CDS to a third party, won’t it have gone up because the underlying Spanish 10 year bond price went up?

    I’m not sure why you feel a CDS isn’t a derivative but then I’m not in the business. Can you expand on that please Yves?

    Thanks

    1. Mel

      I don’t know, but I wouldn’t think so. Isn’t the price of a CDS just the value of the bond times somebody’s estimate of the probability of default (plus a small profit)? If the price of a bond goes up, it means that The Market sees a lower probability of default. The guess at the odds of default is a Finagle’s constant. I think.

      1. Son

        I made a mistake. I used ‘price’ where I meant ‘interest rate’ with respect to the Spanish bond. I should have said:

        “If the interest rate of the 10 year bond goes up won’t the cost of buying a CDS go up? And if I can sell my CDS to a third party, won’t it have gone up because the underlying Spanish 10 year bond interest rate went up?”

        I guess what you’re saying, Mel, is that the price of a CDS wouldn’t fluctuate with the interest rate of the underlying bond (or default risk of the related party – in this case, the Spanish Government). That seems to be what Yves was saying.

    2. Son

      To correct my earlier post: I used ‘price’ where I meant ‘interest rate’ with respect to the Spanish bond. I should have said:

      “If the interest rate of the 10 year bond goes up won’t the cost of buying a CDS go up? And if I can sell my CDS to a third party, won’t it have gone up because the underlying Spanish 10 year bond interest rate went up?”

    3. Yves Smith Post author

      A credit default swap is not a proxy for a bond.

      A proper derivative has its value specifically set in reference to an underlying, so it is priced in reference to tradeable instruments (or an index which is based on tradeable instruments).

      A CDS is set for a single name (Ford, Greece, Spain), and not not specific bonds, and it pays off only in the event of default or other “credit event,” say an involuntary restructuring.

      Interest rates go up and down for reasons other than credit risk, BTW.

      1. chitown2020

        It is insurance fraud but, the insurance co is in on the insurance fraud and so are the politicians.

  34. PaulArt

    I do think however that this program repeatedly drives home one point and that being how the Tax payers bailed out Wall Street and this was facilitated by Paulson, Geithner and Bernanke. This is well repeated, underlined and emphasized. There is no sugar coating of this and for that perhaps we should give credit to PBS. In the part where they cover the Glass-Steagall repeal and the passage of Gramm-Leach-Bliley there is a solid focus on Gramm, Clinton, Schumer as the proponents and Byron Dorgan is shown speaking on the Senate floor with his warning about the CDS market size and its ominous portents. I don’t think anyone would be left in doubt as to who the villains were in this drama. I fully agree with the Obama hagiography but perhaps the final part on May 1 may tell the story of Obama’s egg laying prowess. I hate to speak well of PBS but I do think we should credit them with some gumption for even making this series, I mean, no one was going to sanction them if they did not, right? I know I wouldn’t coz I gave up on them a long time back.

  35. PaulArt

    By the way, what exactly did the JP Morgan dream team create? Was it not a form of insurance that could be sold without oversight or regulation? This is some kind of grand feat? It never occurred to them that this was what it was? Their objective was to dump risk into some fancy package and pull the wool over the eyes of the regulators. ‘Invented CDS’ – What balderdash! They all look fatous and foolish in the program. Inventing snake oil is nothing to be proud of. I am even amazed they agreed to be in the program, looks like they may have a tinge of remorse but are still convinced of what a great achievement theirs was.

    1. CaitlinO

      One thing JPM created and made available free of charge to anyone who wanted it was the VAR model for risk assessment. I remember an article from way back in the NYT, I believe, which, IIRC, seemed to say in about 10000 words that a big problem with VAR was that it made the convenient assumption that risk was normally distributed when it actually isn’t. Anyhow, this contributed to a whole lot of underestimating and underpricing of risk which, when coupled with out and out fraud, led to a disaster that is still unfolding.

      1. F. Beard

        was that it made the convenient assumption that risk was normally distributed when it actually isn’t CaitlinO

        One thing banking is not is natural so it is no surprise that a normal distribution does not apply.

  36. Son

    “It heavily cribs from the Gillian Tett book Fool’s Gold, which to be blunt was not very well received by reviewers…”

    I haven’t read the book but your post made me curious. I found reviews online from The New Yorker, The Spectator, The Washington Post, The Guardian, and The New York Times but they all seemed to think it was a pretty good read. And it made Brad Delong’s 15 favorite books list:
    http://www.amazon.com/Brad-DeLongs-Favorite-Books/lm/R2JDHJRCNFGIYK

    I couldn’t find a review of it at The Nation but The American Prospect didn’t seem to think it was so terrible.

    Of the first half-dozen or so reviews that Google turned up I did find one person that panned it. It was a guest post on this blog (http://www.nakedcapitalism.com/2009/06/guest-post-review-of-gillian-tetts.html) by Knute Knudsen of Design Modulars, Inc. “the total value provider of mobile offices, storage containers, and factory built buildings in Arizona and the southwest since 1995″.

    I’d have to say that he gave it a mixed review:

    “Overall, I found Fool’s Gold to be an engrossing enjoyable read. But ultimately, its pleasures were superficial, a sugar high rather than a good meal…”

    So “engrossing, enjoyable” on the one hand but “superficially pleasing” on the other.

    Even that doesn’t sound so bad.

    1. Yves Smith Post author

      Pretty much everyone I know in the industry found it not impressive at best (both private comments, even by some people close to Tett, as well as comments by readers of this blog). Brad De Long is not a good judge of finance (he and I had a long form tangle a long time ago on that topic, and he later was gracious enough to admit he had been wrong). It did provide a very accessible to laypeople description of CDOs, and some history that was not widely know, even to finance types, but the hagiography to JP Morgan was really astonishing. I honestly don’t know what happened to Tett. She was a really fantastic reporter. I’m not sure whether it was Fool’s Gold or her promotion or both, but now she’s a completely different writer.

      1. Son

        I envy you you’re access to professional sources not available to those of us in the bleachers. I’m guessing they include some of the professionals at the Financial Times whose admiration of you is clear from the frequent links to your site from a number of contributors to FT Alphaville.

        And while I’m still (unsurprisingly) confused about the matter of a CDS not qualifying as a derivative, I won’t ask you to spend any more time than you already have on the matter. Maybe an industry professional will comment on the topic (or has already); I’ll keep an eye out.

        Thanks for taking the time to respond.

  37. JerryDenim

    The “Frontline brought to you by …..” portion of the opening and closing credits are all you need to know.

    Lots of old bankster money sloshing around at PBS.

  38. JerryDenim

    “additional funding provided by …..” always includes quite a few TBTF or prime dealers as well.

  39. John Lenihan

    In spite of many perceptive comments, the basic problem is as it has always been:

    1. Everything has to be dumbed-down for TV for the move-your-lips-when-you-read types. A lot of otherwise wonderful people do that, because their educations were deficient or absent through no fault of their own. It always ends up being oversimplified nonsense.

    2. PBS is establishment-friendly, lock, stock and barrel. They are never going to bite the hand that feeds them. You can believe this-old-house about the nails, screws, paint, grass and wood; otherwise beware.

    1. Skippy

      I’m reminded of a paper written by some well meaning folks, trying teach the uninformed about birth control in tribal areas, Africa. After much planing and effort they would arrive at a village, set up a movie screen and projector. Now the short educational flick was cast with actors playing locals and the background was generic village background.

      Now with all assembled, as most had never seen such a thing (movie on a screen), the celluloid ran, hilarity ensued! You see, the villagers were more enthralled with what the pigs and chickens were doing, running under foot or a different perspective of them selves than the directors intent to inform them.

      It was probably the greatest comic troop to travel the Continent since white man moved next to the water and set up farms. Why do the daft buggers (indigenous people) carry their water so far… ohhhh…. water equals disease vector… ROFLOL.

      Skippy… people are programed to view video and once they are… its a direct jack to their cerebral cortex.

  40. kravitz

    While watching the Chase screw-ups try to suggest they were doing this for good and not their own greed, I made sure no fragile objects were nearby. How they were not challenged on this was rather stunning.

    Less shocking is at least one of them still works for Chase. Suggests a reward for destroying the economy is normal operating procedure.

  41. Diogenes

    I felt that one good aspect of the program is that iot explained in very simple terms what a credit default swap is. That is part of the key to understanding the whole crisis.

    As for the JPM staff, if you read between the lines, they were not at all credible. Glibness is not a substitute for crticial thinking.

  42. mp

    Yves, I’m sorry, but I can’t become excited over this.

    You expect granularity from a television news program?

    1. JBL

      One of the movie reviewers wrote: “This documentary presents a devastating expose of the staggering Wall Street swindle that caused the economic meltdown of 2008. The interview with Martin Feldstein brought back to mind the hoopla of his appointment as chief economic adviser to President Reagan. The movie points out that Feldstein initiated the financial deregulation follies that led to the looting of the Savings and Loans and culminated with the passage of the Commodity Futures Modernization Act of 2000, the lead sponsor of which was Senator Phil Gramm. It was truly depressing to see how this massive swindle was pulled off through the collusion of the economic advisers, politicians, high-flown professors of economics with scandalous and highly unethical conflicts-of-interest, investment banks, and ratings agencies. At the end of “Inside Job,” Robert Gnaizda lists various groups that should be prosecuted. When asked why this has not been done, he answered: “It’s a Wall Street government!”

      Some of the topics in the movie were covered in the FRONTLINE broadcast “Inside the Meltdown” and in the FRONTLINE broadcast “The Warning.” The latter exposed how Brookley Born was sabotaged by Alan Greenspan, Robert Rubin and Larry Summers–the Troika that is directly responsible for the massive fraud perpetrated by the Wall Street crowd.”

    2. Owned by Funder

      Sony is one of them kooky corporations isn’t it? Digital ‘Rights’ Management, spectacular root kit / security fails that were widely publicized, restrictions against developers, outright theft of freedoms, and BlueRay. There are other films viewable for “free” with excellent content, Sony should consider and value their contributions without abuses.

  43. Joe Brown

    I turned it off after about ten minutes and couldn’t help thinking what would Yves think about this crapola?

  44. Clay Matthews

    Once you saw Andrew Ross Sorkin quoted I think you new you could change the channel. Dissapointing.

    I thought the other frontline episodes on the crisis, particularly “THe Warning” featuring a lot of Brooksley Born, was well-done.

  45. mitchw

    Correspondent Martin Smith did an online chat with Tett this week, wherein he states that understanding the crisis was very difficult for him as a journalist. Apparently episodes 3 and 4 are still being edited, so lets see what they do. I have to say that the only reason I watched the first episodes was to see how a respected name like Frontline would go about doing a movie for its audience. During the online chat, Smith thanks Tett for having provided the narrative device of a group of young bankers in Boca developing a new “technology,” as Blythe Master put it so emetically. Funny though, how when I posted questions along your lines, Yves, during the chat, they never appeared onscreen. I so desperately would like to know if Martin Smith has heard of that little problem of properly conveying mortgages into CDOs. So confusing.

  46. Angry Panda

    So we mention Delphi…but not WHY JPM was burned on Delphi…if, in fact, it was burned at all.

    Delphi was in the era of physical settlement. That means, you had to deliver the actual bond to get paid on your CDS contract. Problem is, there were something like 5x or 10x the contracts as there were physical bonds, plus not all the bonds were in the hands of guys who held CDS. In other words, you had the mother of all short squeezes, which, of course, benefitted the sellers of CDS (like, presumably, JPM) immensely.

    Ultimately, there was a settlement that was worked out – if I recall correctly – and DTCC switched to “cash settlement” for future contracts. Now, I don’t know how much money JPM lost – surely an enterprising professional financial blogger could spend the five minutes to check its 2005 10-K before, erm, writing – and I don’t know whether they “pulled out” of the CDS market because of the loss or because upper management said – “we don’t know how the hell this thing works, so let’s not have any more surprises” (a la Delphi).

    But in any case, the story isn’t as simplistic as the poster appears to present. Which is especially ironic since the poster then proceeds to accuse Frontline of glossing over the important details.

    —–

    Separately, something like half of PBS programming carries the “would like to thank David H. Koch for his support” disclaimer. What do you really expect Frontline’s reporting quality to be like these days?

    1. Yves Smith Post author

      This is the second time in a week you’ve tried to discredit me. I don’t mind informed objections, indeed they help me and readers learn, but I do take issue with inept efforts to score points. This salvo is as far off the mark as the last one.

      I must note that you do not dispute that first, JP Morgan took losses on Delphi and second, that it became more cautious as a result. Instead, as before, you try muddying the waters.

      1. How the losses came about is completely irrelevant to this post. The point is that JPM, a CDS market leader, took losses it did not expect, and got much more cautious about its risk taking just around the time that ISDA created the template for “pay as you go” ABS CDS. (June 2005) and the market took off shortly after that, greatly aided in its growth by the use of synthetic and heavily synthetic CDOs. JP Morgan, which has clearly managed to spin the heretofore discerning Ms. Tett rather heavily, professes it was their superior risk management acumen that allowed them to stay largely out of the ABS CDO mess. But the timeline suggests they were lucky enough to get burned early on and rethink their posture just as the risk party was getting wild.

      2. Since the details of l’affaire Delphi are not germane to the post, there was no reason to do more than flag it. But more important, if you are the expert you pretend to be, and it appears you aren’t, you would know banks don’t disclose the dollar amount of losses on single positions unless they involve rogue traders. The idea that that losses on Delphi was reported in the 10-K is bollocks. Get familiar as to what constitutes “materiality” from an accounting standpoint and then we might have an intelligent conversation.

      3. I am well aware of the cash settlement issue on Delphi and have posted on it with far more detail than your sketchy summary. The settlement protocol as various posts have pointed out, had required that bonds be submitted to the protection writer. But there was a squeeze on for Delphi bonds, due to the fact that far more in protection had been written than the actual amount of the bonds. ISDA made up a cash settlement protocol on the fly to keep the market from failing its first major test. I’ve referred to this multiple times since 2008. This is a relatively early one of numerous examples:

      http://www.nakedcapitalism.com/2008/05/warning-credit-default-swaps-may-not.html

      As I said before, better trolls, please.

  47. Francois T

    After refusing to even discuss single payer during the healthcare debate of 2009, after shamefully smearing Bradley Manning and Julian Assange instead of trying to EXPLAIN what this Wikileaks stuff was all about, PBS Frontline has disgraced itself for the very last time.

    They used to be a great program. Not anymore!

  48. psychohistorian

    Thanks for the posting Yves. I will send the link to it to the friend that encouraged me to watch the first segment.

    I expect we will see more of this blatant history rewrite as we stumble forward.

    off the grid fro a couple of weeks…peace to all

  49. Ray Phenicie

    ‘it manages to work in a reference to the formal dismantling of Glass Steagall without saying why it was important (answer: it wan’t, but the gutting of the rule over the preceding decade and a half was’
    thanks for pointing that out; I’ve been saying that for a long time.
    In fact, a look at all of the struggles over government regulation from health care to environmental quality to the conditions surrounding the work place and its safety and what will one find? Lots of squawking by many of the regulated entities about business initiative is being stifled by government regulation while a few of the worst offenders (at least in work place safety and quality) set the tone for the other operators to say “Look, we’re not as bad as the coal mine operators, be thankful you don’t work for THEM; ok? and by the way be eternally grateful you work for a nice business like this.” Meanwhile the putative nice guy literally breaks the back of the employee with tiny little things like horrible lighting in the offices, and the workers are strapped into cubicles with chairs and desks that are the equivalent of ergonomic torture chambers. Years of laboring hours later, many an older worker takes months or years of sick leave off to recover after being subjected to the torture of the “nice guy.”
    Meanwhile OSHA is a dirty word.

    1. Spicey Brine

      No way, Let me apply a coating of rank cyncism. You said:
      “Lots of squawking by many of the regulated entities about business initiative is being stifled by ” da’ Gubbmint.
      They may publically squawk but behind the scenes they are capturing or have captured the agency. You mention OSHA, which cannot even prevent 10Ks of on the job deaths each year. The previous DOL Chief was a worker busting neo-con married to McConnel. It’s all about the money, most with principles or values are railroaded into submission or retirement or something else.

  50. leeskyblue

    “presents pro-Obama propaganda in the form of the meeting McCain called … which Obama wound up dominating. This has just about zero relevance in explaining the crisis”

    Actually, it may explain a lot, as a classic corporate set-up, in which McCain was induced to call the meeting as if it were his idea, only he wasn’t briefed properly. Obama had his own Bush adviser who kept him appraised ongoing, plus his own major banker-backers who assured he would be advised according to their interests. Obama came in to “McCain’s meeting”, briefed poised and articulate while McCain was set up to look like a fool.
    The meeting was an annointing of Obama as the heir and promoter of the Bush administration and someone who would continue to be thouroughly friendly to the plutocrats who controlled Bush.

    It also suggests that the whole “crisis” was not only foreseen but orchestrated by a few of the biggest banks — they profited obscenely and eliminated some competitors. Goldman and JP certainly seem to be the arch-villains even if there were other co-conspiritors, such as Deutch.

  51. Lafayette

    YS: Oh, those great, intrepid, innovative bankers who just wanted to make the world better, and maybe make a buck or two in the process.

    I cringe every time I hear the word Financial Engineering. The less popular it becomes, the better.

    But it was Very Popular a decade or more ago when such financial manipulations were first innovated. What these Financial Nerds (cant quite come to call them Engineers, since I am one) did was unlike anything a real engineer would do when devising a complex mechanism.

    As the Google Boys have said: Do no evil. Translated into engineering-sprachen this means that any complex system, particularly one that implicates usage by humans, should be Fail-Safe. A plane, for instance, when it fails, will do so without imperiling its passengers.

    Which is what “Financial Engineering” should have done long before predatory lending and Triple-A ratings of Toxic Waste were attributed to ease the sale of securitized debt.

    But, of course, it did not. Which is why the SubPrime Mess happened – and why we still can’t see the light at the end of the Great Recession tunnel.

    1. enouf

      though i doubt anyone whom regularly reads this awesome blog w/comments will see this (since so many ‘move on’ quickly since so so much (good) information abounds (and i too succumb sometimes, and cannot offer an antidote))

      Allow me to post some older info (though i might have posted it here in the past) — suffice to say, it’s the kind of information that will always be relevant to civilization;

      James Burke “Connections” series; available on Youtube, et al … One specific episode comes to mind many many times, as i read and digest;

      “James Burke : Connections, Episode 1, “The Trigger Effect”, 3 of 5 (CC)” [b]particularly[/b]

      ..but really, these are 10min chopups of a 5part (50min) series; start at Part 1 (for complete context) ;-)

      Love

      1. enouf

        oh well; guess my “bold-ing” tags failed, heh .. also, i posted it despite other regulars likely missing it, to allow also for search engines to possibly find it in the future.
        Thanks

        Love

  52. lorie levine

    the following is one event in which a large bank, its lawyers,accountants,and the sec and doj (not to mention the courts)have been complicit in defrauding hundreds of millions from thousands of investors, who , through no fault of their own , were forced into investments they did not choose: In 2004 Wells Fargo Corporate Trust Dept of Minneapolis (J> Becker, VP) became a reorganization trustee for the investors of American Business Financial Services (a nasdaq company). This was supposedly done for accounting purposes, but involved taking each investor’s investment, dividing it in 1/2, and converting that half into the company’s preferred stock,and the remainder into senior investment notes. We were told that if we did not agree to this conversion by Wells Fargo, we would have to sue them in order to get any returns on our investments. This was completed by July, 2004, and by January, 2005, with the help of Wells Fargo, the company filed for bankruptcy! In less than 6 months this bank rearranged and lost thousands of investments. After the bankruptcy, Wells become one of the bankruptcy trustees! To date it has not paid investors but has retained high powered lawyers(a firm i personally know about has a large expensive art collection, which i learned is one way these types of businesses can stash and harbor monies),accountants and distributors(such as EPIQ7),and has been using the company’s and investors’ monies for their salaries and “administrative costs”. They now only intend to pay about 2% of the original investments and so far have not been investigated by the DOJ or SEC. Throughout the process and from the time this conversion took place, Wells Fargo has communicated the need to verify and update investor information, stressing that this is a “complicated and painstaking process”! Not only have investors been defrauded of their life savings , their private information has been compromised by companies too BIG to fail and too difficult to win back even a fraction of what they’re owed.

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