Inside the Bubble: The Global Economic Crisis and Journalism

1. Inside the Bubble: The Global Economic Crisis and Journalism

2. Giant Pool of Money • “We did it because everybody else was doing it.” • “The data wasn’t worried.” Data trumps common sense. • “I wouldn't have loaned me the money.” • “Hey, global pool of money - screw you.” • “…Everybody who wanted a mortgage and was qualified to get one .... had gotten one…So Wall Street had to find more people to take out mortgages. Which meant lending to people who never would’ve qualified before.

3. Mar 2008: Bear Stearns’ Toxic Waste • Billions in subprime mortgage loans. • Credit default swaps in 100s of Billions of dollars, global • Bear Stearns nearly goes belly up twice as the Fed tried to negotiate a rescue plan • Mar 16, JP Morgan takes over Bear Stearns, with govt help, at $2 a share.

4. Summer 2008:Fannie and Freddie • Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) are the two largest mortgage lenders in the world. • Created by government, but (were) privately owned. • Stocks drop more than 60% in July. • Sept. 7, 2008. Government takes over (80% stake).

5. Sept 2008: Lehman and AIG • Sep 9, Lehman stock plunges 45%. • Sep 12-14, Paulson and Geithner push Lehman to find a buyer • Lehman is allowed to fail • Markets start to tumble. • AIG is “saved”—we are all in the insurance business now.

6. Markets Crash, Bailout Time • Fed Chair Ben Bernanke pushes Paulson to go to Congress for help. • Sep 18: Fed and Treasury reveal the depth of the problem to leaders in Congress. • Paulson tells Congressional leaders “unless you act, the financial system of this country and the world will melt down in a number of days.” • Sep 29: First bailout bill fails to pass House. Largest drop in the DOW ever. • Oct 3: Revised Bailout bill passes. • WE now own toxic assets.

7. Capital Injections: Government Buys into Banks • Oct 13: Sec Paulson meets with CEOs of the 9 largest banks • Banks are told to take Federal money. • John Ydstie report on the details of the plan.

8. Where were journalists? • Some were on the case for years. • Others were inside the bubble.

9. BusinessWeek’s Dean Foust, in 2000 • High-interest loans to the poor and hard-pressed are not new. They used to be the exclusive purview of subprime lenders. But what is new today is the invasion of mainstream financiers into what was once the sole province of check cashers, pawnshops and the like. Wall Street and banks are financing a growing number of paycheck and car-title lenders that help many Americans survive from week to week. Some of these firms are taking advantage of slack regulations, and are charging annual rates of over 300%. • Top 3 lenders in his story: 1) Lehman Brothers, 2) Merrill Lynch, 3) Bank of America

10. ABC/NYT, Lowell Bergman and Diana Henriques • Report: “Mortgaged Lives: Profiting From Fine Print With Wall Street’s Help”—details the practices that would prove to be the root cause of the crisis. 3/15/2000 • “No Wall Street investment bank had a bigger share of that reviving 1999 [subprime] market than Lehman Brothers, Wall Street’s fourth-largest brokerage house.”

11. Others Largely Inside the Bubble • Jon Stewart goes after CNBC. • Maybe Peter Schiff was right.