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Well, at least they got the story right.
I'll call you back later, I have to save the Earth
In about 100 minutes they managed to explain a very complicated series of rapid-fire events in an understandable, and even entertaining way. The writing was engaging. The acting was great. And so forth.
But ultimately, HBO’s “Too Big To Fail”… fails… because it punts on the whole “blame” issue.
Why with the blame? Well, put simply, so we don’t do this shit again.
Yes, yes yes. The bankers were greedy idiots: hard-headed and childish zillionaires who nearly brought down our entire economic system because they were dumb enough to believe (or to convince themselves) that “real estate only goes up”.
(I mean, really? Real Estate always goes up? Never down? Really? It still boggles my mind that this is even a question. Gah.)
“Too Big To Fail” does a decent job of casting that concept in it’s proper light: a pale illumination of disdain.
Where HBO’s “Too Big To Fail” falls short is ONLY blaming the bankers.
This is a huge, historical mistake.
TBTF completely dismisses Congress and multiple decades of terrible, terrible decisions on everything from Freddie & Fannie, to the FHA, to the CRA. Instead, the film chooses to serve up the “de-regulation” canard in whispy, vague intro scenes (are housing quotas “regulation” or “de-regulation”?).
What’s more, “TBTF” completely lets consumers (us) off the hook.
In this case it took THREE to tango: 1) The greedy, bankers 2) the maybe-well-intentioned but ultimately bumbling and hurtful bureaucrats who first incentivized, and supported those bankers, and 3) the millions of willing homeowners who were also greedy, and bumbling, and now are whining a lot.
We can argue “chicken-egg-chicken” here, but anyone who knows anything about this mess knows that, although the bankers deserve all the disdain we can muster, the other two major players deserve just as much attention.
But “Too Big To Fail” isn’t about those other 2 legs of the stool. It’s about the bankers, and their interaction w/ Paulson, and the slap-dash series of events that took place in the fall of 2008. So it’s understandable that it didn’t dive deep into, say, specific legislation, or some poor, dumb family caught trying to flip some houses.
If “Too Big To Fail” had stayed on topic, then it would be fine. But they didn’t.
Understandably, though, they did try to explain what was going on.
In one painfully obvious scene (putting the 4th wall in much peril) Paulson and his advisors “talk through” how the shit actually got into the fan.
It’s in this scene where “TBTF” willfully ignores The Government’s role in encouraging the build-up, and at the same time washes away any homeowners’ responsibility with the old “American Dream” chestnut; all in about 20 seconds of screen time. This is a damn shame, because they really didn’t have to say much here to be accurate. But instead they chose to perpetuate the fallacy that it was ALL the fault of the bankers.
(Remember kids: bankers are evil, politicians are just there to help, and we consumers can do no wrong.)
The problem here is that, it’s movies like this, about crises like this, that will actually help shape history. And it’s in this little scene that HBO’s “Too Big To Fail” essentially absolves the other 2 legs of the stool of any blame.
Unforgivable.
And what’s extra frustrating is “TBTF” came so darn close to being nonpartisan. All they had to do here, in this short little scene, was be ACCURATE.
= Accuracy FAIL.
Instead, they chose pitchforks and populism. And they just might get away with it because the Bankers are, in fact, pretty darn evil.
So, ultimately, “Too Big To Fail” ends up being a love letter to Hank Paulson. Does he deserve it? Maybe so. But along the way they missed a simple, and important opportunity to help educate the public about what really happened. And why.
It’s a near-miss. Which sucks, because it’s not a bad movie. In fact it’s a pretty darn good movie. But as a historical document, HBO’s “Too Big To Fail” will be doomed to repeats.
Yeah. I just wrote that.
Have you ever wondered why there aren’t more people in jail because of all this Mortgage Madness?
More delicious white collar perp walks? More lawyers suddenly employed?
Sure, there’s Madoff and that other guy in Texas who are both certainly going away for a long, long time. But they weren’t connected to the housing mess, really. Amazingly.
But there is a metric shitton of apparent perpetrators in this disgusting mess. From the realtors, to the brokers, to the CEOs. And they’re called-out every day in the press, and on Capital Hill for their “wrong doing”.
So why haven’t there been more headline-inducing criminal charges for those awful people who so obviously “preyed” on our Nation’s poor and uneducated?
Are we lazy? Are there not enough judges? Have they paid somebody off?
After all, the national “ire” meter is through the roof, the highest it’s ever been. We want blood. If ever there was a time for publically stringing people up, it’s now.
So why isn’t it happening? Wasn’t all that stuff illegal?
Well, no. Sadly, and amazingly… it wasn’t illegal.
In fact, thanks to our super-awesome Government and its relentless pursuit of voters (and their property taxes), they actually made 99.9% of it bona-fide, free and clear, LEGAL.
From verifying income, to making sure the securities were rated accurately, all of it was A-OK.
And it was made A-OK on purpose.
Ala the various iterations of the Community Reinvestment Act, and subsequent tweaks, even a cursory check for something like, say, income, would derail the whole, lucrative process. The Government would be deprived of their precious tax revenue, and the politicians would be deprived of appreciative voters.
And millions of Americans would be cheated out of their “American Dream”.
A quick word about the Community Reinvestment Act, without going tootoo deep into it (wiki, for that). Nobody is arguing the INTENTIONS of the CRA, which were to help people get homes who normally wouldn’t be able to get homes. A laudable aim, for sure, because after all, who wouldn’t want some poor, but well-meaning and hard working family to have the safety, security, and stability of a home of their own? Their very own “American Dream”?
(BTW, the “American Dream” is not “home ownership”, it’s “opportunity”. But if you want your “opportunity” to result in a home with a white picket fence, then so be it. But the “American Dream” is not, and has never been, merely owning a home. That definition was an invention of our politicians, The National Association of Realtors, and the media.)
So, only a certifiable asshole (or a mean old Republican) would deny a good-hearted, but poor soul, their “right” to own a home, right? Well, the problem with that, and the CRA is, instead of addressing the root of the problem –why these people couldn’t afford a home in the first place, or why their credit was bad, etc– the Government decided to simply force banks to loan them the money.
Those big, bad banks.
Again, perhaps an admirable tact, because at one point in our history some banks would “red line” whole communities, unfairly disallowing normally qualified people from access to credit based on their race, age, sex, or proximity to deadbeats. Never mind that various laws have outlawed that sort of thing for many, many decades. And the Fair Housing Act of 1968 made it all illegal yet again. But of course, despite the fact that redlining was already illegal five-times-over, the Carter Administration, through the CRA, decided that it was the banks’ fault, and only the banks’ fault, that more people weren’t buying homes. And therefore the banks’ duty to rectify the situation directly, by forcing banks to jettison their own, time-honored, self-imposed “regulations” for credit worthiness.
That’s right. The CRA outright forced the banks to loan money (for a home) to people who they would never have normally lent to. Not because of race, sex or location, mind you, but because of bad credit or lack of income.
(Leave it to Government to use a jackhammer for a job that really required a little sandpaper.)
At first the CRA only insisted that banks dedicate a small percentage of their total loan portfolio to “bad” home loans (because that’s what they were, “bad”, in a strict financial sense). And the banks quickly figured out how to make it work: by passing along the cost of the added risk to their customers.
The banks’ PR people saw an opportunity too, so we started seeing ads and press releases proclaiming “Last year we proudly made __% of home loans to underpriveledged families… we’re looking out for you”, etc. So it’s not like they used their bully pulpit to bitch about it.
But then under Clinton, though, the quota of “bad loans” went up. Way up, to almost 50%. Thanks Andrew Cuomo.
And, well, the banks hit the roof. 5% forced-bad loans they could deal with. They could sweep it under the carpet, and pass along or hide the cost. But 15, 21, 34, and then almost 50% was just too much. It was becoming catastrophic to their business. And so they did what any red-blooded American big business would do: they lobbied the shit out of congress.
So the Clinton Administration agreed to re-jigger Freddie and Fannie to “back” these increasing numbers of bad loans, which were rechristened “sub prime” and hailed as a new “groundbreaking” loan type because they “helped” so many people.
Again, subprime simply meant “loaning money to someone with bad credit”. 15 years ago that was considered a good thing.
Fast-forward to 1998, and the banks still weren’t happy. At all. F&F simply weren’t efficient enough to “eat” all these ever-increasing numbers of bad loans.
And numbers of bad loans were ever-increasing for more reasons than just ever-rising CRA quotas, of course. As stupid as the banks knew all of this was, the implicit “Government backing” that came with F&F spurred them, and their adjuncts, to make even more bad loans, above and beyond those insane quotas. After all, the Government (us) had their backs, right?
Well, even though, technically, F&F “had their backs” the banks were still nervous about having all those bad loans on their books (Enron hadn’t happened, and so mark-to-market wasn’t in effect yet). So in 1998 Clinton, along with a bipartisan congress, repealed Glass Stegall, allowing banks to securitize these home loans, good and bad, and “kick” them up to wall street.
That meant that these bad loans no longer had to sit on their books. In fact, they could easily sell them now, especially after the dot.com bubble burst in 2000. Because securitized home loans, which represented a solid, underlying, physical asset (the house and it’s property), made sure these new securities were suddenly very sexy.
Then, as they tend to do, Wall Street started divvying them up, and bundling them into packages, and hocking them to anyone and everyone they could. Including poor, poor Iceland.
And then Greenspan refused to raise the interest rates, further fanning the flames. Raising prices.
Etc. Etc. Etc.
(PS, read this post if you want a slightly more detailed explanation of all this awesemeness)
But the overarching point here is this:
IT WAS ALL LEGAL.
That’s why our thirst for blood is going unquenched.
And why was it all legal?
Stay with me here… and follow the money….
Because, under the auspices of helping poor people, the Government MADE it all legal.
That’s why we’re not seeing Dog the Bounty Hunter dragging those asshole mortgage brokers out from under their beds by their hair. That’s why we’re not following some Wall Streeter as he skips from country-to-country trying to evade extradition. That’s why were not seeing anyone busted for anything.
It was LEGAL.
It’s distasteful. It’s greedy. And it might actually end up ruining the World.
But again, IT WAS ALL LEGAL.
The Government forced the banks to abandon their own, century’s old self-imposed “regulations” in order to “fix” a societal problem (regulation). And they repealed their own laws that stood in the way, too (deregulation). They offered up Freddie and Fannie to backstop this idiocy. And then they act surprised that some of the worst elements of our society looked at this ludicrous, artificial market and said “I’ll bite!”
And after a while even the good, moral players had to play along. Because they were losing business.
Government tees it up, and then acts surprised when the private sector knocks it out of the park.
Duh?
And every discussion at every Denny’s, right now, surely includes the words “they should be put in jail!”
And they’re not wrong.
Those slimy mortgage pushers who signed as many people up as they could, and then danced off with their millions of dollars in “fees”? And those unctuous iBankers pushing these bundled securities, they knew were full of shit? And don’t even get me started on the credit ratings agencies. I mean, how on earth were these overly-complicated packets of over-priced, and obviously bad loans given AAA ratings?
WTF?
It was LEGAL!
But now we have to ask ourselves… WHY was it all legal.
As a country, we MUST do that. We HAVE to do that. Because that’s the only way we’ll learn from this.
And let’s be very wary of the people who are saying “Common guys! The damage is done! It’s water under the bridge! Let’s not point fingers of blame! Let’s move forward!”… we need to because those are the people who caused this mess.
We absolutely should go back in time, dig around, point fingers, assign blame, and be vigilant about what exactly happened. And why.
It’s the only way to make absolutely sure it doesn’t happen again. Ever.
It’s our duty to do that. We owe it to ourselves. We owe it to our children.
Yes, now you too can “TOO BIG TO FAIL”!
Just like AIG, Freddie & Fannie, and the S&Ls and Chrysler before them. Privatize your profits! Socialize your losses! Take crazy risks!
Nothing says “The Taxpayers Have MY Back” quite like it!
Too Big To Fail
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This bill failed because the American People were calling their representatives at least 99-1 against this bailout.
Any bailout.
And it’s simply because they don’t quite understand this. Neither the problem, nor the proposed solutions.
And it’s not surprising. I watch CNBC all day, read the Economist every week, and I still don’t understand all of it.
It’s not the public’s fault.
Wall Street has been feeding them a string of lies for years now, and so has DC. It is a classic Chicken Little situation.
They’ve been saying for weeks that if we don’t act tomorrow, the Universe will implode.
But it hasn’t.
If it was so important, the Democrats should’ve passed this bill by themselves.
But they didn’t.
If it was so urgent, they could’ve worked over the Jewish Holiday.
But they couldn’t.
So it’s not crazy that the American People aren’t quite grasping the import, here.
Despite the distrust of DC, the individual, respective representatives could be of help explaining this.
Because, of course, everyone hates every politician… except for their politician.
But it seems they’re too busy insulting each other.
It is undeniable that McCain and Obama missed a chance to win this election when they refused, for some reason, to even half-heartedly address this issue in the debates. They could’ve explained at least a bit of it. They could’ve at least imparted a sense of urgency.
But it seems they were too busy not losing the debate.
You know, it’s not the political ineptitude that’s so surprising here. It’s how long it continues to go on.
Was it greed? Was it capitalism? Was it super-greedy uber-capitalism?
Well, one thing’s for sure, we wouldn’t find ourselves having to bail out AIG, Freddie & Fannie, Bear Stearns, and the millions of flippers and defaulters if the real estate bubble hadn’t burst.
And, of course, the real estate bubble wouldn’t have burst if all the foreclosures and mortgage defaults hadn’t happened.
And all those people wouldn’t have defaulted and gotten foreclosed on if they hadn’t tried to buy too much house to begin with, via those vile subprime and other “predatory” (even “racist”) loans.
Which wouldn’t have happened if we hadn’t all thought real estate was a “good investment” and “always goes up”, and is “The American Dream” (which it’s not, “opportunity” is).
And, it’s important to note, Real Estate wouldn’t have “always gone up” (for 5 meager years) if the tech bubble hadn’t burst and Sir Alan Greenspan hadn’t depressed interest rates for way, way, way too long.
And those securitized rotten mortgages wouldn’t have been peddled so aggressively if Sir Alan Greenspan hadn’t depressed the interest rates for way, way, way too long, either.
(interlude)
Alan Greenspan wouldn’t have depressed interest rates for so damn long if the country wasn’t heading into recession after the demise of the tech bubble.
Of course the tech bubble burst because people finally realized that tech stocks don’t “always go up”.
(end interlude)
All those bad, securitized mortgages wouldn’t have (couldn’t have) been securitized if the banks, along with Freddie & Fannie, hadn’t lobbied for Republican Senators Phil Graham and James Leach to repeal the Glass-Steagall Act (a post-Great Depression law that banned banks and brokerage houses from intermingling their finances) which was passed 90-8-1, and signed by Bill Clinton.
The banks, along with Freddie & Fannie, wouldn’t have lobbied for Glass-Steagall to be repealed if the banks, along Freddie & Fannie, hadn’t been suddenly handling an ever-increasing amount of really stupid, bad mortgages.
Freddie & Fannie wouldn’t have been able to “revamp” themselves and “back” all those idiotic loans if Clinton hadn’t installed his buddy Jim Johnson and former budget director Franklin Raines (both of whom are currently high-level Obama campaign principals).
Clinton wouldn’t have installed his cronies to head up F&F (and change their rules) if the banks hadn’t cried bloody murder (lobbied) about how dangerous, and risky all these mortgages, now sitting heavily on their books, were.
And, finally, the banks would never have partaken in these super-risky mortgages in the first place had the office of Housing and Urban Development, at Clinton’s direction, not drastically increased the home ownership quotas for “minorities” and other, “less fortunate” citizens.
And Clinton would have never demanded that “minorities” and other, “less fortunate” citizens, had it not sounded so darn good. In theory. Politically.
And, well, that’s it. That is exactly what happened.
All of this with the obvious and important fact that throughout all of this the Government willfully failed to enforce laws already on the books, like you can’t loan money to someone who can’t prove their income (bank fraud) and you can’t give junk-rate securities a AAA rating when you know full well they’re junk (securities fraud).
(interlude)
By the way, it’s not too late to enforce these laws, and even collect money from the monumental assholes that perpetuated this mess. Both in Government and in the private sector. From Congressmen, to Fed Chairmen and Presidents. From wannabe BoilerRoom Mortgage Brokers to Wall Street CEOs. These jerks owe us money, and jail time.
(end interlude)
You know what they say about good intentions?
Whoever they are, they’re right.
Okay. Here’s the plan.
Everyone under 40 years-old… STOP SAVING FOR RETIREMENT. NOW.
That’s right.
Stop socking money away in your 401k. Stop buying stocks, bonds, CDs, whatever. Fire your broker and tell your financial advisor to take a hike.
Get all that money back… Get all your credit cards together…
And spend it. Spend it all!
Go on vacation.
Buy a new car.
Have a huge party with all your friends.
Try skydiving.
Whatever.
Just take that money you were saving for retirement, and spend it.
Have a blast!
…Yeah, I know it sounds crazy. And probably goes against some of our “gut” instincts about what’s right, and what’s not.
But you’ve got to trust me on this one.
Because if there’s one thing we’ve learned about personal, fiscal responsibility in the last few months is…YOU DON’T NEED IT!
Isn’t that awesome!
There is no reason whatsoever to keep a budget, balance your checkbook, or even pay your bills. That stuff is way overrated.
Can you smell the freedom!?
…Look, I know this sounds crazy, but we have NOTHING TO WORRY ABOUT. Because the Government’s got our backs. And the Government is, like, HUGE.
So no matter how stupid, or irresponsible we are with our money, and our lives (let the suckaz call it what they want), we will not starve. In fact, we’ll most definitely come out ahead. And rightfully so. I mean, what else is our Government there for? We PAY for it, for crying out loud!
And here’s the beautiful part: the worse we make it, the BETTER it’s going to be! Because if only a few of us throw caution into the wind and live life to it’s fullest NOW, then the chances of Uncle Sam coming to our rescue aren’t so good.
But if ALL of us do it… TENS of MILLIONS of us do it… it can’t fail!
Think about it. 35-or-so years from, there we are, millions of us, all of a sudden either retired or (gasp) layed-off from our jobs. With no where to go. And more importantly, no money to PARTICIPATE IN THE ECONOMY with!
How SAD is that!? And that’s when the news stories start pouring in.
I mean, what plucky up-and-comer at your local news station WOULDN’T do a story on the BIGGEST, SADDEST CATASTROPHE EVER?!? (We won’t call it a “crisis”, that’s so 2008).
Think of the headlines! Think of the empathy!
Then all we have to do is sit back, and let the bailout come to us.
“But wait” you say, “Isn’t that just OUR tax dollars being used to bail us out?!”
Aha. And that’s the real beauty here. It’s not OUR tax dollars, it’s our CHILDREN’S tax dollars. Let THEM figure it out.
Hey, the Government always finds a way, right?
So, my fellow Americans, who’s with me!?!?
Here’s to living in the present. And living life to it’s fullest.
Here’s to 2042 !!!
Huzzah!
e
Well Bear Stearns, you did it.
Sure, there were a lot of greedy bastards in all of this, both on the bank side and the consumer side. But you, sirs, somehow managed to be such monumentally large douches, you’re actually taking the rest of the World down with you.
“Too Big To Fail” is the term that’s been bandied about.
And of this, I’m fairly sure you were well aware. I mean, why else would you ignore just about every news report for the last 3 years and somehow decide that actually *buying* these rotten loans was somehow actually a *good* idea?
Okay, you’re right. You were not alone. But you weren’t satisfied with merely being one of the pack. No sir ree.
Not only did you hold you nose and drink the tainted subprime tequila shot-for-shot with those other greedy douchebag banks, you chased it with a 4-foot bong of northern lights, a whippet, and then went streaking.
And before you say that’s the worst analogy you’ve ever read, let me clarify. …A little back story.
When I was in college there “the rich kids” and the “rest of us”. The rich kids were lucky enough, to have their parents pay for everything: school, food, housing, and even a little spending money for booze. Whereas the “rest of us” had to pay for everything ourselves, either through school loans, or if we were smart, actual jobs.
Well, somewhere between freshman and sophmore years, there was this rash of rich kids who went nuts with their parents’ money. They bought booze, drugs, music, clothes, and everything else you can think of like it was going out of style. Drunk with their first taste of freedom, and a little gratis spending money, they let loose.
And there was always that one kid who took even that way to far. And I knew one of those kids.
On top of the booze, drugs, clothes, music and what have you, this kid signed up for a bank account, and a credit card, and in a desperate attempt to gain some ephemeral small time fame, went and spent as much money as he possibly could buying booze, drugs, clothes and anything else he could think of, for anybody and everybody.
He threw parties. He took other kids on shopping sprees. And for about 3 full months, nobody on campus had to buy any beer or weed because he had it taken care of.
This lasted for several months, and by various accounts he owed well into the tens of thousands of dollars when it was all said and done. And when I asked him why the hell he did that… why, when his other friends were topping out at, say, $1,500… why he had to go so overboard?
It was simple, he explained. You see, those other kids ended up having to pay for their debt themselves, because it was relatively minor. He, on the other hand, was more conniving.
Or was it smart?
Since he had made his situation so bad, so untenable, he was in a unique position. And his parents were in an unenviable one. Since the level of damage was so great, their unfortunate choice was simple: either “teach their son a lesson”, and insist he pay for his monetary misdeeds, which would surely mean dropping out of school, a mountain of mind numbing legal problems, possible criminal charges, and assured bankruptcy? Or, in lieu of “ruining his life”… reluctantly bail him out, but with a stern talking to?
You know what happened.
And who can blame these parents for bailing out their son? As much as they probably wanted to see him suffer because of his idiocy, they couldn’t let his entire future get thrown out the window with the proverbial bath water. So they bit the bullet and did what they had to do.
This kid is Bear Stearns. And the Government is, once again, the parents.
And you thought that was a bad analogy.
So bravo Bear Stearns. Your plan worked perfectly. And only time will tell if you threw the World’s entire future out the window with your dirty bathwater.
Okay that was a bad one.
e
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