Economists Try Target Practice in a Fun-House Mirror

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“Everybody does it,” is what high school students say when caught committing an offense. And now that the economy has plummeted, it’s the defense offered by lenders, borrowers, brokers, investors, credit agencies, government regulators and elected officials alike.

Everybody was doing it, and nobody wanted to stop it. As Michael Francis, a former Wall Street investment banker puts it in “House of Cards,” a documentary on CNBC on Monday, “No, there was never a time where somebody said: ‘Hey, hold on. Let’s not do this.’ ”

Collateralized debt obligations are so complicated that even the former Federal Reserve chairman Alan Greenspan says he finds them bewildering. But now, in hindsight, it’s just as difficult to fathom the individual gambles and collective folly that brought down Wall Street and cost millions of Americans their homes, jobs and retirement savings. And that’s why “House of Cards” and “Inside the Meltdown,” a “Frontline” documentary on most PBS stations on Tuesday, are so gripping.

So much is still at stake that it’s hard to remember what happened even a few months ago when the Bush administration and Congress gave Wall Street its first bailout.

“Inside the Meltdown” is a post-traumatic-stress flashback: a searing look at how the treasury secretary at the time, Henry M. Paulson Jr., and others acted — and failed to act — in those fraught days in September when the world’s entire economic system seemed on the brink of evaporating. “Frontline” concludes that by refusing to rescue Lehman Brothers, Mr. Paulson kicked off the worldwide credit freeze and deepened the recession.

http://www.nytimes.com/2009/02/16/arts/television/16watc.html?th&emc=th

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1. I think you'll find

that there were plenty of people on the record who did in fact say, "let's not do this".

>> As Michael Francis, a former Wall Street investment banker puts it in “House of Cards,” a documentary on CNBC on Monday, “No, there was never a time where somebody said: ‘Hey, hold on. Let’s not do this.’ ”

Too many people were pocketing too much money from the business to listen, though. The entire process by which loans were made to poor risks, and that debt sold to investors at much lower risk levels, was a fraud.