PBS Frontline: "The Warning." What happened to the economy.

[Xicano]

This is troubling! And no one has seen the inside of a jail cell. Why? In the link below at the upper right corner of the page, click the maroon colored box that says "Watch The Program +"

http://www.pbs.org/wgbh/pages/frontline/warning/etc/synopsis.html


"We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?"

In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.

"I didn't know Brooksley Born," says former SEC Chairman Arthur Levitt, a member of President Clinton's powerful Working Group on Financial Markets. "I was told that she was irascible, difficult, stubborn, unreasonable." Levitt explains how the other principals of the Working Group -- former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin -- convinced him that Born's attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was "clearly a mistake."






http://www.pbs.org/wgbh/pages/frontline/warning/etc/synopsis.html

[madmax]

1. Amazing - this should go viral!!

I watched it on Frontline.

[Xicano]

7. Agreed.

This is a powerful video. Remember the clip they played of Ayn Rand about five minutes into the video where she's boasts about being Laissez-faire?

[FourScore]

2. bookmarking. Thanks. k/r

[G_j]

3. a MUST see! K&R

[AllentownJake]

4. Larry and Timmeh are back

and the cheerleaders out there don't understand why some of us aren't happy about it.

[Rick Myers]

5. Great show!!! These clowns should face charges!!!

And Geitner too!!!

[Bgno64]

13. yep

the 'committee to save the world' should go to jail.

[Uncle Joe]

6. Kicked and recommended.

Thanks for the thread, Xicano.

[Xicano]

8. You're very welcome Uncle Joe.

And thanks for the recommend because as many people as possible should watch this. Its a very well put together documentary.

[OnceUponTimeOnTheNet]

9. Allready watched it, but K&R. Is there more coming? I want more.

[slipslidingaway]

10. Great show knr n/t

[WhaTHellsgoingonhere]

11. Disturbing on so many levels, then AND now

Born's snooping scared the crap out of the Clinton/Greenspan admin and Congress and they set out to immasculate her commission. The derivatives market grew from nothing in 1980 to $600 trillion today, post 2008 meltdown. As disturbing as this remains, consider this. Obama's CFTC commisioner is Gary Gensler, the one-time co-head of finance at... Goldman Sachs.

The Warning reported that, as Born had predicted, a huge Wall Street favorite financial institution specializing in derivatives failed just 6 weeks after her Congressional testimony. It required imediate government intervention to keep it afloat and under the radar. In addition to tinkering with interest rates, Greenspan has never been the libertarian, freemarket wonk he claims to be. These libertarians are such hypocritical losers it's beyond comprehension.

[OnceUponTimeOnTheNet]

12. I had read it was up to 750 a couple months ago.

750 trillion. Then the article went on to talk Quadrillion. I feel like I've been running into a brick wall repeatedly for near a year now.

[slipslidingaway]

14. Derivatives report ...

http://www.bis.org/publ/otc_hy0905.htm

There is a 24 page report at the above link, next report no later than November 30.

Regular OTC Derivatives Market Statistics

19 May 2009

"The BIS is releasing today its semiannual statistics on positions in the global OTC derivatives market for end-December 2008. The statistics cover the notional amounts and gross market values outstanding of the worldwide consolidated OTC derivatives exposure of major banks and dealers in the G10 countries.

The total notional amount of over-the-counter (OTC) derivatives contracts outstanding was $592.0 trillion at the end of December 2008, 13.4% lower than six months earlier. The decline is the first since collection of the data began in 1998. Credit market turmoil and the multilateral netting of contracts led to a contraction of 26.9% in outstanding credit default swaps (CDS). The second half of 2008 also saw the first significant decline of OTC derivatives contracts outstanding in the interest rate market (8.6%) and in the foreign exchange market (21%).

Despite the drop in amounts outstanding, movements of financial market prices in the second half of 2008 lifted gross market values 66.5%, to $33.9 trillion. Gross market values measure the cost of replacing all existing contracts and are thus a better measure of market risk than notional amounts outstanding.

The statistical release cites the following trends in the second half of 2008:

•CDS volumes continued to contract
•Commodity derivatives markets declined by two thirds
•The market value of interest rate products almost doubled

Comprehensive explanatory notes in the release define the coverage of the statistics and the terms used in presenting them."


From page 9 of the report

http://www.bis.org/publ/otc_hy0905.pdf?noframes=1

"2. Definitions

2.1 Types of data collected

Notional amounts outstanding: Nominal or notional amounts outstanding are defined as
the gross nominal or notional value of all deals concluded and not yet settled on the reporting
date. For contracts with variable nominal or notional principal amounts, the basis for
reporting is the nominal or notional principal amounts at the time of reporting.
Nominal or notional amounts outstanding provide a measure of market size and a reference
from which contractual payments are determined in derivatives markets. However, such
amounts are generally not those truly at risk. The amounts at risk in derivatives contracts are
a function of the price level and/or volatility of the financial reference index used in the
determination of contract payments, the duration and liquidity of contracts, and the
creditworthiness of counterparties. They are also a function of whether an exchange of
notional principal takes place between counterparties. Gross market values provide a more
accurate measure of the scale of financial risk transfer taking place in derivatives markets..."

[Democrats_win]

15. Of the Frontline shows on the 2008 bush economic collapse, this is the best.

This show demonstrates

1. that the derivatives were a scam: Proctor and Gamble sued Bankers Trust over investments in these derivatives that Bankers Trust knew was meant to rip off P&G

2. The 2008 collapse was foreshadowed by the 1997 Asian Crisis in which a company, called "Long Term Capital Management," almost collapsed which would have been a calamity just like the collapse of Lehman Brothers. In this case, the FED "organized a bailout of $3.625 billion by the major creditors to avoid a wider collapse in the financial markets."
http://en.wikipedia.org/wiki/Long-Term_Capital_Management

3. Greenspan saw nothing wrong with fraud in the markets.

Ladies and Gentlemen, welcome to the "Fraud Market" system! RIP: Free Market.

[WeCanWorkItOut]

16. 90% of the people in Congress didn't understand the concepts, so

--they chose to go with the big donors,
and the guys with the big prestige.

It sounds rather like what's happening in health care now.

I do think it's important to remember that the unregulated
derivatives market wasn't the whole story.
As Joe Stiglitz commented (more or less), if they had done something
(about transparency, reserve requirements, etc.)
they might have prevented some of the major problems.

Thanks for posting this.