News & Analysis
HBO, Daily Beast, Sorkin and the Financial Crisis: Too Big to Explain
Too Big Too Fail ... At a New York screening of the new HBO adaptation of Andrew Ross Sorkin's Too Big to Fail, Treasury Secretary Timothy Geithner said that not only is our financial system not too large to go bust—but we're headed for another crisis. The Wall Street meltdown of late 2008 was, in real life, a harrowing event, triggering a terrible recession from which we're still recovering. In the HBO movie Too Big to Fail, it's also a surprisingly gripping melodrama – a clash of greedheads and egomaniacs desperate to escape the consequences of their own bad behavior. – Daily Beast
Dominant Social Theme: This is a great book! It brings you inside the financial crisis and makes it come alive! You really get to feel the crisis! You are there! You can see it happening! And after reading this book you will not have a clue as to why it occurred! So watch the movie! You still won't know! But you will feel like you were there! You will feel like an insider! You will still be ignorant as hell! But you will feel connected! Wow!
Free-Market Analysis: HBO has adapted Andrew Ross Sorkin's book, Too Big to Fail and Timothy Geithner appeared at the initial screening and predicted the system will fall apart yet again. (Big news! The current system sucks!) This seems to come as a surprise to the Daily Beast, which profiled the event (see excerpt above). We were struck by this perfect storm of media activity. Surely, we decided, given the tremendous agglomeration of resources and reporting, the mainstream media must have finally "gotten it right."
In fact, what strikes us most clearly about the Daily Beast article is the portrayal of a kind of elite dominant social theme: There simply is no way to understand financial catastrophes; they are as inexplicable as they are ruinous; as mysterious as they are vast. Thus the mainstream media is better off trying to catalogue the results rather than explaining the underlying difficulties.
The Daily Beast article reports on a media nexus worth billions: HBO, the New York Times, the US Government Treasury Secretary Timothy Geithner all attended the HBO screening. And yet ... what has occurred as a result of all this intellectual firepower? Nada. Nothing. Read the book, watch the movie, listen to the speech and read the article and we guarantee you this: You still will know not one wit more about the root cause of the current financial crisis than you do now.
It's funny. And sad. Neither the book, nor the Daily Beast, nor Timmy Geithner, nor apparently the HBO movie, can shed any light on the "crisis" no matter how hard they try. Geithner tempts us but apparently does not deliver – though his remarks certainly sound scary enough. Perhaps, the article or the book are to blame? Click over to Amazon.com and the reviews of Too Big to Fail are irritated about the same thing. Five hundred pages and no answers. Woops.
Unfortunately, we expect no more. Sorkin, a New York Times writer, is a practitioner of the "too-close-to-explain" school of journalism. That is, in 500-plus pages, he apparently gets inside of every head of every major player in Washington DC and Wall Street without ever providing the "why."
Gonzo journalism can be likened to eating cellophane. It is crunchy and full of crinkly sparkles, but in the end it proves innutritious. With so much brainpower concentrated on a single issue, you surely should walk away enlightened about how the world's current financial system came within a few hours of a global meltdown. Nope.
"Media genius" Tina Brown who has made a habit of failing upward everywhere she goes, has produced yet another article of exquisite vapidity. Like the book itself, we learn the details without ever comprehending the issues. It takes enormous talent in our view to concentrate so many resources on an issue of such singular import without revealing even a single drip of significant information.
But why are we surprised? (And we are, perennially.) This is actually what Tina Brown, Sorkin, et al. are paid to do. They are professional obfuscators. Their worth is calculated by how much they can conceal, and how well. Here's some more from the article:
At various moments of high tension, Treasury Secretary Hank Paulson (played by a bedraggled, unshaven William Hurt) flees an important meeting to stress-vomit in his private bathroom, and New York Federal Reserve President Timothy Geithner (a perfectly turned-out Billy Crudup) continually curses into his cell phone.
It's an alarming entertainment (premiering May 23 at 9 p.m.), and an even more disturbing memory. So having the real Geithner predict the coming of another big crisis was the last thing the well-heeled screening crowd at the Time Warner Center wanted to hear Tuesday night. "It will come again. There will be another storm," warned Geithner, who in early 2009 succeeded Paulson as treasury secretary. "But it's not going to come for a while."
Under mostly gentle questioning from Pulitzer Prize-winning financial writer Liaquat Ahamed and New York Times business columnist Andrew Ross Sorkin, author of the book on which the film is based, Geithner said "I'm certain we will" experience another catastrophe – he just couldn't say when or what kind. "You will not know," he answered when Sorkin tried to pin him down. "It's not going to be possible for people to capture risk with perfect foresight and knowledge."
The 49-year-old Geithner – looking sharp and fresh in his precisely creased suit, starched white shirt, and brilliantly shined Oxfords – favored his audience with a grim history of the near-collapse of Bear Stearns and AIG, and the downfall of Lehman Brothers, events that pushed the markets into a panicked death spiral. "Things were falling apart," Geithner told an audience that included Time Warner CEO Jeffrey Bewkes and former Lehman Brothers chief executive Pete Peterson.
"We had no playbook and no tools... Life's about choices. We had no good choices... We allowed this huge financial system to emerge without any meaningful constraints... The size of the shock was larger than what precipitated the Great Depression ...
So there you have it, folks. Paulson vomits; Ahamed questions and Geithner predicts (another calamity). So much drama, so little insight. This is perfect US mainstream reporting. Ignorance perfected as an art form, though just to be fair we should mention Sorkin does come to a couple of conclusions at the end of his heavyweight tome. The main one apparently is he thinks there should be more regulation!
Gee, how's that for originality and where does it end? The 20th century was virtually a factory of regulation in the West and finished with a financial crash that is rivaling the Great Depression. After 500 pages, Sorkin can only muster the insight that more of the same will provide a better outcome. Yes, it's true ... Professional communicators and Western bureaucracies in aggregate are clinically insane.
Tina Brown has been known to lament the impact of the Internet and electronic reporting on 20th century media. From her point of view, the menu of information choices are simply too vast and people cannot be bothered to focus on any one media property. Too bad. In fact, this article, this gathering, these people, all provide us with sterling reasons why Ms. Brown feels the way she does, and why she is, in fact, wrong. It is not the wide range of resources currently available that makes the difference; it is the paucity of information she is willing to provide.
We have now come to the end of our article. But before we go, we are going to perform a chemistry experiment. We shall mix together inexpensive electrons and serve them up on your computer screen to provide a brief, shining moment of clarity. We will do so just to show how inexpensively and quickly it can be done. Even if you disagree, at least we will have provided you with genuine information that you can react to ...
The world's financial crisis was the result of the West's central banking economy, which has been sponsored and expanded by a group of elite banking families mostly centered in the City of London, a private enclave for the impossibly wealthy. Central banks, perhaps owned and operated by these families (and one in particular), fix the price of money via interest rates and money-volume, and price-fixing inevitably creates economic distortions.
Economies, as a result, inflate wildly and then crash. Once this happens a few times over decades, the economies in question are so distorted that a final crash is inevitable. This is what happened in 2007-2008. The West's financial structure, swamped by trillions of dollars printed from nothing, became so distorted that no one could tell a real investment or profit-making company from a phony one. The world's economy as a result froze up. The dollar reserve system crashed and likely shall not recover.
Hopefully, the world will eventually return to some sort of commodity standard. If the fascists do not triumph, the end-result of the current pain shall be money competition. Let all kinds of money compete and the best shall emerge as the most useful currency. And what about Geithner? The Treasury Secretary, without explaining what actually happened, is indicating that the current system of money-price fixing is still in effect and sooner or later will cause another crash. The powers-that-be, rather than repairing the current system by allowing the free-market to operate are desperately puffing it up with yet more money-from-nothing. How predictable. How sad.
See how easy that is? We didn't need 500 pages or two years and a million-dollar advance. We didn't need an HBO movie or even an adulatory article from the Daily Beast. We didn't need the admittedly impressive presence of Timothy Geithner, the attendance of the Wall Street crowd or other members of the mainstream press. We just needed a few electrons and readers who prefer English to gibberish.
Here are some more points to which the Daily Beast article does not allude: The current system is a farce and fraud; it cannot provide jobs; cannot provide careers; cannot provide much of anything except paper profits for bankers. This is the system that Hank Paulson bailed out (no wonder he vomited); this is the system that Timmy Geithner is dedicated to upholding. This is why the pain and terror of the past few years are bound to be repeated.
Conclusion: The people that brought you the current dysfunctional economic system are still in charge. You can see them in operation later in May on HBO. You can read the book, too. You will be amazed! Stimulated! Entertained! But you won't know anymore afterward than before. Geithner, Paulson, Ms. Brown and the banking families to whom they report, wouldn't have it any other way.
Editor's Note: Here is a link to a video that was made several years ago by the Mises Institute that should be playing on HBO instead of the dribble discussed above: Money, Banking and the Federal Reserve.
Posted by Texon on 05/19/11 06:44 PM
Don't you know millions of Americans REALLY DO GET IT? Question is, what pray tell do you propose for a viable solution?
Posted by Avatar on 05/19/11 06:07 PM
Great Article and Valid Predictions to boot!!! I encourage everyone to read this week's Rolling Stone Article on Goldman Sachs and its role in profiting from the housing collapse by withholding information and selling toxic assets to its customers and then shorting these very same assets. This was partially made possible by the 2004 creation of Consolidated Supervised Entities which employed 7 people to oversee investment banks activities. Hank Paulson was the CEO of Goldman at the time. Bush later appoints him Secretary of the Treasury where he basically saves his buddies. Obama's biggest contributor in the 2008 campaign: Goldman Sach's. Wake up people.
Posted by rossbcan on 05/19/11 04:16 PM
HELLO...REGULATION IS FUTILE:
Where to start refuting a near infinite artificial reality and dangerously false paradigm?
Start by realizing that any ORGANIZED opinion has a self-interest agenda, determined by what they believe is in their self-interest in their environment which determines the choice possibilities available. In other words, any organized viewpoint and most individual viewpoints are parochial, within a narrow paradigm.
What should be clear to all competent thinkers is: REAL massive organizational failure has occurred. REAL factors are driving REAL events. The laws of reality (action inevitably leads to consequence) are imposing attrition costs for FALSITY. We, the people have already paid a hefty price for this and, the cost IS increasing. Our children will be slaves to the debt we have bequeathed them. This is OK, by some perspectives.
The first thing to do is to KNOW that regulation is an attempt of central command and control. As such, accurate information and models of reality are required, else: garbage in, garbage out.
I posit that anticipation of the future even if we have correct behavioral models is IMPOSSIBLE due to information corruption as it traverses hierarchies and the fact that such information is used to the detriment of information providers, encouraging lying. Proof:
Click to view link
The best (assuming honest regulators) that regulation can do is, in response to known action (choice) sequences that result in crime, deem these sequences illegal. This, presumably will prevent problems that have happened in the past, from recurring.
But, it appears that regulators, enforcers and interpreters are coerced by the regulated (lobbyists, bribes).
Another problem is that, since we live in an action precedes consequence reality, regulation must, by definition be reactive.
The result is that we have a massively expensive war (paid for by business, taxpayers and consumers) between regulators and their lawyers and innovative criminals and their lawyers. When innovative criminals manage to create a new method of fraud, such as subprime, well, they can honestly say: we were obeying law, nya nya, cannot touch us. This is a very expensive moral hazard, an environment that appears to be designed (by the legal profession) to achieve these very results.
There is only one thing that can be done to restore an honest economy, given that the future cannot be predicted. Respond to crime after the fact (and compensate victims), using REAL, basic definitions of crime. Restore the "rule of law":
Click to view link
Else, the costs of predatory regulation (ballooning to infinity as it attempts to track and anticipate infinity) and criminals running amok will continue to collapse civilization.
Mathematics of Rule irrefutably PROVES this:
Click to view link
We, the people KNOW we are prey. We are slowly achieving consensus regarding what to do about it.
Posted by Dark Markets on 05/19/11 04:04 PM
Loved your article, Daily Bell, and especially your sneering dismantling of the media elites & pooh-bahs who presided over this fluffy HBO docu-drama... TYPICAL Washington Post & NY Times Ivy League, horse-race, "Aren't we so smart? "don't we know so much?", "aren't we so connected?" "reporting" - but in the end, the SOBs can't explain why little economic hit man gs/jpm hatchet man Timmy Geithner is out to "TARGET" federal workers' pension funds, to make up for that MONSTER DEFICITS _he_ has overseen as Treasury Secretary!
Click to view link
Click to view link
But then you went & blew it by your sneering dismissal of "TOO MUCH REGULATION."
Hello? This (2008-2011) financial crisis was CAUSED by the DISMANTLING of the DECADES worth of financial regulation built up since the Great Depression, particularly the dismantling of Glass-Steagall, which PROHIBITED retail banks (mom & pop Savings & Loans) from being used as CASINO GAMBLING CHIPS by speculator/gambler "investment bankers."
While the twin late 1990s DEREGULATION ATROCITIES, the Gramm-Leach-Bliley Act (1999) and Commodities Futures 'Modernization' Act (2000)
Click to view link
Click to view link
...had a distinctly Southern, Texas, Republican flavor to them, they were REALLY insigated, pushed, & passed by the usual NY, Wall St, GS, JPM multi-national crowd, with "Democrats" Bob Rubin & Larry Summers (and their toady proteges, Timmy Geithner & Rahm Emanuel, etc.) doing the heavy, behind-scenes work to assure passage (and arrange all those big NY bank "campaign donations" to Congress-critters & Senators to fund & finance said atrocities.)
These twin DEREGULATION bills DISMANTLED the (my words) "intrustive" REGULATION regime you seem to sniff at!
Here's how wiki explains the ENRON EXEMPTION under the CFMA: "The "Enron loophole" EXEMPTS most over-the-counter energy trades and trading on electronic energy commodity markets FROM government REGULATION. Click to view link
What was pioneered at Harkin Energy in the 1980s (with then 1st son, and later president G.W. Bush on Board of Directors AND Audit Committee) - STASHING DEBT in "off balance sheet" subsidiaries, ALLOWING companies to FALSIFY profits - became well established as "ENRON ACCOUNTING" a decade or two later.
That's HARDLY "TOO MUCH REGULATION" !!
Indeed, by allowing UNREGULATED DERIVATIVES trading, Greenspan, Wall Street, and the SEC effectively DISMANTLED 100+ years of strict INSURANCE regulations.
Now, instead of insuring the value of a building, port facility, or stored commodity, you could simply write an insurance-like contract on the company's STOCK PRICE.
This took ALL THE TEMPTATIONS for INSURANCE FRAUD (whether by insurer or insured) and put 'em on STEROIDS: now, instead of burning down a warehouse, you could simply SABOTAGE a company's STOCK in a thousand different ways, and, in UNREGULATED markets, who would know?
This is exactly what Golddamn-Sachs did, DUMPING TRASH "securities" on unsuspecting clients, then BETTING AGAINST those SAME 'securities' with Credit DEFAULT Swaps written by AIG, which, being TOXIC when they were created, were SURE to explode... = DEFAULT!
YOU say "the western financial markets were TOO regulated" I say, SHOW ME ONE "regulatory" prosecution of GS (or JPM) - there WERE and ARE NONE.
That's not "too much regulation" - that's NO regulation!
Posted by rossbcan on 05/19/11 03:56 PM
First the pandering. You stated that you were "relieved" I was not accusing you of hypocrisy or whining. Why should you care about anything I say or think, if you KNOW to the contrary? So, I was just stating the obvious: stand up. Your ruffled feathers indicate I hit a nerve, not my intent.
About US / Nazis. Check your history. That is EXACTLY it. Nuremberg law WILL be biting the US, which is a large factor in the panic of the "leaders". The "leaders" cannot afford to lose and, will take the rest of the US down with them because of "going along, to get along". Even the dissenters and rebels in Nazi Germany (and, there were a lot of them) faced the lash of collective punishment. For the US it is worse, first you punish yourself by destroying your country, then, the rest of the planet will, at a minimum, refuse to trade with you and, if they do, terms will be: hand over the perps AND pay damages. The arrogance: 5% can rule and enslave 100% of the planet, without consent? Get real.
So YES, I am clearly stating, independent of excuses, 100% of taxpaying / voting US population is morally / legally culpable and responsible for what you consent to, pay for and tolerate your "leaders" to do, just as in Nazi Germany. It was a hard lesson for Germany and, is looking to be an even harder lesson for the US to have a reality haircut regarding "manifest destiny".
Posted by cat writer on 05/19/11 03:19 PM
First, going along to get along is one nasty inversion. Normal, healthy relationships start by getting along before anyone takes a ride.
The Germans learned their lesson, especially the city of Dresden. It was the least Nazi of all German cities yet suffered the most. It got literally powdered and they are still rebuilding it even as I write at this moment.
Americans are just going to have to take responsibility for their actions, or in many case, their inaction and allowing this nonsense to continue. It is a hell of a karmic burden!
Posted by dotti on 05/19/11 03:08 PM
And one other thing: the following comment was totally tongue-in-cheek.
"Sorry. I thought you were referring to me. That's a big relief."
I guess you missed that.
Posted by dotti on 05/19/11 03:04 PM
Yeah. I noticed that too. Got my attention, but didn't need to address it. I knew what he meant.
Posted by dotti on 05/19/11 03:02 PM
You apparently clicked on the feedback reply for my post of 12:45:
Concerning Cat's statement that "all Americans are psychopaths and narcissists".
You said: They (land of the free, home of the brave) have not stopped their government which exhibits these traits, making them complicit, just as the Germans who "went along, to get along" with the Nazis, a moral omission and legal obligation (fight criminals or, be complicit) they came to regret.
Either you do not understand the Reply To Feedback feature or you were addressing me.
Also. I am an American so your statement comparing Americans to Nazis applies to me. If your opinion is that if it is not a factual opinion that I should just ignore it, I do not agree.
In another post you said:
"Its not all about you, dotti
And, if I have issues, I normally state them."
I have to disagree with that statement based on what I have seen. I don't think there's any doubt about what you posted. Now you use this telling me how to be FREE stuff. And how many women have thanked you for teaching them--getting them out of the subservient trap. You don't need to teach me to stand up for myself.
The fact that you said of me: "you seem like a likeable sort" doesn't impress me. And I didn't need you to repeat it. Pandering isn't very manly.
Posted by bionic mosquito on 05/19/11 02:42 PM
"Some men like this (I'm married to one)."
Whoa there, a comment like this can't slide by so easily!
Needless to say, either interpretation is fine with me, but just a bit surprising to learn this (again, either interpretation) from an off-the-cuff remark, if you know what I mean.
Posted by rossbcan on 05/19/11 02:31 PM
"do not ever assume"
or, that it will not. We are at a historical inflection point, a small force can have big consequences (chaotic).
You have managed to convince me you are just a bigot, mistaking the forest for the trees. US tyranny (against their own people, as opposed to internationally) is historically, a very recent phenomena, going against the grain of the US people and all of their values. This is sticking in their craw and, ultimately, the majority will be forced to grow cohones, or perish.
Posted by cat writer on 05/19/11 02:22 PM
John, do not ever assume that any blossoming of freedom is going to come from America. First, people outside may like individual Americans, but they are quite aware that the people and government of the United States are deficient in character. They have been through this routine many times.
I have had the dubious pleasure of facing the music at most social functions I have attended. People not just talk to me; they unload and the best response I can give them is one of agreement.
Numerous foreigners have regarded America as that city on the hill and they behave like Americans to achieve personal material success. This includes adopting an attitude of contempt and those antisocial behavior syndromes. Most people outside of the USA are a decent sort of folk, and where I live, they run quite conservative. Some are quite open to libertarian principles even if only in reaction to the tyranny they, their parents and grandparents have faced.
Reformations can start anywhere and America does NOT have a monopoly on libertarian thought even if much of the ideology originates there. I gravitate towards those who put that theory into practice.
If America is to regain its position as an example to the world, then it damn well better start a revolution immediately.
Posted by rossbcan on 05/19/11 02:19 PM
"Sorry. I thought you were referring to me. That's a big relief."
If you want to be FREE, ignore ALL but factual opinions (learn from them) of others. So what if I (or you think I do) state something bad about you. If it is an unsubstantiated opinion, it has no weight and you may have grounds to write me off as an idiot. Opinions don't matter. Facts do.
I already said, several days ago "you seem like a likable sort". Preen if you will, but, do you really want your self-worth opinion to depend on the opinion of others? I know many females who have thanked me for teaching them this, getting them out of the subservient trap. That doesn't mean they go butch, just more willing to express their opinions and stand up for themselves. Some men like this (I'm married to one).
Posted by dotti on 05/19/11 02:15 PM
Regarding the earlier discussion:
Encarta Dictionary definition for 'greed':
"an overwhelming desire to have more of something such as money than is actually needed"
In my opinion it's too subjective to be a good definition. What constitute an "overwhelming desire" and who defines what is "actually needed".
Posted by dotti on 05/19/11 02:08 PM
Re: Whining is FUTILE. People actually gotta get off their butts and take a PERSONAL stand / risk. It is a chance of being smited for defiance versus certain doom by "going along, to get along".
Re: Its not all about you, dotti
Sorry. I thought you were referring to me. That's a big relief.
Re: You asked. I HATE hypocrites and whiners, so I am not one.
I don't know when I asked, but I am glad that you are not one.
Posted by dotti on 05/19/11 02:03 PM
BTW, there is a big grey rectangle at the link. You may need to check it out.
Posted by rossbcan on 05/19/11 01:54 PM
Its not all about you, dotti
And, if I have issues, I normally state them.
Posted by dotti on 05/19/11 01:37 PM
Re: Here's what I am doing, in addition to providing potent intellectual ammunition required to restore peace and civilization:
Are you taking a risk by providing "potent intellectual ammunition"? Your "defiance" puts you at personal risk?
And have I said something to make you think that I am either a hypocrit or a whiner?
Posted by rossbcan on 05/19/11 01:19 PM
Here's what I am doing, in addition to providing potent intellectual ammunition required to restore peace and civilization:
Click to view link
Whining is FUTILE. People actually gotta get off their butts and take a PERSONAL stand / risk. It is a chance of being smited for defiance versus certain doom by "going along, to get along".
You asked. I HATE hypocrites and whiners, so I am not one.
Posted by dotti on 05/19/11 01:14 PM
I have no idea of percentages. I drew the percentage figure from cat who said 4% with a question mark.
And thanks for the cheers. i needed all three of them! (does that make me greedy AND narcissist?)