Financial Crisis: 60 Minutes Revives Investigative Journalism

Even on subjects as hot as the financial crisis, much of the "news" and comment we see on TV lacks real depth, revelation of key facts and critical thinking. 60 Minutes has revived investigative journalism. More please.

60 Minutes asked experts for the real key to the crisis. Answer: derivatives, especially credit swap derivatives. Unregulated, there is no capital requirement to back them up. So they are not unlike bets by a bad bookie. With many trillions of them issued, when the horse they bet on gets sick (the price of houses, represented by bundles with flawed mortgages in them), the bookie (AIG, for instance) and all the bettors get wiped out.

How could this be legal? It is unregulated gambling. Turns out we've had speculation and leverage before. In fact, there were "bucket shops," parlors where the public could place bets on the direction of the market each day. Then there was a panic (1907) where millions got wiped out. Then Congress passed a law making it illegal. Fast forward to 2000 at the end of a lame duck Congress. Wall Street lobbied to make it legal again. Not just legal, but with an exemption against state laws that classified it as a felony! 60 Minutes found and displayed a copy of the actual Act, making it legal, giving the exemption and allowing a banking system outside the banking system to be unregulated. Then along came Alan Greenspan, a true believer in free market self-correction and easy money. The rest, along with the recklessness and greed that followed, is history.

Did the senior executives and boards know the cancer that was growing in their firms? An apologist says they did not. Had there been regulation, there would have been forms to fill out. Absent that, they not only did not understand the securities, but did not know how much they had! Rubbish. Risk managers (who analyze and simulate the impact of investments) and those who gave warning were ignored or banished. It varies by firm, but those who should have known either knew or did not want to know.

But 60 Minutes did us all a service to think and do their research. Would that other news organizations were as diligent and proactive.

That's my view. What's yours?

Comments

[knosiswar]

I wonder Stephen if you think this has all happened by accident. I would suggest it hasn't, but is part of the larger scheme to take all of the Western world towards the Rothschilds goal of a super national central bank. Gordon Brown says that we need a 'cross-border mechanism' to regulate the financial institutions. What would that look like. Look who created CDS's, JP Morgan Chase. Just like when the chemists took Cocaine and created Crack, it wasn't the drug users who created Crack, but the Drug Sellers who wanted to get irrational people hooked. JP Morgan, if you study the bank panics that fostered the political will to create the FED, were orchestrated by JP Morgan himself to create the privately held central bank of the US. JP Morgan, along with Rockefeller's Standard Oil, were Bank Rolled by The Rothchilds. As was Cecil Rhodes of the DeBeers Mining Monopoly, who in at least one of his wills set aside a trust to see to the future dominance of the British Empire, by extension, the Banks of London, creating a group called the Round Table. The following article, even though it comes from the Far-right news sight NEWMAX, is more Libertarian in it's message, and forgiving the partisan language, is dead on in it's facts.

http://www.newsmax.com/insidecover/bush_obama_socialism/2008/10/27/144554.html

A history of US banking.

http://www.fdrs.org/index.html

[stephenhbaum]

I am not much of a conspiracy theorist as the perpetrators are (a) not that smart and (b) too selfish to put at risk what it takes to build a conspiracy.

[knosiswar]

I and a few other significant people from American History respectfully disagree.

If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks...wi­ll deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.­.. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." President, Thomas Jefferson

"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance." James Madison

"The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest." Abraham Lincoln

"You are a den of vipers and thieves. I intend to rout you out, and by the Eternal God, I will rout you out... If people only understood the rank injustice of the money and banking system, there would be a revolution by morning." Andrew Jackson

http://www.fdrs.org/banking_history.html

[HeevenSteven]

Funny that they made sure they said Clinton backed the deregulation, and they blamed Greenspan big-time, but the didn't even mention Phil Gramm.

[proreality]

Clinton didn't back the deregulation. It was the last vote on the last day of a lame duck congress in 2000 just before Christmas after which a new congress and new president would be sworn in. Notice the specific language that prevented state's from prosecuting, Phil Gramm and the rest of the con's knew exactly what this was and what it would be used for and how. Just like the deregulation of the commodities markets that led to Enron and 150 dollar a barrel oil. It was buried in a 12,000 page omnibus spending package, funding the Federal Government for the following year.

[stephenhbaum]

The only way to reduce this sort of outrageous behavior is to make all acts of "public servants" transparent. Then, with transparency, what must happen next is a much more vocal public opinion. And the only way that happens is with the help of the media. Obama has closely studied, of all people, Reagan. It is my hope that he will be as good a communicator and get us all to take back our country.

There will always be some selfishness and misbehavior, But the last eight years have seen it get out of hand.

[stephenhbaum]

You are right. Phil Gramm and a number of Republicans put into practice the unswerving belief in free (read: hands off) markets. The philosophy of deregulation and laissez faire extended to environmental protection, consumer product safety, food and drug, oil regulation, a far cry from Reagan's "trust but verify."

[pkscottx]

DEREGULATION of the financial industry was a real bi-partisan effort, but a Republican mantra.
I've been watching the derivatives tale for a couple of years since I googled "derivatives" and learned that they had ZERO underlying assets.
They were completely unregulated and opaque as mud. Nobody knows how much, who has, or where the ultimate liability lies but credible estimates put the notional value as high as $1.125 quadrillion dollars. Like 60 Minutes said NOBODY was checking to see if the other party could pay up (that's the counterparty risk that has banks hoarding cash and eyeing each other with suspicion.­)
Lots of finger pointing at sub-prime mortgages but they were a SYMPTOM not the disease. In a world where leverage is kept at sane levels and "risk" is not made to magically dissapear you don't have institutions that can be TOTALLY bankrupt by as little as a 2% loss.
The "bailouts" are essentially an attempt to bail out derivatives losses, which could ultimately be multiples of the annual GDP of the entire freaking planet. That should be about as effective as bailing out the ocean with a soup spoon. This is all information that was freely available over two years ago. Now the MSM is reporting it. Everyone who was screaming from the rooftops that we were headed for a train wreck was marginalized (by MSM) as a nut job.
Great quality "investigative" reporting. Too bad they didn't do it 2 years ago.

[compubomb]

This fiasco has everything to do with corporations being able to sway congress in any direction it points it's money at. Congress has become an entity which is owned wholly by big business. Congresses only objective is to first get public opinions to believe they can help improve the current environment, and once elected you have a new fox in charge of the hen house which big business wants direct access to. So big business lobbyists made sure they persuaded congressional and senatorial leaders to push in pocket bills in exchange for special favors. As bayside put it, Corruption to the highest degree. We need a new congress / senate and we need one now! These are the people who got us into this mess and we need to eliminate their kind with our votes. We also need the paper ballots back. Electronic voting is impossible without a reasonable amount of integrity in the system which we have none at the moment. We need to reform our current government finance laws, and institute larger stipends for congressional / senatorial leaders as to avoid them giving into their human nature as greed mongering scum. There are politicians who do honestly try to do good, but they get played at every angle by the lobbyists. Just my 2 cents.

[bayside]

What caused this mess? My opinion, Corruption at the highest level, when republicans came into office and the dems that knew it was going on and said or did nothing. I am sure bush and his cronies knew about the stealing of our resources and money and encouraged it, thinking it was all going to blow up when Obama or MCCain took office hoping it was Obama ,so they could blame him for what republicans did.. Will they get a chance to spend their loot, I doubt it. If Obama is as smart as they say ,he better investigate bushs corruption and jail them or he himself will be blamed..