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« Ritholtz: TARP Was An Elaborate Ruse To Bailout Citigroup (Video) | Main | The President Admits The Obvious: The United States Is Flat Broke »
Wednesday
Jun172009

Preview Of PBS Frontline: 'Breaking The Bank' Airs June 16 (Video Now Includes Complete 1 Hour Broadcast)

Complete one-hour broadcast

The bets were huge and risky—billions of dollars on the housing market. The upside was undeniable—superbanks reaped billions of dollars, dominated the landscape, and gobbled up competitors. Then the bottom dropped out—the massive losses on Wall Street nearly broke the banks. In the worst crisis in decades, brand name banks are on the brink. Now as the federal government implements an unprecedented intervention in the industry, FRONTLINE goes behind closed doors to tell the inside story of how things went so wrong so fast and to document efforts to stabilize Wall Street. Veteran FRONTLINE producer Michael Kirk (Inside the Meltdown) untangles the complicated financial and political web threatening one particular superbank-Bank of America.

Preview 1

Preview 2

 

From Frontline:

Ken Lewis, the CEO of Bank of America, is in trouble—a stock collapse; a rocky merger; the worst fourth-quarter losses in at least 17 years; a stockholder revolt; an urgent need to raise more capital despite a $45 billion infusion from the federal government; and on top of that, he effectively has a new boss, President Barack Obama.

In Breaking the Bank, airing Tuesday, June 16, 2009, on PBS (check local listings), FRONTLINE producer Michael Kirk (Inside the Meltdown, Bush’s War) draws on a rare combination of high-profile interviews with key players Ken Lewis and former Merrill Lynch CEO John Thain to reveal the story of two banks at the heart of the financial crisis, the rocky merger, and the government’s new role in taking over—some call it “nationalizing”—the American banking system.

It all began on that fateful weekend in September 2008 when the American economy was on the verge of melting down. Then-Secretary of the Treasury Henry Paulson, his former protégé John Thain, and Ken Lewis, one of the most powerful bankers in the country, secretly cut a deal to merge Bank of America and Merrill Lynch.

The merger of Bank of America and Merrill Lynch was supposed to help save the American financial system by preventing the imminent Lehman Brothers bankruptcy from setting off a destructive chain reaction. But it became immediately clear that it had not worked. Within days, the entire global financial system was collapsing.

In Washington, Secretary Paulson was determined to spend billions of government dollars to prevent the American banking system from dragging the country into a depression. That October, Lewis, Thain and other top bank CEOs found themselves at an emergency meeting at the Treasury Department. Paulson told the group they had no choice but to accept $125 billion of capital from American taxpayers in order to save the financial system. Initially, Bank of America’s CEO Lewis was supportive of the plan. “We are so intertwined with the U.S. that it’s hard to separate what’s good for the United States and what’s good for Bank of America,” Lewis tells FRONTLINE.

But some observers now say that Paulson’s injection of public capital was the beginning of unprecedented government involvement in the nation’s banking system, with consequences few understood.

“I think we nationalized the banks in the U.S. on that day,” former International Monetary Fund economist Simon Johnson says. “The government got a lot of say in how they are run, a lot of constraints, a lot of responsibility. A lot of downside risk was taken on that day.”

By December, Lewis was discovering what it meant to have the government as a partial owner. When fourth-quarter losses at Merrill grew to $15 billion, Lewis began to look for a way to get out of the deal. But in tense negotiations with government officials, Lewis was told he had no choice. If he did not go through with the merger, regulators threatened to change the bank’s management.

“Ken Lewis blinked, the full force of the government is being brought upon him. The rules of the game have changed,” Wall Street Journal reporter Dan Fitzpatrick says. “Ken Lewis is on top of the financial services world, but he’s not in charge. The government holds all the cards at the end of the day.”

FRONTLINE’s Breaking the Bank tells the story of Lewis’ struggle to survive in this new financial order, where public outrage and government edicts are now as important to banking as shareholders and deposits. With his bank on the brink, Lewis now finds himself the subject of a shareholder revolt, congressional indignation, presidential pressure and the increasingly conflicting demands of private investors and government officials.

“This is more than a story about just one man or one bank,” says producer Michael Kirk. “This is the story of the most important change in the relationship between government and private business in a generation.”

 

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Reader Comments (14)

Lately, I have been thinking about the role of psychology in the economic crisis. What has really struck me is the unyielding hubris of Ben Shalom Bernanke and his unshakeable ego. Hubris is the word used to describe the emotions in Greek tragic heroes that led them to ignore warnings from the gods and thus invite catastrophe. It is considered a form of hamartia or a tragic character flaw that stems from overbearing pride and lack of piety. Yes, this has all the makings of a Greek tragedy. It was Bernanke’s hubris that helped invite the economic collapse and it now perpetuates the myth that the solution is his to manufacture and implement. The media never fails to remind us that Bernanke is considered the pre-eminent living scholar of the Great Depression and here we stand on the precipice of another. As an avid motorcycle rider, there is a well-known phenomenon that you merely need to actively look in the direction you wish to go and the bike will take you there. A sharp curve in the road is where this phenomenon becomes gospel and once committed to the turn you let the bike do most of the work. But even in a sharp curve, you have to know what to do when danger rears its ugly head. See a dear in the road and you must quickly try to straighten the bike and then brake. Do those two things in reverse order and you may end up kissing the pavement. As the economy weakened, Bernanke sensed inflation and steered interest rates in the direction of cheaper money. Once he committed, his dear in the headlights was a sharp drop in consumer spending and a growing fear in the markets. Bernanke should have respected the warnings from the economic gods and made the appropriate adjustments even if it risked sending the economy into oncoming traffic for a moment. This is where Bernanke let his ego get the best of him and, in my opinion, erred on the side of a recession which would utilize all his supposed scholarly knowledge. Yes, his hubris invited the crisis. It is the same reason that Obama will have more run-ins with the Constitution than any other President in history starting even before he took office with his questionable birth certificate. Obama snubbed the Constitution as the media focused on Palin’s wardrobe. Right, back to Bernanke, he is now the anointed father of our imaginary recovery. He sees green shoots in the brown fields and calmer seas over the horizon when most of us see a thirty car pileup and hope that the fog lifts so that it doesn’t become a fifty car pileup. Bernanke needs to put his hubris in check and as the Brits say, stop trying to sell us his cock and bull story. Ben Shalom Bernanke, please do us a favor and piss off you dodgy right merchant banker (yes, that’s slang for wan…).
Jun 15, 2009 at 6:19 PM | Unregistered Commentergobias bluth
Gobias- You're right about Ben and wrong about the birth certificate. You pissed on your own argument.
Jun 15, 2009 at 7:33 PM | Unregistered CommenterMichael Bluth
and I spelled deer wrong...oh well...thanks m. bluth
Jun 15, 2009 at 10:35 PM | Unregistered Commentergobias bluth
Gobias.

It was an outstanding post with regard to Bernanke.

Now read this.

http://www.counterpunch.org/hudson06152009.html
Jun 15, 2009 at 11:29 PM | Registered CommenterDailyBail
Federal Reserve Appears to be Big Loser in Hotel Bankruptcy

http://www.calculatedriskblog.com/2009/06/federal-reserve-appears-to-be-big-loser.html

Much more of this to come.
Jun 15, 2009 at 11:34 PM | Registered CommenterDailyBail
Flying Blind: Risk Management, Bank Debt And The Next Financial Disaster

http://ow.ly/ejQ1

Look out. Have we learned nothing?
Jun 15, 2009 at 11:38 PM | Registered CommenterDailyBail
Amherst is Cloaked in Awesomeness.

http://bit.ly/oz7U1

I Love this story.
Jun 15, 2009 at 11:48 PM | Registered CommenterDailyBail
I am in love with Janet Tavakoli, please post one of her interviews on the banking debacle.
Jun 16, 2009 at 3:18 PM | Unregistered Commentergobias bluth
Hey Gobias

Use our search feature: I posted one of her videos about 8 weeks ago after she contacted me. You like the intelligent, sexy, strawberry-haired Miss Tavakoli, eh? She's not married and lives in Chicago. The rest is up to you.

http://dailybail.com/home/janet-tavakoli-talks-about-banks-derivatives-and-financial-m.html
Jun 16, 2009 at 4:38 PM | Registered CommenterDailyBail
The NYT on tonight's Frontline broadcast.

The writer is not impressed.. It sounds like they portray Ken Lewis as a victim.

http://www.nytimes.com/2009/06/16/arts/television/16bank.html?ref=business
Jun 16, 2009 at 7:59 PM | Registered CommenterDailyBail
I'm sorry this is off topic but I'm really enjoying whats developing in Iran and want the young Iranian people to overthrow the criminal mullahs ruling the country. I hope Iran is set free and the country is given back to the young peope. iranian people are very nice people, but unfortunately the country is being ruled by a number of hardcore Islamist extremist. Go Young Iranian peole! Go New Iran!!
Jun 17, 2009 at 10:05 PM | Unregistered CommenterSell Short
@Sell Short

Millions of Americans are behind the new Iranian revolution.
Jun 17, 2009 at 11:01 PM | Registered CommenterDailyBail
One of the journalists early on in this piece said that if Merrill "went down" it could take down most of Wall Street and the rest of the economy with it. Can anyone explain how this would work? I've NEVER seen or heard anyone explain the chain of causality. Now, even if there were a utilitarian argument for bailing out the banks at my children's expense, I still wouldn't do it. But even so, what is the argument that we would somehow revert to a hunter-gatherer society because we let some bank bondholders take a haircut?
Jun 19, 2009 at 12:46 AM | Unregistered CommenterJames H
@James

You have figured it out already. The reason you haven't seen details backing up these statements IS they are nothing but empty threats.

Anyone you hear attempting to make this point is automatically an apologist. No less an authority than Chris Whalen has stated many times that this line of fearful reasoning is complete and utter bullshit utilized by the oligarchy to remain in power.
Jun 23, 2009 at 12:50 AM | Registered CommenterDailyBail

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