Mind Over MoneyFollow

Based on the title and that it's being produced on PBS, I'm going to go out on a limb and guess that their answer wont include "Because a cushy relationship between politicians and Fannie/Freddie resulted in the investors being lied to about the value of mortgage securities while the government provided cover". Can I just assume it'll spent the entire show talking about the psychology of greed and how it makes people make bad long term decisions?


It must be ridiculously easy to be a writer for PBS.

"Discussed at length" by whom? The same guys doing the PBS show? Seriously. Lay off the crack. Government programs and the obligations they placed on the financial industry was at the heart of the financial problems. It's really simple. Remove Fannie and Freddie from the equation, and the sub prime loan debacle doesn't happen. Remove that, and there's no financial crisis.

Outside of vaguely stated claims about financial practices, do you have any rational explanation for how all those financial corporations suddenly lost a ton of money at the same time?

No matter how awful those PBS guys may be, at least they don't do **** like this.

Then answer the question? Who's discussed this at length to the point where some feel there's no need for any debate? Is this like arguing that global warming is "settled science"? That worked out so well...

It takes time and effort to create a false reality in which gbaji's points make sense.

"Seriously. Lay off the crack." is what I was referring to, you fool.

I watch far less than 2 hours of TV a month.

Sorry. I thought "lay off the crack" was a perfectly appropriate response to someone making an absolutely ridiculous and unsubstantiated claim. But maybe in your world it is somehow related to literacy? Strange leap of logic, but maybe it's just the crack talkin!

You forgot to mention the credit default swaps which were the actual reason for the financial crisis. And the private companies that gave AAA ratings to risky CDOs. And the over-leveraging of the financial institutions.

I forgot to watch it, so no comment on it's content or it's foreshadowed slant. Gbaji, why so distrustful of science?

I like how he conveniently leaves out the fact that several high ranking members of congress threatened the banks with investigation & increased regulation should they not lower their lending practices. He finds a nice scapegoat in investor demand for the CDOs. He also mischaracterizes the rationale behind the GSEs' indiscriminate purchase of sub-prime debt. They were instructed to do so by those same members of congress who, in addition, continued to downplay the risk all the while.

Allan Greenspan is still worried about his legacy and the power of people still in power to alter how it's written.

I didn't see the documentary, so I can't say for sure, but I have always enjoyed Nova and never found it to be outlandishly out of touch (I've never seen anything they've done on climate science so I can't assess their presentation of that).

I had previously read Greenspan's testimony & his statement, however, and it alone has been most responsible for me losing any shred of respect for him that I had left.

Credit Default Swaps had nothing to do with the cause of the financial crisis. They are an investment technique, nothing more. It's like saying that it wasn't the failed breaks that caused the crash, but the fact that the car had wheels, allowing it to continue rolling after the breaks failed that did. It's absurd.

Regardless of financial tools in play, the crisis occurred because one day mortgage securities were worth one amount of money, and the next day they were worth a whole hell of a lot less. The drop was so sudden and so complete, that the value of those securities for a period of time was effectively zero (if no one will buy them, they are worthless for that period of time). This created a drop in liquidity for the financial industry, which trickled down through the entire economy.

That sudden drop was caused because over a period of nearly 10 years, a combination of FHA programs and actions by the GSEs Fannie and Freddie had caused the ratio of sub-prime loans bundled in those securities to rise from about 5%, to over 25%, but had managed to keep this information concealed from the financial institutions who were investing in them. Not only did they hide this information, but when the GOP attempted to investigate the matter the CEO of Fannie Mae lied blatantly, insisting that mortgage securities were completely safe while testifying to Congress.


That's why the financial crisis occurred. All the financial tools and techniques used are irrelevant. They work just fine as long as the perceived value of a traded commodity is reasonably accurate and doesn't change too fast for the market to react. A sudden drop in a major asset like mortgage securities can only occur if some agency is hiding something about the asset itself. Which is precisely what was happening. Surprise!