Money, Power and Wall Street, Part One (full documentary) | FRONTLINE
FRONTLINE PBS | Official・2 minutes read
Wall Street led to a severe economic crisis in 2011, causing the loss of $11 trillion of Americans' net worth and high unemployment. The financial crisis of 2008 was triggered by undisclosed risks and a lack of transparency among banks, resulting in unprecedented bankruptcies and a global economic threat.
Insights
- The financial crisis of 2008 was triggered by the collapse of institutions like AIG due to undisclosed risks and a lack of transparency among banks, leading to unprecedented bankruptcies and putting the global economy at risk.
- The impact of the crisis on Main Street was profound, with rising numbers of vacant properties due to complex financial structures, leaving ownership unclear and neighborhoods neglected, showcasing the direct consequences of Wall Street's greed and financial mismanagement.
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Recent questions
What led to the severe economic crisis in 2011?
The economic crisis in 2011 was primarily caused by Wall Street, the largest sector of the American economy. This sector led the world into a severe economic downturn, destroying $11 trillion of Americans' net worth. The recession resulted in high unemployment rates and loss of jobs, impacting the overall economy significantly.
How did the Occupy Wall Street protests impact America?
The Occupy Wall Street protests spread across America, demanding accountability from bankers and financial institutions. These protests were a response to the economic crisis caused by Wall Street, aiming to hold those responsible for the financial downturn accountable. The movement highlighted the dissatisfaction and anger of many Americans towards the financial sector and its role in the economic crisis.
What role did credit default swaps play in the banking industry?
Credit default swaps were created by young bankers at JP Morgan in 1994 to reduce risk in the banking industry. These financial products allowed banks to bypass capital requirements, freeing up capital for more loans. The creation of credit default swaps marked a new era in banking, making credit more accessible and driving economic growth, albeit with significant risks.
How did synthetic CDOs revolutionize the banking industry?
JP Morgan expanded their credit derivatives operation by creating synthetic collateralized debt obligations (CDOs). These financial products allowed investors to bet on portfolios of loans independently of the companies themselves, revolutionizing the banking industry. Synthetic CDOs marked a significant shift in banking practices, making it easier for investors to trade risk and leading to a global credit boom.
What were the consequences of the lack of regulation in the derivatives market?
The lack of transparency and regulation in the derivatives market had severe consequences, leading to the financial crisis of 2008. Banks, supported by Alan Greenspan, successfully avoided oversight and regulation, resulting in undisclosed risks and a lack of transparency among financial institutions. This lack of regulation ultimately led to the collapse of major institutions like Lehman Brothers and put the global economy at risk.
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