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FINANCIAL CRISIS

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Juan Arenas

on 3 May 2015

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Transcript of FINANCIAL CRISIS

Deregulation, Greed, and Corruption
Inside Job
The Bubble (2001 - 2007)
- Federal Reserve ignored all warnings (FBI, IMF chief economists, lessons
from past)
- With Deregulation, there was not much they could do
- CDO's collapse
- Banks are stuck with loans
- Business stopped in its tracks
- Federal Reserve acquires Fannie Mae and Freddie Mac (AAA)
- Lehman Brothers file for bankruptcy
- Troubled Asset Relief Program
(TARP)
- Oct. 3, 2008
- $700 billion
- AIG taken over by government
- The major investment banks came together to rescue Lehman
Brothers bad debt
- The banks in the US are bigger, more concentrated, and more
powerful than ever


$20,000,000,000,000
Wednesday, April 29, 2015
TEMITOPE ADEPOJU, JUAN ARENAS, GABBY HALL, ANDREW JOSEPH, JC LAUGHLIN, VADIC PATE
L
HOW DID WE GET HERE?
Early beginnings
Where are we now?
1980's - Investments banks went public
- Donald Regan: CEO Merril Lynch (1981)
- Savings and loan companies deregulated
- Starting a 30 year period of Deregulation
- Alan Greenspan:
-"sound business and pans and managerial expertise"
- Chairman of The Federal Reserve
- Reappointed by Clinton and Bush
- Step by step, this corrupted the political system
- 1990's Consolidated into a few gigantic firms
-Too Big To Fail (video)
-
Merger of Citi Group and Travelers
- Dominating the industry with no regard
- Get rich quick creating something out of
nothing (Video)
- When the bubble burst there was no
accountability




FINANCIAL CRISIS
- Subprime lending
- Lehman Brothers $106.4 Billion in 2 years
- "Imaginary profits"
- Greenspan denied regulation by ignoring The home
ownership and equity act

- SEC risk management staff reduced to 1
- Borrow more and create more CDO's
- Derivatives allowed banks to Insure toxic assets
they did not own, and then bet against them
- This allowed large rewards with huge risks for short term revenues (bonuses) in good economic times
- Huge cash bonuses for short term profits
-This encouraged bankers to take risks that could bring down their own firms

All of the profits were not real profits or real income, just money created by the system and booked as income


Accountability
- The men who caused the crisis, CEOs of the investment banks, walked
away with their fortunes in tact , not even a scratch
- Nobody went to jail, had to pay fines, or was "forced" to resign
- No prosecuted or arrests for securities fraud or accounting fraud
- 2 Months after Merrill was bailed out by US taxpayers, Merrill handed
out 3.6 Billion dollars in bonuses
- Ridiculous amount of political influence
- Lobbying power
- Stated that credit derivatives were enhancing financial stability, reducing
risk, recessions have become less frequent and milder
- Huge conflict of interests, moving into the education system at top
business schools
- Only getting worse
The Crisis
- Instead of going to jail, many top executives were appointed to top government positions and advise the president
- Since the 1980’s, the US has become a more unequal society, with declining economic dominance falling behind its foreign competitors
- Inequality of wealth in the US is higher and in any other developed country
(top 1% accounts for about 20% of the nation's earnings)
- We borrow to finance everything
- Campaign messages say one thing, but when presidents are appointed to office, nothing even significant was even proposed
- The system is unfair
- Zero room for regulatory reform
- "Wall Street Government"
- Corrupt political system
- The financial industry is worse than ever with corruption, deregulation, and it all needs to change
- We are rebuilding and recovering, but the men that caused the crisis are still in power
- Billions spent fighting reform
-
10 Banks Own 77 Percent Of All U.S. Banking Assets




Too big to fail?
Full transcript