Tonight on FRONTLINE, the third episode of a special four-hour investigation unfolds. The ongoing saga of the global financial crisis is explored. The American public expresses anger towards the banks and demands accountability. Delving into the political landscape of the financial meltdown, questions arise about the lack of consequences for CEOs of major corporations. The narrative of challenging the too-big-to-fail banks is highlighted. The discussion shifts to the necessity of imposing conditions on banks receiving bailouts. The complex persona of Obama during the crisis is examined, contrasting his public statements with his private actions. The focus remains on the intertwining themes of money, power, and Wall Street in this episode. Tonight on FRONTLINE, the aftermath of the election day euphoria is evident as the economy sheds 650,000 jobs in three months. The impending inauguration of Barack Obama is shadowed by economic turmoil, marking a pivotal moment in American history. The pressure mounts on Obama to navigate the country through the crisis as he observes the economy deteriorate. The situation is likened to a slow-motion train wreck, with the S&P 500 hitting an 11-year low. Obama's transition team of reform-minded economists faces the daunting task of addressing the economic challenges from the outset of his presidency.
[00:00:04.94 --> 00:00:10.78] >> Tonight on FRONTLINE, episode three of
a four-hour special investigation.
[00:00:10.78 --> 00:00:13.93] The epic story of the global meltdown continues.
[00:00:13.93 --> 00:00:18.36] >> The American people are angry those banks
needed to be held accountable.
[00:00:18.36 --> 00:00:20.94] >> Inside the politics of the financial crisis.
[00:00:20.94 --> 00:00:23.70] >> Why do we not fire the CEO of some of these
companies?
[00:00:23.70 --> 00:00:26.09] >> Taking on banks too big to fail.
[00:00:26.09 --> 00:00:32.75] >> How can we not demand from the banks some
conditions upon getting bailed out?
[00:00:32.75 --> 00:00:34.93] >> There was almost two faces of Obama.
[00:00:34.93 --> 00:00:38.87] Publicly he wanted to tell you that these
were the fat cat bankers, privately he wanted
[00:00:38.87 --> 00:00:40.15] to get them on board.
[00:00:40.15 --> 00:00:44.94] >> Money, Power and Wall Street, episode three.
[00:00:44.94 --> 00:00:48.77] Tonight on FRONTLINE.
[00:00:48.77 --> 00:00:56.50] >> So much for that election day euphoria—
[00:00:56.50 --> 00:01:02.07] >> The economy has now lost 650,000 jobs just
in the past three months—
[00:01:02.07 --> 00:01:05.68] >> The inauguration was 76 days away.
[00:01:05.68 --> 00:01:10.68] >> This was the most eventful and consequential
presidential transition in American history.
[00:01:10.68 --> 00:01:15.55] >> —and all eyes are now on Barack Obama
to turn it around.
[00:01:15.55 --> 00:01:20.08] >> In Chicago, President-elect Barack Obama
was watching the economy continue to collapse.
[00:01:20.08 --> 00:01:22.65] >> It's like watching a train wreck in slow
motion.
[00:01:22.65 --> 00:01:25.35] >> —the S&P 500 in an 11-year low.
[00:01:25.35 --> 00:01:29.23] >> He had to start thinking about this the
day after he was elected.
[00:01:29.23 --> 00:01:36.99] >> At the start of his presidential quest,
Obama had chosen a dream team of reform-minded
[00:01:36.99 --> 00:01:37.99] economists.
[00:01:37.99 --> 00:01:43.26] >> That team, for the most part, gathers around
Barack Obama as he rises.
[00:01:43.26 --> 00:01:44.90] And who've you got?
[00:01:44.90 --> 00:01:48.20] You've got Robert Reich, the liberal labor
secretary under Bill Clinton.
[00:01:48.20 --> 00:01:52.12] You've got Joe Stiglitz, who, of course, called
the crisis earlier than anyone.
[00:01:52.12 --> 00:01:56.37] And at the center of it, you've got all 6-foot-8
of him, Paul Volcker.
[00:01:56.37 --> 00:02:01.88] >> They had been advising him for months—
warning, really.
[00:02:01.88 --> 00:02:06.35] >> Obama at that moment gets a real glimpse
of the future.
[00:02:06.35 --> 00:02:08.29] Disaster is coming.
[00:02:08.29 --> 00:02:12.95] >> And in those first weeks after the election,
his entire economic team was stunned by the
[00:02:12.95 --> 00:02:15.25] bad news.
[00:02:15.25 --> 00:02:17.84] >> We were all worried about what we were
seeing.
[00:02:17.84 --> 00:02:23.90] We knew that the credit system was pretty
quickly headed towards something that looked
[00:02:23.90 --> 00:02:26.18] a lot like seizure.
[00:02:26.18 --> 00:02:29.02] >> Unemployment was nearly 7 percent and climbing.
[00:02:29.02 --> 00:02:32.98] The stock market was down more than 6,000
points.
[00:02:32.98 --> 00:02:35.87] >> There was a growing sense of calamity.
[00:02:35.87 --> 00:02:42.62] This could be the most climactic economic
crisis in all of American history, that we
[00:02:42.62 --> 00:02:46.81] were that close to a complete meltdown.
[00:02:46.81 --> 00:02:53.35] >> At the end of the conversation, there's
basically no bright spots.
[00:02:53.35 --> 00:02:55.40] And I say to the then president-elect,
[00:02:55.40 --> 00:03:02.13] "Wow, that had to have been the worst economic
briefing a new president's had in, you know,
[00:03:02.13 --> 00:03:03.34] almost a century."
[00:03:03.34 --> 00:03:07.44] And the president says, "That's not even my
worst briefing this week."
[00:03:07.44 --> 00:03:12.07] >> CitiGroup, which crumbled 26 percent today,
was one of the biggest—
[00:03:12.07 --> 00:03:17.57] >> Just then, overleveraged and filled with
toxic mortgage assets, the mega-bank CitiGroup
[00:03:17.57 --> 00:03:18.91] was failing.
[00:03:18.91 --> 00:03:22.55] >> Every option from a merger to a possible
fail is on the table.
[00:03:22.55 --> 00:03:25.62] >> CitiGroup stock fell 23 percent—
[00:03:25.62 --> 00:03:28.57] >> It's a very dynamic situation because the
economy is melting.
[00:03:28.57 --> 00:03:32.35] The Bush administration has left, or rapidly
leaving the stage —
[00:03:32.35 --> 00:03:34.68] "This is beyond our ken to manage.
[00:03:34.68 --> 00:03:36.28] We're going to be out of here in January."
[00:03:36.28 --> 00:03:40.81] Meanwhile, there's no one really to manage
it.
[00:03:40.81 --> 00:03:42.57] >> The federal government plans to pump billions
of dollars into CitiGroup—
[00:03:42.57 --> 00:03:47.03] >> The government rescued CitiGroup from the
brink—
[00:03:47.03 --> 00:03:53.90] >> George W. Bush's treasury secretary, Henry
Paulson, had already spent $125 billion bailing
[00:03:53.90 --> 00:03:55.90] out Wall Street's largest banks.
[00:03:55.90 --> 00:04:02.27] And now during the transition, he would spend
another $20 billion to keep super-bank CitiGroup
[00:04:02.27 --> 00:04:04.46] afloat.
[00:04:04.46 --> 00:04:07.99] But it wouldn't stem the unfolding disaster.
[00:04:07.99 --> 00:04:12.65] >> That period, when we go back and look at
the history books, I think is going to be
[00:04:12.65 --> 00:04:13.88] one of those periods where you look and go,
[00:04:13.88 --> 00:04:14.88] "What were they doing?
[00:04:14.88 --> 00:04:17.24] Why did nothing happen?
[00:04:17.24 --> 00:04:19.72] Why was there no political will to do anything?"
[00:04:19.72 --> 00:04:22.24] And the reason was very simple.
[00:04:22.24 --> 00:04:24.10] There was nobody in charge.
[00:04:24.10 --> 00:04:27.53] There really was nobody in charge.
[00:04:27.53 --> 00:04:36.78] >> In Chicago, President-elect Obama faced
a critical decision about who he would hire
[00:04:36.78 --> 00:04:40.93] to handle the crisis?
[00:04:40.93 --> 00:04:42.08] >> The rumors were swirling.
[00:04:42.08 --> 00:04:44.14] "So who's going to be secretary of the treasury?
[00:04:44.14 --> 00:04:45.88] Who's going to be the head of the NEC?
[00:04:45.88 --> 00:04:47.93] Who's going to be what?"
[00:04:47.93 --> 00:04:50.24] >> The decision would be an early signal.
[00:04:50.24 --> 00:04:54.97] Was the new president going to ally himself
with those who wanted to reform Wall Street,
[00:04:54.97 --> 00:04:59.07] or those who wanted to rebuild it?
[00:04:59.07 --> 00:05:03.22] >> There's people on the left who are saying
that Obama should appoint someone who represents
[00:05:03.22 --> 00:05:06.55] a tough-on-Wall-Street regulator,
[00:05:06.55 --> 00:05:10.91] someone who's going to take Wall Street to
the woodhouse on behalf of the Treasury.
[00:05:10.91 --> 00:05:13.52] >> Paul Volcker is extremely close to Obama—
[00:05:13.52 --> 00:05:15.57] >> The left's first choice was Paul Volcker.
[00:05:15.57 --> 00:05:18.27] >> —a kind of advisor-in-chief during this
financial—
[00:05:18.27 --> 00:05:22.69] >> Feared on Wall Street, he was the reformers'
guru, a former Federal
[00:05:22.69 --> 00:05:28.85] Reserve chairman, a pro-regulation advocate,
and an outspoken critic of the Wall Street
[00:05:28.85 --> 00:05:29.89] banks.
[00:05:29.89 --> 00:05:37.21] >> Volcker was the main force for a historic
change that has brought inflation rates down
[00:05:37.21 --> 00:05:39.25] for 30 years now,
[00:05:39.25 --> 00:05:45.07] and interest rates have been declining for
30 years.
[00:05:45.07 --> 00:05:50.34] >> Picking Volcker would deliver on his campaign
promises to reform the banks and get tough
[00:05:50.34 --> 00:05:53.09] on Wall Street.
[00:05:53.09 --> 00:05:58.53] But inside his transition team, there was
also a more moderate faction, veterans of
[00:05:58.53 --> 00:06:01.01] the Clinton administration.
[00:06:01.01 --> 00:06:03.91] They had their own candidate.
[00:06:03.91 --> 00:06:10.78] >> You could not afford to have anybody but
the best, most knowledgeable person on the
[00:06:10.78 --> 00:06:13.57] job with their hand on the wheel.
[00:06:13.57 --> 00:06:17.12] Tim Geithner was the perfect person.
[00:06:17.12 --> 00:06:21.77] >> Tim Geithner, the president of the New
York Federal Reserve.
[00:06:21.77 --> 00:06:27.91] During the financial crisis, he had led the
Bush administration's response on Wall Street.
[00:06:27.91 --> 00:06:29.30] >> He's 47 years old.
[00:06:29.30 --> 00:06:30.88] He looks like he's about 32.
[00:06:30.88 --> 00:06:40.81] >> Extremely smart, extremely aware of this
stuff, very discrete, controlled.
[00:06:40.81 --> 00:06:46.28] >> Geithner's career took off in the Clinton
administration, a protege of Treasury Secretary
[00:06:46.28 --> 00:06:47.78] Robert Rubin.
[00:06:47.78 --> 00:06:50.08] >> I knew that he was a protege of Bob Rubin.
[00:06:50.08 --> 00:06:54.48] I knew that he was therefore of and by and
from Wall Street.
[00:06:54.48 --> 00:07:00.12] He sees the economy, as a practical matter,
the way Wall Street sees the economy.
[00:07:00.12 --> 00:07:08.24] And therefore, Tim Geithner is going to reflect
what Wall Street ultimately wants.
[00:07:08.24 --> 00:07:13.23] >> And during the meltdown, he had engineered
the bail-out of Bear Stearns, had gone along
[00:07:13.23 --> 00:07:14.95] with letting Lehman go bankrupt,
[00:07:14.95 --> 00:07:22.75] but then pushed for a more than $180 billion
bail-out of the insurance giant AIG.
[00:07:22.75 --> 00:07:29.52] >> Tim Geithner thought that if they did not
do everything they had to do to save AIG,
[00:07:29.52 --> 00:07:32.17] as distasteful as it was,
[00:07:32.17 --> 00:07:35.39] that they would be jeopardizing the global
economy.
[00:07:35.39 --> 00:07:41.36] >> He certainly talks now of having stared
into the abyss after Lehman and concluded
[00:07:41.36 --> 00:07:44.83] that that was not going to happen again on
his watch.
[00:07:44.83 --> 00:07:49.81] >> For Obama, adding Geithner, a key player
during the Bush administration, would be an
[00:07:49.81 --> 00:07:53.04] unusual choice.
[00:07:53.04 --> 00:07:58.42] But the two men had formed a personal connection
the first time they met, just before the election.
[00:07:58.42 --> 00:08:03.76] >> The meeting was secret because they didn't
want things coming out about who might or
[00:08:03.76 --> 00:08:06.39] might not be in the Obama cabinet.
[00:08:06.39 --> 00:08:11.33] >> People tell me it was like— men tell
me, who know about this, it was love at first
[00:08:11.33 --> 00:08:12.80] sight.
[00:08:12.80 --> 00:08:14.49] And I got this from both sides.
[00:08:14.49 --> 00:08:18.33] People close to Geithner said he was, quote,
unquote, "smitten."
[00:08:18.33 --> 00:08:22.45] >> They were almost exactly the same age,
born just two weeks apart.
[00:08:22.45 --> 00:08:25.23] >> Geithner is an Obama kind of guy.
[00:08:25.23 --> 00:08:27.00] He's a no-drama guy himself.
[00:08:27.00 --> 00:08:32.83] I mean, their personalities sort of meshed,
to some extent.
[00:08:32.83 --> 00:08:35.70] >> They had an almost immediate mind meld.
[00:08:35.70 --> 00:08:37.38] They'd both grown up partly abroad.
[00:08:37.38 --> 00:08:42.88] They both had a parent who worked for the
Ford Foundation.
[00:08:42.88 --> 00:08:46.07] And they had a similar world-view.
[00:08:46.07 --> 00:08:53.68] >> According to Geithner's official calendar,
the meeting lasted only one hour.
[00:08:53.68 --> 00:09:00.74] By now, the financial crisis that started
on Wall Street was going global.
[00:09:00.74 --> 00:09:04.78] >> On the trading floors, turmoil—
[00:09:04.78 --> 00:09:07.81] >> The global financial meltdown comes to
Iceland—
[00:09:07.81 --> 00:09:12.73] >> Today's was the nightmare scenario—
[00:09:12.73 --> 00:09:17.99] >> We had a contagion that operated almost
around the globe.
[00:09:17.99 --> 00:09:24.06] The panic from Lehman spreads to AIG, spreads
to Morgan Stanley, spreads to Goldman Sachs.
[00:09:24.06 --> 00:09:27.84] Suddenly, Ireland is having problems.
[00:09:27.84 --> 00:09:32.30] Suddenly, the Bank of England is bailing out
banks.
[00:09:32.30 --> 00:09:35.41] Suddenly, Iceland is bankrupt.
[00:09:35.41 --> 00:09:39.43] The govern— the state of Iceland, it's bankrupt,
an entire country!
[00:09:39.43 --> 00:09:46.20] Suddenly, China has gone from being one of
the world's highest-growth countries to almost
[00:09:46.20 --> 00:09:50.90] a no-growth country in the flash of an eye.
[00:09:50.90 --> 00:09:53.99] That's contagion.
[00:09:53.99 --> 00:09:59.16] >> Wall Street will once again be keeping
a close eye on the incoming administration.—
[00:09:59.16 --> 00:10:04.07] >> Back in Chicago, Obama had news he hoped
would reassure the markets.
[00:10:04.07 --> 00:10:06.07] Tim Geithner would be his treasury secretary.
[00:10:06.07 --> 00:10:10.16] >> This is the guy who's going to be the point
man in leading us out of the worst economic
[00:10:10.16 --> 00:10:13.44] period since the Great Depression.
[00:10:13.44 --> 00:10:19.47] >> Then another insider, former Clinton treasury
secretary Larry Summers, would be the president's
[00:10:19.47 --> 00:10:21.56] chief economic advisor.
[00:10:21.56 --> 00:10:23.48] >> Old hands from the Clinton era—
[00:10:23.48 --> 00:10:27.18] >> Obama called him one of the great economic
minds of our time.
[00:10:27.18 --> 00:10:29.58] >> Obama was always looking for establishment
guys.
[00:10:29.58 --> 00:10:32.26] He was looking for establishment input,
[00:10:32.26 --> 00:10:35.58] even sort of establishment affirmation.
[00:10:35.58 --> 00:10:40.40] He definitely was a guy for whom credibility
with the establishment was something that
[00:10:40.40 --> 00:10:44.31] he cared about.
[00:10:44.31 --> 00:10:49.09] >> Summers had been president of Harvard and
had made millions working at a hedge fund.
[00:10:49.09 --> 00:10:55.74] >> Well, he was told that appointing this
team would present a problem.
[00:10:55.74 --> 00:10:58.75] People will see it as reflecting the interests
of the banks.
[00:10:58.75 --> 00:11:03.10] You're bringing in the same plumber that caused
the problem.
[00:11:03.10 --> 00:11:06.24] Why do we believe that they're going to be
fixing it, at least fixing it in the interests
[00:11:06.24 --> 00:11:09.36] of the American people and not the interests
of the banks?
[00:11:09.36 --> 00:11:14.28] >> But to Obama's team, the choice signaled
they intended to hit the ground running.
[00:11:14.28 --> 00:11:20.52] >> I think the President's view was, "I've
got to have some people who can come in and
[00:11:20.52 --> 00:11:25.43] are going to know what they're doing right
away because it is such a dangerous moment."
[00:11:25.43 --> 00:11:30.68] >> Two-and-half months after he was elected—
[00:11:30.68 --> 00:11:36.67] >> It's the inauguration day of the nation's
first African-American president—
[00:11:36.67 --> 00:11:41.00] >> —the president and his economic team
arrived at the White House.
[00:11:41.00 --> 00:11:43.65] >> I, Barack Hussein Obama, do solemnly swear—
[00:11:43.65 --> 00:11:48.31] >> Now the financial crisis was theirs.
[00:11:48.31 --> 00:11:51.85] >> It's like you're moving into a new house
and the roof's on fire and the basement is
[00:11:51.85 --> 00:11:56.06] flooded and there's gas in the kitchen, there's
a dog in the back yard.
[00:11:56.06 --> 00:12:01.28] The question is, how do you make this house
livable?
[00:12:01.28 --> 00:12:07.11] >> Next door at the Treasury Department, Tim
Geithner was also just moving in.
[00:12:07.11 --> 00:12:08.84] He hadn't yet hired a staff.
[00:12:08.84 --> 00:12:13.39] >> When you go to the Web site for Treasury
and you try and figure out who holds what
[00:12:13.39 --> 00:12:15.80] position and it says,
[00:12:15.80 --> 00:12:17.21] "Vacant, vacant, vacant, vacant, vacant."
[00:12:17.21 --> 00:12:23.54] They're still learning, like, which keys go
to which locks and how to get around the offices.
[00:12:23.54 --> 00:12:28.68] And they're being asked to provide the plan
that will save the world.
[00:12:28.68 --> 00:12:33.34] >> One of Geithner's top deputies, Lee Sachs,
was there.
[00:12:33.34 --> 00:12:38.55] >> Our piece of it was, "How do you stabilize
the financial system?"
[00:12:38.55 --> 00:12:45.11] It was all about making sure that we stopped
things from going off a cliff.
[00:12:45.11 --> 00:12:50.35] You need a functioning banking system to have
a functioning economy.
[00:12:50.35 --> 00:12:58.06] And so we were charged with coming up with
the plans to deal with that problem.
[00:12:58.06 --> 00:13:02.70] >> Just a few months before, Geithner had
been in and out of these rooms when the Bush
[00:13:02.70 --> 00:13:04.45] administration was spending billions of dollars
to
[00:13:04.45 --> 00:13:06.54] save the banks.
[00:13:06.54 --> 00:13:11.54] But it hadn't been enough, and the Obama White
House was under pressure to do something immediately.
[00:13:11.54 --> 00:13:16.95] >> The White House tells Geithner, "Look,
we've got to tell the American people something.
[00:13:16.95 --> 00:13:18.61] We've got to tell the financial markets something."
[00:13:18.61 --> 00:13:22.41] You know, "Ready or not, you guys are going
to have to take this show public."
[00:13:22.41 --> 00:13:29.63] >> I know how much pressure the president
was feeling to produce, to show action, to
[00:13:29.63 --> 00:13:32.36] do as much as possible,
[00:13:32.36 --> 00:13:38.24] to get out there with some appreciation of
the magnitude of the problem and some sense
[00:13:38.24 --> 00:13:40.63] of— of direction.
[00:13:40.63 --> 00:13:46.06] >> On February 9th, the president tried to
do just that.
[00:13:46.06 --> 00:13:50.05] He promised Geithner would deliver a plan
to rescue the financial system.
[00:13:50.05 --> 00:13:51.28] >> Good evening, everybody.
[00:13:51.28 --> 00:13:56.78] My secretary of the treasury, Tim Geithner,
working with Larry Summers, my national economic
[00:13:56.78 --> 00:13:58.74] advisor, and others,
[00:13:58.74 --> 00:14:01.38] are coming up with the best possible plan—
[00:14:01.38 --> 00:14:03.76] >> President Obama set a high level of expectations.
[00:14:03.76 --> 00:14:07.25] The impression from watching that press conference
was,
[00:14:07.25 --> 00:14:13.13] "Tomorrow, Secretary of Treasury Tim Geithner
is going to tell us what the plan is to save
[00:14:13.13 --> 00:14:14.13] the world."
[00:14:14.13 --> 00:14:19.06] >> Tomorrow, my treasury secretary, Tim Geithner,
will be announcing some very clear and specific
[00:14:19.06 --> 00:14:23.51] plans for how we are going to start loosening
up credit once again.
[00:14:23.51 --> 00:14:26.78] >> The White House announces that Tim Geithner's
got a plan to fix the banks, and he's going
[00:14:26.78 --> 00:14:27.81] to present it.
[00:14:27.81 --> 00:14:30.72] >> And I'm trying to avoid preempting my secretary
of the treasury.
[00:14:30.72 --> 00:14:33.11] I want all of you to show up at his press
conference, as well.
[00:14:33.11 --> 00:14:34.78] He's going to be terrific.
[00:14:34.78 --> 00:14:39.68] >> The President said Tim Geithner is going
to come with a plan and that plan is going
[00:14:39.68 --> 00:14:43.82] to contain the magic bullet.
[00:14:43.82 --> 00:14:47.18] >> But inside Treasury, Geithner wasn't ready.
[00:14:47.18 --> 00:14:48.86] His speech was still not finished.
[00:14:48.86 --> 00:14:55.21] And Larry Summers, the president's chief economic
advisor, was not satisfied.
[00:14:55.21 --> 00:14:59.31] >> The moment of reckoning is coming, and
they're sending copies to Larry Summers.
[00:14:59.31 --> 00:15:04.13] And Summers writes back, "Well, this doesn't
sound like language a treasury secretary would
[00:15:04.13 --> 00:15:05.13] use."
[00:15:05.13 --> 00:15:09.16] You know, "It sounds"— you know, "It sounds
a little amateurish.
[00:15:09.16 --> 00:15:11.68] It doesn't quite have the gravitas."
[00:15:11.68 --> 00:15:15.00] You know, "I don't think this is going to
inspire confidence when you deliver."
[00:15:15.00 --> 00:15:19.58] So they— they get very nervous and they—
you know, they tear that draft up and they're
[00:15:19.58 --> 00:15:22.39] frantically reworking it.
[00:15:22.39 --> 00:15:28.07] >> The next day, Secretary Geithner's time
was up.
[00:15:28.07 --> 00:15:33.91] >> You have everything set up, a VIP audience,
cameras, all the press.
[00:15:33.91 --> 00:15:38.76] Markets are expecting something big, and they're
expecting details.
[00:15:38.76 --> 00:15:43.76] So the secretary walks out, and frankly, looked
nervous.
[00:15:43.76 --> 00:15:49.78] And he comes to the podium and there are two
teleprompters there.
[00:15:49.78 --> 00:15:52.08] >> Thanks to all of you for coming here today.
[00:15:52.08 --> 00:15:55.50] >> He starts his speech, but he's just not
good at this yet.
[00:15:55.50 --> 00:16:00.07] And so his head's turning from one teleprompter
to the next, and he gave the whole speech
[00:16:00.07 --> 00:16:01.88] going like this.
[00:16:01.88 --> 00:16:04.51] >> Our plan will help restart the flow of
credit.
[00:16:04.51 --> 00:16:07.54] It will help clean up and strengthen our banks—
[00:16:07.54 --> 00:16:10.20] >> At that point, Geithner had never given
a national press conference.
[00:16:10.20 --> 00:16:15.24] This was the country's first view of this
guy who was, you know, put in place to rescue
[00:16:15.24 --> 00:16:17.36] the country from this crisis.
[00:16:17.36 --> 00:16:23.02] >> Geithner was very inexperienced before,
you know, the public eye.
[00:16:23.02 --> 00:16:27.86] Before he became treasury secretary, had never
once appeared on television.
[00:16:27.86 --> 00:16:30.57] >> Geithner looked like he was about 12 years
old.
[00:16:30.57 --> 00:16:40.21] He is not a good public speaker, and he just
seemed like he wasn't ready for primetime.
[00:16:40.21 --> 00:16:44.51] >> Geithner's plan centered on what he called
a stress test.
[00:16:44.51 --> 00:16:45.98] >> This borrows a medical term.
[00:16:45.98 --> 00:16:50.48] We want their balance sheets cleaner and stronger,
and we're going to help this process by providing
[00:16:50.48 --> 00:16:55.85] a new program of capital support for those
institutions that need it.
[00:16:55.85 --> 00:16:59.67] >> Under the stress test, the government would
examine the health of the country's biggest
[00:16:59.67 --> 00:17:00.67] banks,
[00:17:00.67 --> 00:17:04.41] and if necessary, bail out those that were
in the most trouble.
[00:17:04.41 --> 00:17:11.77] >> They're going to go through and get some
hard data, make as much of it public as possible,
[00:17:11.77 --> 00:17:15.16] and it'll be a confidence-building exercise
for the banks.
[00:17:15.16 --> 00:17:17.54] >> —too often added to public anxiety—
[00:17:17.54 --> 00:17:22.72] >> To many watching, however, Geithner's plan
seemed inadequate.
[00:17:22.72 --> 00:17:24.79] >> It's a pretty bad flop.
[00:17:24.79 --> 00:17:30.90] Every cable network is showing the Dow just
collapsing hundreds of points as he's speaking.
[00:17:30.90 --> 00:17:33.80] >> Thank you very much.
[00:17:33.80 --> 00:17:38.43] Thank you for coming.
[00:17:38.43 --> 00:17:45.78] >> He gives his speech, he turns and walks
away.
[00:17:45.78 --> 00:17:47.83] And you could tell even the VIPs,
[00:17:47.83 --> 00:17:51.06] Ben Bernanke and everyone else, are, "OK,
well, I guess we leave now."
[00:17:51.06 --> 00:17:54.34] There was a little bit of clapping, and it's
over.
[00:17:54.34 --> 00:18:00.80] >> The market responds by dropping almost
400 points the day he announces it.
[00:18:00.80 --> 00:18:02.99] Over 4 percent it drops that day.
[00:18:02.99 --> 00:18:06.36] >> This is the guy who's going to be our secretary
of the treasury...
[00:18:06.36 --> 00:18:08.66] >> It did not go as well as anyone had hoped—
[00:18:08.66 --> 00:18:14.19] >> In the wake of Geithner's speech, the financial
markets were near a 10-year low and still
[00:18:14.19 --> 00:18:15.19] falling.
[00:18:15.19 --> 00:18:16.19] >> The new treasury secretary—
[00:18:16.19 --> 00:18:20.27] >> Maybe he doesn't understand it well enough
to explain it to the rest of us!
[00:18:20.27 --> 00:18:26.54] >> The markets reacted in a way that none
of us would have hoped.
[00:18:26.54 --> 00:18:29.62] Expectations got way out of control.
[00:18:29.62 --> 00:18:32.96] We shouldn't have let that happen, frankly.
[00:18:32.96 --> 00:18:35.35] >> They'd been in office three weeks.
[00:18:35.35 --> 00:18:40.69] Already, Obama was being pressured to replace
his young secretary of the treasury.
[00:18:40.69 --> 00:18:42.52] >> There was instantly chatter in Washington.
[00:18:42.52 --> 00:18:43.97] "How long would he last?
[00:18:43.97 --> 00:18:46.84] Is he going to be the first one out the door?
[00:18:46.84 --> 00:18:47.84] Is
[00:18:47.84 --> 00:18:50.84] Obama going to have to find somebody else?"
[00:18:50.84 --> 00:18:54.82] >> People start saying that this guy is in
over his head and is just not the right guy
[00:18:54.82 --> 00:18:56.40] for the job.
[00:18:56.40 --> 00:18:57.65] >> Everybody's calling for blood, right?
[00:18:57.65 --> 00:19:01.54] They want the sacrificial lamb, and it's going
to be Geithner.
[00:19:01.54 --> 00:19:05.53] >> But in the Oval Office, Geithner mounted
a spirited defense.
[00:19:05.53 --> 00:19:09.13] He stood by his strategy for stress tests.
[00:19:09.13 --> 00:19:13.44] >> The guy people describe is a different
guy than the one we all saw on TV.
[00:19:13.44 --> 00:19:18.51] And he was very convinced that this was the
way to go, and he was very resolute.
[00:19:18.51 --> 00:19:21.74] >> He was unflappable.
[00:19:21.74 --> 00:19:26.38] If you think about what was going on in the
markets, what was going on in the economy,
[00:19:26.38 --> 00:19:29.38] the pressure that you can imagine,
[00:19:29.38 --> 00:19:31.75] he didn't miss a beat.
[00:19:31.75 --> 00:19:34.13] >> Geithner walked Obama through the details.
[00:19:34.13 --> 00:19:38.38] >> The stress test, which is ultimately Geithner's
solution to this problem, kind of grows out
[00:19:38.38 --> 00:19:41.32] of that idea that if you can just convince
the
[00:19:41.32 --> 00:19:46.57] markets that these guys are going to be OK,
that the hole isn't as bad as everyone's worst
[00:19:46.57 --> 00:19:51.52] case scenario suggests, then the panic will
subside,
[00:19:51.52 --> 00:19:58.05] confidence will come back, prices of securities
will rise, things will just level off.
[00:19:58.05 --> 00:20:00.42] >> Critics doubted the stress tests would
be enough.
[00:20:00.42 --> 00:20:04.57] But for now, the president would stick with
Geithner.
[00:20:04.57 --> 00:20:07.30] >> Obama couldn't back off of Tim Geithner
at this point.
[00:20:07.30 --> 00:20:10.13] You're in the honeymoon stage of an administration.
[00:20:10.13 --> 00:20:12.85] You can't dump one of your guys.
[00:20:12.85 --> 00:20:15.97] So he stands by Tim Geithner.
[00:20:15.97 --> 00:20:20.35] >> The president stuck with the secretary.
[00:20:20.35 --> 00:20:26.71] And he was under tremendous pressure to change
course.
[00:20:26.71 --> 00:20:33.16] I've got to believe that this decision was
one of the hardest decisions he had to make
[00:20:33.16 --> 00:20:36.15] at that time.
[00:20:36.15 --> 00:20:55.84] >> For months, there had been public anger
at Wall Street.
[00:20:55.84 --> 00:21:01.91] The focus was CEOs like the chairman of Lehman
Brothers, Dick Fuld.
[00:21:01.91 --> 00:21:06.40] >> You belong in jail!
[00:21:06.40 --> 00:21:08.90] >> Growing backlash against Wall Street—
[00:21:08.90 --> 00:21:10.24] >> The frustration with the economy—
[00:21:10.24 --> 00:21:12.11] >> —anger from the U.S. public towards bankers—
[00:21:12.11 --> 00:21:16.06] >> And in cities across the nation, protests
erupted.
[00:21:16.06 --> 00:21:17.78] >> They got bailed out!
[00:21:17.78 --> 00:21:19.50] We got sold out!
[00:21:19.50 --> 00:21:23.44] >> In Chicago, Bank of America CEO Ken Lewis
was seen as one of the villains.
[00:21:23.44 --> 00:21:30.62] >> This is exactly the kind of story the Obama
administration doesn't need.
[00:21:30.62 --> 00:21:48.84] >> In Washington, outrage at Wall Street and
the bail-outs pushed the anger to the edge.
[00:21:48.84 --> 00:22:03.94] And the anger was not just confined to the
streets.
[00:22:03.94 --> 00:22:08.13] On Capitol Hill, Congress responded to the
public anger.
[00:22:08.13 --> 00:22:10.75] They summoned the heads of the nation's biggest
banks.
[00:22:10.75 --> 00:22:11.75] >> Let me be frank.
[00:22:11.75 --> 00:22:14.28] My constituents in Illinois are angry, and
so am I.
[00:22:14.28 --> 00:22:17.63] >> What did the banks do with the taxpayers'
money?
[00:22:17.63 --> 00:22:20.77] >> I cannot believe no one's prosecuted you
on this!
[00:22:20.77 --> 00:22:25.32] >> It was chilling to watch that— I mean,
just to see them all lined up next to each
[00:22:25.32 --> 00:22:26.60] other.
[00:22:26.60 --> 00:22:30.89] I think most Americans, when they saw that,
thought of the heads of tobacco.
[00:22:30.89 --> 00:22:31.89] That's where we're at.
[00:22:31.89 --> 00:22:36.36] We have an industry that's just vilified to
that point and the frustration is so high.
[00:22:36.36 --> 00:22:42.63] >> The whole thing, frankly, had a bit of
political theater element to it, that particular
[00:22:42.63 --> 00:22:43.63] hearing.
[00:22:43.63 --> 00:22:46.59] There seemed to be a little bit of a contest
to who could get these guys by the scruff
[00:22:46.59 --> 00:22:49.14] of the neck and slap them around the most.
[00:22:49.14 --> 00:22:54.46] >> As of matter of fact, Bank of America,
you paid yourself $30 million dollars in fees
[00:22:54.46 --> 00:22:56.56] just to accept our TARP money!
[00:22:56.56 --> 00:22:59.01] >> I don't know what you're talking about.
[00:22:59.01 --> 00:23:02.89] >> Bank of America's CEO, Ken Lewis, was in
the spotlight.
[00:23:02.89 --> 00:23:06.34] His bank had taken more than $45 billion in
government bail-outs.
[00:23:06.34 --> 00:23:11.78] >> It was clear we were there to take a public
whipping, you know, and we did.
[00:23:11.78 --> 00:23:17.60] I just tried to think of it that way and think
of it as, you know, this too will pass, and
[00:23:17.60 --> 00:23:19.46] just get through it.
[00:23:19.46 --> 00:23:24.95] >> There's been wide speculation that some
of our larger banks around the nation may
[00:23:24.95 --> 00:23:28.13] end up being nationalized.
[00:23:28.13 --> 00:23:31.59] Do you feel that your bank should be considered
one of those banks at risk?
[00:23:31.59 --> 00:23:34.48] >> Are you talking to me?
[00:23:34.48 --> 00:23:35.48] >> Yeah.
[00:23:35.48 --> 00:23:36.48] >> Absolutely not.
[00:23:36.48 --> 00:23:41.39] I don't know why you would ask the question.
[00:23:41.39 --> 00:23:43.11] >> This was a grilling that lasted all day.
[00:23:43.11 --> 00:23:44.11] >> Bank of America has to explain this to
Congress.
[00:23:44.11 --> 00:23:49.65] >> —comes on the heels of growing public
anger aimed at banks which received massive
[00:23:49.65 --> 00:23:51.36] infusions of taxpayer—
[00:23:51.36 --> 00:23:56.24] >> At the White House, the political team
worried it was just a matter of time before
[00:23:56.24 --> 00:23:58.65] the anger would be aimed at the president.
[00:23:58.65 --> 00:24:02.26] They wanted to make an example of one of the
CEOs.
[00:24:02.26 --> 00:24:07.86] >> David Axelrod, Obama's top political advisor,
very much wanted some scalps.
[00:24:07.86 --> 00:24:12.95] Robert Gibbs, who was the press secretary
but also a very senior political aide, wanted
[00:24:12.95 --> 00:24:14.14] scalps.
[00:24:14.14 --> 00:24:21.12] And even Larry Summers thought there should
be a scalp.
[00:24:21.12 --> 00:24:26.03] And that was when the talk drifted toward,
"Do you fire," you know, "the CEO of Bank
[00:24:26.03 --> 00:24:28.29] of America"?
[00:24:28.29 --> 00:24:32.60] >> Summers and the political team thought
that maybe it was time for a CEO like Ken
[00:24:32.60 --> 00:24:35.15] Lewis to lose his job.
[00:24:35.15 --> 00:24:40.39] It would send the banks and the public a message—
those responsible for the financial crisis
[00:24:40.39 --> 00:24:43.17] would pay a price.
[00:24:43.17 --> 00:24:47.44] >> Summers thought that maybe they needed
to have a change in management, at least one
[00:24:47.44 --> 00:24:48.44] bank,
[00:24:48.44 --> 00:24:57.81] and that they needed to send a signal that,
you know, poor performance was going to lead
[00:24:57.81 --> 00:24:58.97] to consequences.
[00:24:58.97 --> 00:25:02.51] >> Royal Bank of Scotland is almost twice
as big as CitiGroup.
[00:25:02.51 --> 00:25:04.32] You know what the British government did?
[00:25:04.32 --> 00:25:07.82] They took it over and they fired the CEO.
[00:25:07.82 --> 00:25:08.82] Guess what?
[00:25:08.82 --> 00:25:13.70] When we had the problem with car dealers,
car companies, we went out there, we fired
[00:25:13.70 --> 00:25:15.63] the CEO.
[00:25:15.63 --> 00:25:20.93] Why do we not fire the CEOs of some of these
companies that have gotten into terrible trouble?
[00:25:20.93 --> 00:25:25.86] >> It would have been a bold step for Obama,
but Tim Geithner warned the president against
[00:25:25.86 --> 00:25:26.86] it.
[00:25:26.86 --> 00:25:33.29] He wasn't going to participate in what he
called "Old Testament justice."
[00:25:33.29 --> 00:25:36.58] >> Geithner didn't want to do it because it
would kind of create this risk.
[00:25:36.58 --> 00:25:40.03] It would create this conception that the government
was going to come
[00:25:40.03 --> 00:25:45.21] in and mess with these banks and that that
would frighten off private investors.
[00:25:45.21 --> 00:25:48.19] >> Geithner believed the banking system was
still fragile.
[00:25:48.19 --> 00:25:52.84] >> This notion that the financial system was
so fragile that you couldn't do anything that
[00:25:52.84 --> 00:25:54.26] might hurt confidence—
[00:25:54.26 --> 00:25:58.86] it becomes very formative and very important
to understanding Geithner.
[00:25:58.86 --> 00:26:04.47] He is very afraid to do anything to roil the
market and to create fear.
[00:26:04.47 --> 00:26:07.82] It becomes this very delicate, "Let's tiptoe
around the situation.'
[00:26:07.82 --> 00:26:13.34] >> He saw the banks as an ailing patient in
critical condition.
[00:26:13.34 --> 00:26:17.32] He had taken to invoking the first principle
of medicine.
[00:26:17.32 --> 00:26:23.95] >> The first rule is, to borrow from medicine
the Hippocratic Oath, "First do no harm."
[00:26:23.95 --> 00:26:31.47] And there were a lot of ideas out there, frankly,
that some of us thought might do harm.
[00:26:31.47 --> 00:26:36.47] >> Geithner insisted now was not the time
to reform Wall Street.
[00:26:36.47 --> 00:26:43.86] But inside the White House, he had a powerful
opponent, Larry Summers.
[00:26:43.86 --> 00:26:49.19] >> The hard part about Larry Summers is, A,
Larry Summers wanted to be treasury secretary,
[00:26:49.19 --> 00:26:50.78] still acts in some cases,
[00:26:50.78 --> 00:26:54.24] depending on who you talk to, like he's treasury
secretary.
[00:26:54.24 --> 00:26:59.93] >> Summers is very smart, very experienced,
and has very sharp elbows.
[00:26:59.93 --> 00:27:08.63] >> Summers, a highly regarded economist, believed
Wall Street was fundamentally broken.
[00:27:08.63 --> 00:27:10.62] Aggressive reform was necessary.
[00:27:10.62 --> 00:27:18.82] >> He thought that there was perhaps trillions
of dollars in losses and that, you know, you
[00:27:18.82 --> 00:27:21.98] were going to need to do something really
bold and
[00:27:21.98 --> 00:27:25.90] aggressive to solve that problem.
[00:27:25.90 --> 00:27:27.73] >> Summers had a bold idea.
[00:27:27.73 --> 00:27:32.11] >> He wants to restructure the major "too
big fail' banks.
[00:27:32.11 --> 00:27:38.64] >> Summers wanted to take on and break up
at least one of the "too big to fail' banks.
[00:27:38.64 --> 00:27:42.08] >> Larry says, "What if we don't bail out
these institutions?
[00:27:42.08 --> 00:27:43.40] What if we restructure them?
[00:27:43.40 --> 00:27:46.72] There's going to be blood on Wall Street,
a lot of it.
[00:27:46.72 --> 00:27:50.82] Wall Street won't exist the way it has existed
up to now, it's going to be restructured."
[00:27:50.82 --> 00:27:59.46] >> Summers was concerned about "too big to
fail" banks like Citi, Wells Fargo, Bank of
[00:27:59.46 --> 00:28:01.87] America, the new breed of super-banks.
[00:28:01.87 --> 00:28:07.44] >> They bought and bought and bought, and
they would buy one bank and then they'd buy
[00:28:07.44 --> 00:28:09.56] another bank and get bigger and bigger and
bigger.
[00:28:09.56 --> 00:28:13.21] And even if they got bought by someone else,
they were the ones who ended up taking over
[00:28:13.21 --> 00:28:15.16] the show.
[00:28:15.16 --> 00:28:20.17] >> But in the crisis, the banks were so large
and interconnected, the government felt it
[00:28:20.17 --> 00:28:25.87] had to bail them out because their failure
could bring down the entire economy.
[00:28:25.87 --> 00:28:28.44] They are too big to fail.
[00:28:28.44 --> 00:28:31.79] >> The financial system is too dependent on
them.
[00:28:31.79 --> 00:28:38.08] And therefore, the taxpayers— we have, in
effect, decided that we will not allow them
[00:28:38.08 --> 00:28:40.61] to fail.
[00:28:40.61 --> 00:28:44.83] >> And Summers now believed some of the too
big to fail banks might be on the verge of
[00:28:44.83 --> 00:28:46.28] collapse.
[00:28:46.28 --> 00:28:49.41] The time was right to do something dramatic
about it.
[00:28:49.41 --> 00:28:55.28] >> His thought was, "Well, we need to take
over, to shut down, to nationalize the weakest
[00:28:55.28 --> 00:28:59.02] of the banks, and A, that would set a good
example."
[00:28:59.02 --> 00:29:05.20] You know, Wall Street would see that if you
gamble with your own fortunes, if you gamble
[00:29:05.20 --> 00:29:07.73] with the country's fortune and you fail, you're
[00:29:07.73 --> 00:29:09.55] going to get shut down, you're going to lose.
[00:29:09.55 --> 00:29:11.27] That's supposed to be one of the basic lessons
of capitalism.
[00:29:11.27 --> 00:29:12.27] >> And Summers had a formidable ally, Christina
Romer, a Berkeley economist who had been picked
[00:29:12.27 --> 00:29:13.87] as one of Obama's top advisors.
[00:29:13.87 --> 00:29:16.82] >> But Geithner completely disagreed.
[00:29:16.82 --> 00:29:22.23] He thought the banks were vulnerable and that
Summers was playing with fire.
[00:29:22.23 --> 00:29:29.98] >> If you're going to take over one of these
institutions, that's like pushing a boulder
[00:29:29.98 --> 00:29:32.72] off a— down a hill.
[00:29:32.72 --> 00:29:38.91] You have to make sure that you have enough
firepower to stop that boulder from rolling
[00:29:38.91 --> 00:29:43.72] all the way down.
[00:29:43.72 --> 00:29:56.37] >> On March 15th, they all gathered with the
president, Summers versus Geithner, a showdown.
[00:29:56.37 --> 00:29:58.63] >> It was an extraordinary meeting.
[00:29:58.63 --> 00:30:04.39] It was literally a six-hour murder board in
which you had the president of the United
[00:30:04.39 --> 00:30:08.47] States, sometimes aided by Larry Summers,
really asking the
[00:30:08.47 --> 00:30:16.75] hardest questions, raising every criticism
that was being raised from the outside.
[00:30:16.75 --> 00:30:22.39] >> Summers and his allies argued that Geithner's
stress test plan was not aggressive enough.
[00:30:22.39 --> 00:30:25.94] >> The stress tests are a part of a confidence
game.
[00:30:25.94 --> 00:30:30.32] Many people in the administration, and out
of the administration, were worried that the
[00:30:30.32 --> 00:30:34.49] stresses that the system would be put through
were not real stresses.
[00:30:34.49 --> 00:30:39.75] >> I was one who was critical of the stress
tests and worried that the scale was going
[00:30:39.75 --> 00:30:42.69] to be tilted in a way that you'd get the result
you want.
[00:30:42.69 --> 00:30:48.27] You know, it's not that hard to cook a stress
test and make it look like you're in much
[00:30:48.27 --> 00:30:50.92] better shape than you are.
[00:30:50.92 --> 00:30:53.70] >> Geithner would not back down.
[00:30:53.70 --> 00:30:55.50] >> Tim says the stress tests are enough.
[00:30:55.50 --> 00:30:57.16] It's real action.
[00:30:57.16 --> 00:30:58.22] Summers says, "No it's not.
[00:30:58.22 --> 00:30:59.52] It's watchful waiting."
[00:30:59.52 --> 00:31:00.81] Tim is livid.
[00:31:00.81 --> 00:31:03.03] "It's not watchful waiting.
[00:31:03.03 --> 00:31:04.73] It's not just waiting around.
[00:31:04.73 --> 00:31:05.73] It's real."
[00:31:05.73 --> 00:31:10.20] And Larry said, you know, "What you're doing
is not action that's needed.
[00:31:10.20 --> 00:31:11.65] You need to pull off the Band-Aid."
[00:31:11.65 --> 00:31:18.18] >> Hour after hour, in front of the president
of the United States, Tim Geithner stood up
[00:31:18.18 --> 00:31:19.36] to Larry Summers.
[00:31:19.36 --> 00:31:26.84] >> The secretary just kept methodically, but
clearly, making the case that the plan we
[00:31:26.84 --> 00:31:32.11] had laid out had the best chance of success
with the
[00:31:32.11 --> 00:31:34.12] least downside risk.
[00:31:34.12 --> 00:31:41.12] And he just— every time someone would raise
another point, he would just, again, go through
[00:31:41.12 --> 00:31:42.84] it.
[00:31:42.84 --> 00:31:44.67] >> Obama listened.
[00:31:44.67 --> 00:31:47.85] Should they take on a major bank?
[00:31:47.85 --> 00:31:51.79] Were Geithner's stress tests the best way
to go?
[00:31:51.79 --> 00:31:54.41] For now, he'd keep his own counsel.
[00:31:54.41 --> 00:31:59.14] >> For the economy, this is what freefall
feels like.
[00:31:59.14 --> 00:32:01.19] >> When will the recession end?
[00:32:01.19 --> 00:32:05.78] >> Two weeks later, the nation's top bankers
were summoned to the White House.
[00:32:05.78 --> 00:32:09.01] >> —after leveling some very harsh words
at bankers—
[00:32:09.01 --> 00:32:11.13] >> The president wanted to talk to them.
[00:32:11.13 --> 00:32:15.55] >> Looking for accountability from the nation's
banking leaders, today President Obama is
[00:32:15.55 --> 00:32:18.50] meeting with CEOs of some of the nation's—
[00:32:18.50 --> 00:32:23.79] >> Thirteen bankers were called into a room
to meet with the president of the United States.
[00:32:23.79 --> 00:32:28.97] They were told that they were going to be
chastised, that this was going to be the opportunity
[00:32:28.97 --> 00:32:33.44] for the president to vent the public's anger.
[00:32:33.44 --> 00:32:41.76] >> The bankers feared they could be forced
to accept dramatic reforms— a ban against
[00:32:41.76 --> 00:32:44.27] "too big to fail," a limit on executive compensation,
[00:32:44.27 --> 00:32:51.67] and a requirement that they refinance mortgages
for underwater homeowners.
[00:32:51.67 --> 00:32:56.32] >> Walking into that meeting, these guys have
not been this nervous since they were in nursery
[00:32:56.32 --> 00:32:59.32] school.
[00:32:59.32 --> 00:33:04.67] They're ultimately powerful, sovereign men
atop their institutions, but now they know
[00:33:04.67 --> 00:33:09.89] that they really could get whacked.
[00:33:09.89 --> 00:33:25.52] >> No one knew what to expect, Summers's Old
Testament justice or Geithner's cautious encouragement.
[00:33:25.52 --> 00:33:29.11] Now they'd find out what he thought.
[00:33:29.11 --> 00:33:32.96] >> Obama comes in, and he's all business.
[00:33:32.96 --> 00:33:35.54] >> There were few pleasantries exchanged.
[00:33:35.54 --> 00:33:38.18] The president spoke first.
[00:33:38.18 --> 00:33:41.06] >> The president made it pretty clear when
he talked to us, you know,
[00:33:41.06 --> 00:33:43.11] "We're between you and the pitchforks, guys.
[00:33:43.11 --> 00:33:45.66] And you need to just acknowledge that."
[00:33:45.66 --> 00:33:51.09] >> The bankers have essentially made a decision
that they're prepared to go along with what
[00:33:51.09 --> 00:33:54.13] needs to be done to resolve this problem,
[00:33:54.13 --> 00:34:01.29] to get the public back on the side of corporate
America.
[00:34:01.29 --> 00:34:05.79] >> But as the meeting progressed, to their
astonishment, it became clear the president
[00:34:05.79 --> 00:34:09.37] was in no mood for confrontation.
[00:34:09.37 --> 00:34:13.76] >> What's interesting is that the next statements
and the rest of the meeting essentially is
[00:34:13.76 --> 00:34:20.38] Obama skinning back as fast as he can on that
pitchforks punch.
[00:34:20.38 --> 00:34:25.44] And he says right after that, "What we have,
gentlemen, is a public relations disaster
[00:34:25.44 --> 00:34:29.08] that's turning into a political disaster.
[00:34:29.08 --> 00:34:30.08] And I'm here to help."
[00:34:30.08 --> 00:34:35.04] >> I interpreted it as a kind of a watershed
time.
[00:34:35.04 --> 00:34:38.74] Banks are the catalyst to get us out of this
morass that we're in.
[00:34:38.74 --> 00:34:42.66] You can talk so long about the past, but at
some point, you've got to look at the present
[00:34:42.66 --> 00:34:43.95] and the future.
[00:34:43.95 --> 00:34:48.17] And I felt that's what he was saying.
[00:34:48.17 --> 00:34:52.57] >> I think the president sees himself as a
pragmatist, and I do, too.
[00:34:52.57 --> 00:34:53.80] "Let's get through this.
[00:34:53.80 --> 00:34:55.01] Let's be pragmatic.
[00:34:55.01 --> 00:34:57.95] Let's not shoot for the moon and miss.
[00:34:57.95 --> 00:35:03.21] Let's accomplish as much as we can, but let's
do it with the certainty that we know we can
[00:35:03.21 --> 00:35:06.46] produce by taking this a little more cautiously."
[00:35:06.46 --> 00:35:11.45] >> The president required no firm commitments
from the bankers.
[00:35:11.45 --> 00:35:14.98] >> I think it's clear it was an opportunity
lost.
[00:35:14.98 --> 00:35:18.97] He had a room full of very frightened CEOs.
[00:35:18.97 --> 00:35:22.98] He was in a position then to make demands,
and he didn't.
[00:35:22.98 --> 00:35:26.50] >> He didn't want to disturb the banks.
[00:35:26.50 --> 00:35:32.89] He wanted them on their side so that things
were as calm as possible.
[00:35:32.89 --> 00:35:36.73] There would be basically business as usual.
[00:35:36.73 --> 00:35:38.38] >> The president had decided.
[00:35:38.38 --> 00:35:41.12] Geithner had prevailed.
[00:35:41.12 --> 00:35:46.49] That day, there would be no aggressive action
to take on Wall Street.
[00:35:46.49 --> 00:35:48.74] >> There was almost two faces of Obama.
[00:35:48.74 --> 00:35:52.59] Publicly, he wanted to tell you that these
were the fat cat bankers.
[00:35:52.59 --> 00:35:56.60] But privately, when he was with the bankers,
[00:35:56.60 --> 00:35:58.97] he wanted to get them on board.
[00:35:58.97 --> 00:36:01.65] >> Good afternoon.
[00:36:01.65 --> 00:36:04.65] I'm John Stumpf with Wells Fargo.
[00:36:04.65 --> 00:36:09.19] >> The bankers made it clear the president
had let them off.
[00:36:09.19 --> 00:36:12.77] >> We had a wonderful meeting today with the
president.
[00:36:12.77 --> 00:36:15.90] The basic message is we're all in this thing
together.
[00:36:15.90 --> 00:36:19.23] >> We're quite pleased with the cooperation
that's evidenced with the group and with the
[00:36:19.23 --> 00:36:20.23] White House.
[00:36:20.23 --> 00:36:24.16] >> I think the bankers came out of that meeting
realizing that they had dodged a bullet, and
[00:36:24.16 --> 00:36:26.68] that was what was required of the was to go
out,
[00:36:26.68 --> 00:36:32.18] stand before the cameras and speak as though
everyone were in harmony, that they and the
[00:36:32.18 --> 00:36:34.50] president were on board, to make this great
[00:36:34.50 --> 00:36:36.26] expression of confidence and reassurance.
[00:36:36.26 --> 00:36:40.62] >> I believe all of us walked out of there
knowing fully that we're all in it together.
[00:36:40.62 --> 00:36:41.62] And we're all looking forward to promoting
a recovery— economic recovery.
[00:36:41.62 --> 00:36:42.62] Thank you.
[00:36:42.62 --> 00:36:50.10] >> The
bankers who left the meeting that day had
[00:36:50.10 --> 00:36:58.74] already received more than $180 billion from
the federal government with almost no conditions.
[00:36:58.74 --> 00:36:59.74] >> No strings attached?
[00:36:59.74 --> 00:37:04.50] I mean, everybody else — home owners, everybody
else who's trying to get a loan, everybody
[00:37:04.50 --> 00:37:06.51] on Main Street, small businesses —
[00:37:06.51 --> 00:37:11.97] not only are they not able to get loans, but
if they get anything, there are huge strings
[00:37:11.97 --> 00:37:13.37] attached.
[00:37:13.37 --> 00:37:21.55] How in good conscience, in good faith, can
we not ask the banks — demand from the banks
[00:37:21.55 --> 00:37:26.17] — some conditions upon getting bailed out?
[00:37:26.17 --> 00:37:31.52] That just seemed incredible.
[00:37:31.52 --> 00:37:35.75] >> Unknown at that time, many of these banks
had been drawing on a vast reservoir of cash
[00:37:35.75 --> 00:37:38.03] from the Federal Reserve in order to keep
their
[00:37:38.03 --> 00:37:40.43] daily operations from freezing up.
[00:37:40.43 --> 00:37:47.96] It had started more than a year before, during
the Bush administration.
[00:37:47.96 --> 00:37:51.57] >> Now we know that these banks were not successful.
[00:37:51.57 --> 00:37:54.70] These banks were on the brink of failure.
[00:37:54.70 --> 00:38:00.07] What we found out was that the biggest banks
in the United States borrowed a heck of a
[00:38:00.07 --> 00:38:03.18] lot more money than anybody had imagined.
[00:38:03.18 --> 00:38:08.37] >> The details of the loans became public
only after Bloomberg News took the case all
[00:38:08.37 --> 00:38:11.24] the way to the Supreme Court.
[00:38:11.24 --> 00:38:17.06] >> So what we found out, really, was that
Wall Street was in much, much deeper problems,
[00:38:17.06 --> 00:38:20.60] they were in much deeper trouble, than we
ever imagined.
[00:38:20.60 --> 00:38:28.90] On the peak day in 2008— it was December
5th, 2008— the banks had taken loans of
[00:38:28.90 --> 00:38:29.90] $1.2 trillion.
[00:38:29.90 --> 00:38:31.55] And that's one day.
[00:38:31.55 --> 00:38:38.34] And out of that $1.2 trillion, not necessarily
on the same day, Morgan Stanley alone took
[00:38:38.34 --> 00:38:44.25] out $107 billion, had $107 billion in loans
out on a single day.
[00:38:44.25 --> 00:38:48.78] CitiGroup, over $99 billion on a single day.
[00:38:48.78 --> 00:38:52.80] Bank of America, $91 billion on a single day.
[00:38:52.80 --> 00:38:58.66] Royal Bank of Scotland, UBS, all the biggest
banks in the world had borrowed way more than
[00:38:58.66 --> 00:38:59.90] we ever thought.
[00:38:59.90 --> 00:39:05.35] >> The loans were part of an unprecedented
intervention in the financial system.
[00:39:05.35 --> 00:39:10.64] In all, the Federal Reserve made available
more than $7.7 trillion
[00:39:10.64 --> 00:39:17.43] in loans, commitments and guarantees to financial
institutions around the world.
[00:39:17.43 --> 00:39:21.53] >> The data shows the Fed was lending not
just to American banks, but to banks all over
[00:39:21.53 --> 00:39:28.16] the world, and in amounts that were really
astonishing.
[00:39:28.16 --> 00:39:29.74] >> Another big bank is in the black—
[00:39:29.74 --> 00:39:34.05] >> —people starting to get comfortable that
maybe these banks can earn through their problems.
[00:39:34.05 --> 00:39:39.18] >> But in that spring of 2009, in New York,
the public was hearing good news about the
[00:39:39.18 --> 00:39:40.18] banks.
[00:39:40.18 --> 00:39:42.52] >> Bailed-out banks reporting billions in
first quarter profits.
[00:39:42.52 --> 00:39:45.35] >> So should we be outraged or enthused?
[00:39:45.35 --> 00:39:49.05] >> Just in time for Tim Geithner's stress
tests.
[00:39:49.05 --> 00:39:54.21] >> They sent all these supervisors from the
Fed to kind of look up and down the banks
[00:39:54.21 --> 00:39:57.42] and to see if they have enough capital.
[00:39:57.42 --> 00:40:03.07] >> It was a three-month process, all the bank
supervisors working together in an unprecedented
[00:40:03.07 --> 00:40:09.02] fashion, digging into the books of each one
of these banks.
[00:40:09.02 --> 00:40:13.19] >> The government today officially announces
the results of the financial stress tests—
[00:40:13.19 --> 00:40:15.80] >> Today was report card day.
[00:40:15.80 --> 00:40:19.29] >> By May 7th, the government was ready to
reveal the results.
[00:40:19.29 --> 00:40:21.72] >> Today we got the official findings.
[00:40:21.72 --> 00:40:26.15] >> These actions today are going to bring
an unprecedented level of transparency and
[00:40:26.15 --> 00:40:28.45] clarity to the health of the nation's banking
system.
[00:40:28.45 --> 00:40:29.69] They're going to replace—
[00:40:29.69 --> 00:40:34.92] >> According to Geithner's stress tests, the
nation's 19 largest banks were fundamentally
[00:40:34.92 --> 00:40:38.14] healthy, and soon they would repay their loans.
[00:40:38.14 --> 00:40:40.70] >> —the government's investments with private
capital as soon as possible.
[00:40:40.70 --> 00:40:44.25] >> None of the 19 banks are at risk of insolvency.
[00:40:44.25 --> 00:40:48.76] >> Tim Geithner feels like he saved the financial
system and that he did so at extraordinarily
[00:40:48.76 --> 00:40:50.98] low cost.
[00:40:50.98 --> 00:40:53.20] >> And Geithner took a victory lap.
[00:40:53.20 --> 00:40:58.29] >> When those stress test results come in
and the news is quite good, he goes over to
[00:40:58.29 --> 00:41:03.11] the White House, actually shows the president
some of
[00:41:03.11 --> 00:41:06.16] the reports, sort of his moment of, "You see,
Mr. President?
[00:41:06.16 --> 00:41:08.73] I was right."
[00:41:08.73 --> 00:41:13.67] >> The president and even some of Geithner's
White House critics seemed pleased.
[00:41:13.67 --> 00:41:17.76] His position as secretary of treasury was
secure.
[00:41:17.76 --> 00:41:19.65] >> Looking back, I actually think they were
pretty effective.
[00:41:19.65 --> 00:41:23.75] And if anything, the financial sector is highly
profitable again.
[00:41:23.75 --> 00:41:27.70] I think the problem is that they're about
the only ones that are highly profitable right
[00:41:27.70 --> 00:41:28.70] now.
[00:41:28.70 --> 00:41:34.67] And so that leads to, I think, very justifiable
anger at the bail-outs that didn't help the
[00:41:34.67 --> 00:41:35.67] middle class enough.
[00:41:35.67 --> 00:41:39.30] >> We're made as hell, and we're not going
to take it anymore!
[00:41:39.30 --> 00:41:41.88] >> Hundreds of rallies in all 50 states today—
[00:41:41.88 --> 00:41:45.88] >> They came to vent their outrage in big
gatherings and small groups.
[00:41:45.88 --> 00:41:46.88] >> August 2009.
[00:41:46.88 --> 00:41:52.61] The Wall Street bail-outs stoked new anger
from a new movement, the Tea Party.
[00:41:52.61 --> 00:41:53.61] >> Maximum individual liberty—
[00:41:53.61 --> 00:41:54.61] >> —runaway government spending—
[00:41:54.61 --> 00:41:58.11] >> They want to send a message to bailed-out
companies that the party's over.
[00:41:58.11 --> 00:42:03.13] >> The anger was over health care, taxes,
and especially the bank bail-outs.
[00:42:03.13 --> 00:42:08.31] >> There was a lot of anger, a lot of incredible
concern about what was going on.
[00:42:08.31 --> 00:42:11.29] The American people were angry to a person.
[00:42:11.29 --> 00:42:13.02] They were just angry.
[00:42:13.02 --> 00:42:14.02] >> No!
[00:42:14.02 --> 00:42:15.02] No!
[00:42:15.02 --> 00:42:16.02] No!
[00:42:16.02 --> 00:42:18.79] >> Hard-working Americans all across this
country, you know, they have a right to be
[00:42:18.79 --> 00:42:22.37] offended, to be frustrated by what they saw
happen.
[00:42:22.37 --> 00:42:24.19] Those banks needed to be held accountable.
[00:42:24.19 --> 00:42:29.01] >> Much of the anger was directed personally
at President Obama.
[00:42:29.01 --> 00:42:32.06] >> —at President Obama's stimulus package
and budget in particular.
[00:42:32.06 --> 00:42:33.69] >> Obama's a Marxist, socialist—
[00:42:33.69 --> 00:42:41.24] >> We are the people and we have finally awoken,
and we are not going to stop until we take
[00:42:41.24 --> 00:42:42.40] down this government!
[00:42:42.40 --> 00:42:43.40] >> You work for us!
[00:42:43.40 --> 00:42:44.40] You work for us!
[00:42:44.40 --> 00:42:45.40] >> Fired up!
[00:42:45.40 --> 00:42:46.40] Ready to go!
[00:42:46.40 --> 00:42:47.40] Fired up!
[00:42:47.40 --> 00:42:48.40] Ready to go!
[00:42:48.40 --> 00:42:49.40] >> It was this new force in American politics.
[00:42:49.40 --> 00:42:51.36] And the White House did not have a plan to
counter this.
[00:42:51.36 --> 00:42:54.13] It kind of caught them by surprise.
[00:42:54.13 --> 00:42:59.21] And on the communications front, they were
flat-footed.
[00:42:59.21 --> 00:43:04.29] >> At the White House, chief of staff Rahm
Emanuel had been worried
[00:43:04.29 --> 00:43:09.92] about the growing public anger for months,
telling the president he should act.
[00:43:09.92 --> 00:43:15.21] >> Rahm Emanuel, he recognized that you cannot
inject hundreds of billions of dollars into
[00:43:15.21 --> 00:43:17.65] the banking system without reassuring the
[00:43:17.65 --> 00:43:20.40] American people that this is not going to
happen again.
[00:43:20.40 --> 00:43:22.07] >> Rahm Emanuel is quite forceful.
[00:43:22.07 --> 00:43:27.26] Now, Emanuel's usually a guy favoring "Do
no harm," favoring Wall Street, says, "Now's
[00:43:27.26 --> 00:43:31.84] the time, Mr. President, for Old Testament
justice."
[00:43:31.84 --> 00:43:39.54] >> Now the president decided to revive a central
theme of his campaign, reforming Wall Street.
[00:43:39.54 --> 00:43:43.97] >> President Obama visits New York today to
deliver a major address to Wall Street.
[00:43:43.97 --> 00:43:46.99] >> One year to the day after the fall of Lehman
Brothers—
[00:43:46.99 --> 00:43:52.39] >> That September, on the one-year anniversary
of the meltdown, the president returned to
[00:43:52.39 --> 00:43:56.26] Wall Street to again make the case for reform.
[00:43:56.26 --> 00:43:59.33] He would push for legislation to reform the
banks.
[00:43:59.33 --> 00:44:01.50] >> —immediate action to reform financial
regulation—
[00:44:01.50 --> 00:44:06.75] >> We've seen bail-outs, stress tests, an
alphabet soup of Treasury and Fed programs.
[00:44:06.75 --> 00:44:10.46] >> He decides to have a meeting that's literally
steps from Wall Street, right?
[00:44:10.46 --> 00:44:19.01] I mean, Federal Hall is— you can walk down
to the Exchange floors.
[00:44:19.01 --> 00:44:25.38] >> Washington's power brokers were there—
congressional leaders, Tim Geithner, even
[00:44:25.38 --> 00:44:28.56] Paul Volcker.
[00:44:28.56 --> 00:44:32.05] But many of the titans of Wall Street didn't
show up.
[00:44:32.05 --> 00:44:36.67] >> Essentially, none of the big figures from
Wall Street show up to hear the speech.
[00:44:36.67 --> 00:44:40.27] They all— they all just stay in their offices
and do their work.
[00:44:40.27 --> 00:44:42.09] >> They don't even show up to the speech.
[00:44:42.09 --> 00:44:43.98] Jamie Dimon and Lloyd Blankfein—
[00:44:43.98 --> 00:44:48.71] it wasn't like the speech was scheduled, you
know, without notice.
[00:44:48.71 --> 00:44:51.11] They just had better things to do that day.
[00:44:51.11 --> 00:44:56.63] >> None of the bank CEOs had been fired or
prosecuted.
[00:44:56.63 --> 00:45:01.34] >> That's why we need strong rules of the
road to guard against the kind of systemic
[00:45:01.34 --> 00:45:02.100] risks that we've seen.
[00:45:02.100 --> 00:45:08.51] >> Those who attend from Wall Street, you
know, they're checking their watches.
[00:45:08.51 --> 00:45:10.79] You know, they're talking about their summer
vacations.
[00:45:10.79 --> 00:45:17.45] Somehow, they have survived this disaster
of their own making, and it is back to business
[00:45:17.45 --> 00:45:18.47] as usual.
[00:45:18.47 --> 00:45:23.55] >> If you go have a speech on Wall Street
and people from Wall Street don't even show
[00:45:23.55 --> 00:45:26.82] up for your speech, and you're the president
of the United States—
[00:45:26.82 --> 00:45:33.79] what more public display can you make to try
and force these guys to come and participate?
[00:45:33.79 --> 00:45:37.92] And they apparently just felt like they could
just wash their hands and walk away.
[00:45:37.92 --> 00:45:40.53] >> It's a very difficult day for Barack Obama.
[00:45:40.53 --> 00:45:45.88] >> We will not go back to the days of reckless
behavior and unchecked excess that was at
[00:45:45.88 --> 00:45:48.43] the heart of this crisis, where too many were
[00:45:48.43 --> 00:45:53.30] motivated only by the appetite for quick kills
and bloated bonuses.
[00:45:53.30 --> 00:45:57.04] >> Once everything's calmed down, once the
banks have gotten what they want, once revenues
[00:45:57.04 --> 00:46:02.82] have gone up again, once things seem stable,
they just completely disengaged.
[00:46:02.82 --> 00:46:07.15] And there was no way for the White House to
force them to the table.
[00:46:07.15 --> 00:46:12.32] There was nothing that the White House could
do.
[00:46:12.32 --> 00:46:23.50] >> Fifty-two percent of the American people
disapprove of President Obama's handling of
[00:46:23.50 --> 00:46:24.50] the economy—
[00:46:24.50 --> 00:46:26.63] >> —rising doubt about his approach on domestic
issues.
[00:46:26.63 --> 00:46:31.42] >> Back in Washington, the president's efforts
to reform the financial system were competing
[00:46:31.42 --> 00:46:33.82] with another priority - healthcare reform.
[00:46:33.82 --> 00:46:35.77] >> Between the economy and health care reform,
the president's approval rating is tumbling.
[00:46:35.77 --> 00:46:41.73] >> You're tied down in this disaster of a
public fight over health care.
[00:46:41.73 --> 00:46:46.15] All the energy of the political people in
the White House are fighting this health care
[00:46:46.15 --> 00:46:47.15] campaign.
[00:46:47.15 --> 00:46:53.35] >> There was no interest, no incentive inside
the White House for doing structural reform
[00:46:53.35 --> 00:46:59.41] to the banking system before health care was
passed.
[00:46:59.41 --> 00:47:05.28] >> As the health care debate heated up, reforming
Wall Street was left to Congress.
[00:47:05.28 --> 00:47:06.80] >> The problem was the timing.
[00:47:06.80 --> 00:47:10.20] It was 2010.
[00:47:10.20 --> 00:47:13.05] And by 2010, the banks had recovered.
[00:47:13.05 --> 00:47:14.85] They were much more aggressive.
[00:47:14.85 --> 00:47:17.41] They were no longer under the thumb of the
government.
[00:47:17.41 --> 00:47:25.63] And they— they could, you know, water down
big parts of the bill, buy off senators, and
[00:47:25.63 --> 00:47:28.17] have more of their way.
[00:47:28.17 --> 00:47:31.57] >> Armies of bank lobbyists descended on Congress.
[00:47:31.57 --> 00:47:39.19] >> What you had was a financial system, individual
banks, that were really rescued by the U.S.
[00:47:39.19 --> 00:47:40.49] government and the Fed,
[00:47:40.49 --> 00:47:45.65] then using some of that money to influence
the U.S. government to make the rules less
[00:47:45.65 --> 00:47:47.72] strict on them going forward.
[00:47:47.72 --> 00:47:51.40] >> The vast majority of money that's spent
for lobbying was being spent by Wall Street.
[00:47:51.40 --> 00:47:54.90] And they were hiring the very, very best people
to do it.
[00:47:54.90 --> 00:47:57.06] >> The lobbying effort has just been incredible.
[00:47:57.06 --> 00:48:00.75] The banks have thrown every weapon they have
on Washington.
[00:48:00.75 --> 00:48:04.44] And it's— you know, this is what we've gotten
as a result.
[00:48:04.44 --> 00:48:06.87] It's like one loophole after another.
[00:48:06.87 --> 00:48:12.55] >> The one thing that's been demonstrated
by this is, if you leave the smallest hole,
[00:48:12.55 --> 00:48:13.99] the littlest hole,
[00:48:13.99 --> 00:48:18.32] very, very smart people on Wall Street will
figure out how to slip through that hole.
[00:48:18.32 --> 00:48:23.45] >> Key congressional proposals to break up
those too big to fail banks were kept out
[00:48:23.45 --> 00:48:25.46] of the bill by Wall Street lobbyists.
[00:48:25.46 --> 00:48:29.18] >> Almost two years after the entire banking
system almost collapsed—
[00:48:29.18 --> 00:48:31.74] >> It's designed to prevent another economic
meltdown—
[00:48:31.74 --> 00:48:36.03] >> Today, President Obama signed into law
the Wall Street Reform and Consumer Protection
[00:48:36.03 --> 00:48:37.34] Act.
[00:48:37.34 --> 00:48:44.42] >> On July 21st, 2010, President Barack Obama
signed what became known as the Dodd-Frank
[00:48:44.42 --> 00:48:45.42] bill.
[00:48:45.42 --> 00:48:49.69] >> And finally, because of this law, the American
people will never again be asked to foot the
[00:48:49.69 --> 00:48:52.69] bill for Wall Street's mistakes.
[00:48:52.69 --> 00:49:00.20] There will be no more tax-funded bail-outs,
period!
[00:49:00.20 --> 00:49:05.15] >> The bill included some rules against risk
taking by banks, limited consumer protections,
[00:49:05.15 --> 00:49:09.10] and new powers for regulators.
[00:49:09.10 --> 00:49:14.12] But even some at the White House admitted
the reforms may not be enough.
[00:49:14.12 --> 00:49:20.71] >> I think the weakness is that in order to
get it over legislative hurdles, there were
[00:49:20.71 --> 00:49:25.96] so many I's and T's left un-dotted and crossed
that big
[00:49:25.96 --> 00:49:33.15] decisions that are actually of great importance
are still being made.
[00:49:33.15 --> 00:49:37.28] And they're being made in a climate where
they're not necessarily under public scrutiny,
[00:49:37.28 --> 00:49:39.68] where the lobbyists have a chance to get in
and sway
[00:49:39.68 --> 00:49:40.99] things their way.
[00:49:40.99 --> 00:49:47.93] I very much worry that we haven't learned
the lessons that this crash should have taught
[00:49:47.93 --> 00:49:49.29] us.
[00:49:49.29 --> 00:49:52.34] In an era of this level of interconnectedness,
yeah, I worry.
[00:49:52.34 --> 00:49:57.87] I worry that we haven't learned the lessons.
[00:49:57.87 --> 00:50:02.52] >> The president's supporters say his greatest
accomplishment has been to save the financial
[00:50:02.52 --> 00:50:05.50] system from complete collapse.
[00:50:05.50 --> 00:50:09.81] >> The problem for Obama is the thrust of
his case right now to the American public
[00:50:09.81 --> 00:50:11.82] is it could have been worse, you know?
[00:50:11.82 --> 00:50:14.71] And that's a hard bumper sticker, "It could
have been worse," on the back of your car.
[00:50:14.71 --> 00:50:19.00] I think that's not something that you run
for president on.
[00:50:19.00 --> 00:50:24.60] >> That's an abstraction that can't be proven,
that you prevented something that didn't happen.
[00:50:24.60 --> 00:50:31.93] And it's a much harder sell to say to the
American people, as he's doing in this election,
[00:50:31.93 --> 00:50:33.82] "It could have been worse."
[00:50:33.82 --> 00:50:41.76] It's true, but it's not a very good— a very
strong political argument.
[00:50:41.76 --> 00:50:46.81] >> And many worry the serious problems are
still out there.
[00:50:46.81 --> 00:50:50.67] >> What we have done is institutionalize "too
big to fail."
[00:50:50.67 --> 00:50:56.27] And in many respects, one crisis sows the
seeds of the next crisis, and I'm afraid the
[00:50:56.27 --> 00:51:00.35] next one could be even larger.
[00:51:00.35 --> 00:51:04.42] >> The three pieces that we really had to
get right— too big to fail, risky investments,
[00:51:04.42 --> 00:51:05.42] derivatives.
[00:51:05.42 --> 00:51:07.67] It isn't a matter of opinion.
[00:51:07.67 --> 00:51:12.35] Those three things are three things that we
really haven't solved, and therefore, until
[00:51:12.35 --> 00:51:17.02] those are solved, we haven't dealt with the
problem.
[00:51:17.02 --> 00:51:22.27] >> Here we are, three years plus after, and
very little has changed.
[00:51:22.27 --> 00:51:24.94] In many respects, the financial crisis never
ended.
[00:51:24.94 --> 00:51:26.60] It never ended.
[00:51:26.60 --> 00:51:33.67] People seem to think about this financial
crisis as one in which there was a run-up
[00:51:33.67 --> 00:51:37.37] to September 2008, a bail-out, and then the
crisis passed.
[00:51:37.37 --> 00:51:42.99] But in fact, those clouds are still hanging
over the global economy and they're still
[00:51:42.99 --> 00:51:44.66] filled with risk.
[00:51:44.66 --> 00:53:10.83] This crisis really never ended.