"Too Big to Fail"

I recently saw the HBO movie “Too Big to Fail” about the bailout money given to the 10 largest banks in America. This was the TARP money you heard bandied about so much in recent years. It starred William Hurt as Hank Paulson (Secretary of the Treasury), Paul Giamatti as Ben Bernanke (Chairman of the Federal Reserve Board) and Billy Crudup as Tim Geithner (Chairman of the New York Reserve Board). It attempted to explain the banking industry melt-down in 2008 that left Lehman Bros. folding and both AIG and Merrill Lynch coming within a whisker of going down as well. It goes on to say that had the Federal Government not forced ten US banks to take 125 billion in Federal dollars, the entire economy would have gone up in flames.

I don’t disagree with the substantive facts that the movie portrays. Lehman Brothers, like Merrill Lynch, Goldman Sachs, AIG, and others had engaged in giving bad home mortgage loans, and then took out insurance policies on the bad loans. That way if the “border-line” borrower paid the loans they made money and if they defaulted the lenders also made money by collecting the insurance. Knowing they had it coming in one way or another, they just continued to give out increasingly more and more “toxic” loans. Money was made hand over fist. Borrowers enticed to take introductory low interest rates got into deals that were going to in time implode on them in the way of very high interest rates or balloon payments. It didn’t matter to the lenders because by the time the shit hit the fan they would have made their money off the loans no matter what. Executive compensation was at its highest levels in the history of this country, bonuses for landing crap loan mortgages were astronomical.

Then when the American consumer said no more, I refuse to pay a million dollars for a track home that is 15 years old, when consumers finally reach a point they simply couldn’t or wouldn’t borrow more the bottom fell out. Then the stock market fell as people sensed a massive down turn. The panic selling created the massive down turn they feared and away it went. Next thing you know the Federal Government saves Bear Stearns and then bailed out AIG. They also got Bank of America to buy Goldman Sachs thus averting their melt down. Paulson and Geithner also had a bank ready for Lehman Brothers (Barclay Bank of London) but the London Bank regulator demanded 30 days to review the transaction and Lehman couldn’t meet its obligations until even the next Monday so down it went.

Then later the 10 largest American banks are forced to take 125 billion federal dollars (tax payer money) and told to use it to make loans to borrowers. WHY? Well, these large banks (Wells Fargo, Bank of America, Citicorp etc.) had lay off employees and essentially shut down all lending. As the movie correctly portrayed when loans aren’t made people don’t buy, when they don’t buy you have the foundation of a depression.


All this is factually correct BUT the reason the movie pissed me off was because it made Hank Paulson, Timothy Geithner, and Ben Bernanke look like heroes as they frantically make deals to save banks, and force banks to get the economy moving again. Time and again Hank Paulson is seen wide awake at night worried sick over the plight of Americans, lamenting to his wife how troubling all this was. Poor, poor Hank Paulson the rat-bastard that blocked every attempt to regulate the banking and home loan industry going all the way back to Bill Clinton’s, and even George Bush I days. Time and again efforts to regulate the industry were attempted through congressional legislation and Paulson blocked and talked Presidents into using influence to block any regulation. Paulson used to be the head of Goldman Sachs and his saving AIG is called into question; since AIG’s biggest client was….you guessed it Goldman Sachs.


Geithner was Paulson’s lackey and he also never wanted any regulation. The kind of regulation that would have made it next to impossible to make toxic loans, and for damn sure not make the loan and then take out insurance policy protecting themselves from the result. At one point in the movie an aide of Paulson’s asked him, “Wouldn’t have regulating the industry have been easier”? Paulson (William Hurt) sighs and says, “Nobody wanted regulation, they were making too much money”. He and that weasel YODA Ben Bernanke (Chairman of the Federal Reserve Board) both knew that what was going on was WRONG. They are college educated economists and they knew it was WRONG but they stood fast with the money changers. They could have done something or at least led the way to reform. They are not heroes; they are morally bankrupted money grubbers.


At the end of the movie Paulson, Geithner, and Bernanke get the Bank Presidents in a room and tell them they are going to take Federal Dollars. Imagine forcing someone to take 25 billion dollars at a very, very low interest rate, my God the humanity. The ten agree to take the money (hey 10 billion doesn’t hurt right) but with the stipulation that NO regulations (beyond a couple of cosmetic paperwork/forms issues) would come with the money. Imagine that, because of no government regulations these lenders and others ruined the financial sector, get bailed out and then their punishment is they are given 125 Billion more and asked to use it to make loans to the American people (their customers) BUT are not required to.

YOU know what happened, they did not loan the money to customers (remember no regulations in place to compel them to do that) but instead bought land, other investments that made them even more money. Executive compensations and bonuses were higher than before the meltdown and after using taxpayer money to make money they gave the principle back. Americans still find it hard to get credit (4 years later), the unemployment is high, and banks are sitting on obscenely large cash reserves. How dare they portray Hank Paulson, Ben Bernanke and Timothy Geithner as heroes that saved the American economy!? There is Hank Paulson looking out the window in the last scene of the movie muttering to him, “they will lend the money to the people won’t they”? This hardened, hard-scrabble modern day Henry F. Potter (It’s a Wonderful Life) didn’t get to be in charge of the US Treasury with that kind of Mr. Smith Goes to Washington wistful hoping. Such nonsense and I am surprised HBO (which did the movie in 2011) would stoop to that muck-raking level.

When you ask a den of wolves to guard the chicken coop and later find out there are no more chickens and in fact there are a few missing rabbits too, the prudent question to ask is who put the wolves in charge? Their names are Hank Paulson, Ben Bernanke, and Tim Geithner. Heroes my ass.