On Thursday, Sept. 18, 2008, the incredulous leadership of the US Congress was told in a confidential session by the chairman of the Federal Reserve that the American nation was in grave danger of a complete meltdown within a matter of days. “There was literally a pause in that room where the oxygen left,” says Sen. Christopher Dodd (D-Conn.). As the housing bubble burst and trillions of dollars’ worth of toxic mortgages started to go terrible in 2007, dread spread through the massive firms that form the heart of Wall Street. By the spring of 2008, burdened by billions of dollars of terrible mortgages, the investment bank Bear Stearns was the subject of rumors that it would soon fail. “Rumors are such that they can just plain place you out of business,” Bear Stearns’ former CEO Alan “Ace” Greenberg tells FRONTLINE. The company’s stock had dropped from 1 to a share, and it was hours from declaring bankruptcy. Federal Reserve Chairman Ben Bernanke acted. “It was clear that this had to be contained. There was no doubt in his mind,” says Bernanke’s colleague, economist Mark Gertler. Bernanke, a former economics professor from Princeton, specialized in studying the Fantastic Depression. “He more than anyone else appreciated what would happen if it got out of control,” Gertler clarifies. To stabilize the markets, Bernanke engineered a shotgun marriage linking Bear Sterns and the commercial bank JPMorgan, with a promise that the federal government would use billion to cover Bear Stearns …
Video Rating: 4 / 5
Randal Wray: Banks are larger than in ’07, are cooking their books to show profits – need regulation and increase in purchasing potential and jobs program to avoid larger crash
Video Rating: 4 / 5
