The Financial Crisis, the Recession, and the American Political Economy: A Systemic Perspective

Charles Ferguson shows how useful a varied background in math, political science and business can be, as he dissects the complexities and recent crisis of the U.S. financial system. In a lecture that distills many of the arguments of his recent film, Inside Job, Ferguson conveys dispassionately yet persuasively the reasons we all should feel profound anxiety not only about the nation’s financial institutions, but about our economic and political future as well. Ferguson details the “securitization food chain,” a system of investing (and gambling) with debt that U.S. financial institutions enthusiastically adopted around 15 years ago. Encouraged by friendly government policies, a handful of investment behemoths such as JP Morgan and Lehman Brothers began transforming the banking landscape, buying up mortgages and other forms of debt worth countless billions of dollars, and packaging these securities for buyers worldwide. Allied financial institutions became adept at selling cheap mortgages to ordinary people, creating an inflated housing market. Insurance and ratings companies bought in. The speed of growth and scale of this securities chain was unprecedented, recounts Ferguson — as was its impact on the nation’s economy, both at the market’s peak, and after its collapse. Ferguson provides a very detailed and pointed sidebar on industry incentives that underlay the wild growth years. These included allowing investment banks to bet on the failure of their own securities; and linking rating agencies’ income to their approval of risky securities. Individuals inside big institutions made out like bandits, because they could. Senior executives in places like Bear Stearns took out over $1 billion in cash each in the years prior to the 2008 collapse. The head of Countrywide Mortgage saw the end coming, and cashed out over $100 million in stock. Asks Ferguson, “Why was such extreme behavior permitted? I have to conclude there was a complete abdication on t...

Channel: MIT World Video Length: 0s Date Found: Fri, Jan 07 2011 7:04 PM Category: Science Date Produced: Fri, Jan 07 2011 12:00 AM View Count: 1