Frontline’s “Money, Power & Wall Street” Series Shows Fed Was Flat-Footed:
The Fed, Bernanke, Geithner and Paulson were behind the curve.
Frontline has completed a new series called “Money, Power & Wall Street” that the describes the global financial crisis that began in 2007. The most interesting part of the series focuses on how the Fed, Ben Bernanke, Tim Geithner and Hank Paulson were caught behind the curve when the crisis worsened.
The new Frontline series is important not only for understanding what happened five years ago but for getting insights into what could happen several years from now. When a financial crisis is looming, most of the time, regulators are caught flat-footed and don’t know what banks are doing that is contributing to systematic risk.
Could Such A Crisis Happen Again?
Absolutely. Financial firms have a knack for skirting regulations and over time they find new instruments that will help them make money before they are regulated. Banks are innovative. The 2007 financial crisis may not have been avoided but the risks of contagion were clear and ignored until it was too late.
A New Crisis In Confidence 2012
As the U.S. economy continues to recover slowly, a new crisis in confidence may be occurring with investors lacking certainty. Fiscal uncertainty caused by the Obama administration kept market participants wondering if the U.S. government would shutdown while the Fed has put forward a noisy policy that underestimates how long it may take for the U.S. economy to add more jobs at the current rate. Investors are less confident than ever before about the future which keeps them holding capital and investing in safe instruments such as bonds. In essence, a new crisis in confidence is holding back the U.S. economy along with heightened levels of uncertainty.
Watch Frontline’s Money, Power & Wall Street Episode 2 Below-