So episode two continues with the same propaganda narrative. For example, Ben Bernanke is presented as a top expert, with Paul Krugman saying if he wasn’t Chairman of the Fed, he’d be the guy you go to to understand all this stuff. Except that Bernanke couldn’t even see it coming and denied there even was a housing bubble right up until it burst (while Ron Paul was warning about it for nearly a decade).
It similarly portrays President Obama as a great leader who managed the crisis as only a great leader could. Which he did, of course, by bringing a bunch of guys responsible for helping to create the crisis to help “solve” it, which they did, of course, by bailing out the banks at public expense.
Like Timothy Geithner, head of the Federal Reserve Bank of New York, who was, to the bankers, “one of their own”, the program points out. With him at the helm at the FRBNY, Lehman Brothers CEO Dick Fuld felt confident that Lehman would get bailed out, but Treasury Secretary Hank Paulson–former CEO of Goldman Sachs–decided to make an example of Lehman.
Yet this decision by Paulson to allow a free market solution–bankruptcy–rather than to bail out Lehman is villainized in the show, characterized as disastrous. Krugman is shown trying to imagine what it must have been like for Paulson at the time to have just made the “decision that may have destroyed the world”.
So when it became apparent that insurance firm AIG was going under as well (a consequence of its $526 billion portfolio in credit default swaps), of course the mantra was that if it was allowed to collapse like Lehman, it would lead to a “worldwide depression”. Geithner, naturally, argued for a bailout, and Paulson, not wanting to be held responsible for having “destroyed the world”, got on board. The bailout of AIG is portrayed in the show as an act to “save the economy”. Geithner’s plan was to pay AIG’s full losses, $180 billion dollars. Goldman Sachs–Paulson’s former hangout–and other banks also received billions.
Then Bernanke pressed Paulson for another major Wall Street bailout. They went to Congress and warned of a financial meltdown of “epic proportions”. If Congress didn’t pass this $700 bailout bill, there (gasp) wouldn’t be an economy! It would be the end of the world!
There was an emergency meeting with Obama, who is, of course, portrayed as well-informed and “prepared”, the big hero. Frontline drools over Obama’s “dominance” at the meeting.
Congress passed the Troubled Asset Relief Program (TARP) bailout bill. The heads of the nation’s largest banks were then summoned to the Treasury department and told by Paulson that they would receive billions in taxpayers’ money, whether they wanted it or not. The government would take an ownership stake in the banks, the CEOs were ordered, and this was “not really discretionary”. When the CEO of Wells Fargo refused, Paulson threatened to declare the bank “capital deficient”. The banks all took the money.
There were no strings attached. The banks wouldn’t have to do anything differently from what they were doing before. Hooray for our heroes, Obama, Bernanke, Paulson, Geithner, et al, who saved the world from destruction!