TABACCO: If you don’t or didn’t work on ‘Wall Street’ (I mean that generically, not literally), you still do not understand why the T.A.R.P. BAILOUT was necessary or sufficient. Recent History has proven the ‘sufficiency’. I have finally found an explanation of the ‘necessary’.
The Media uses terms like ‘Derivatives’ and ‘Credit Default Swaps’ as if the folks in front of their TVs know what is being said. Hell, most of those Talking Heads didn’t know what they were mouthing.
I have viewed ‘Too Big To Fail’ previously, but I glossed over this one epic scene where an explanation as simplistic as you are ever going to get was delivered (to inform the audience, not the players in the room). It always pays to watch important films more than once. You always pick up on stuff you ignored the first time. I have this film on TiVo, so I watched it again to refresh my own knowledge. Then I realized that I should publish this scene for novices like myself.
Without further ado, I transcribe that scene. Names of participants are omitted lest I publish this in 2014. The content, not the sources, is what is essential.
The woman in the scene represents us, the ignorant viewers, who don’t work on Wall Street.
THE REAL ESTATE
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Transcribed by Tabacco:
(William Hurt as Hank Paulson, George W. Bush’s Treasury Secretary & Former CEO Of Goldman Sachs at U.S. Treasury, I think): Where’s AIG?
Man: It closed at $2.00.
Hank Paulson: Tim (Geithner) thinks we need to do something big. Ben agrees and so do I.
Woman: What can we do? AIG’s not even a bank.
Hank Paulson: The Fed can lend to non-banks under unusual and exigent circumstances we’re thinking of: taking over 80% of the Company.
Man: Hank, we can’t! This morning we were lecturing the entire country on moral hazard.
Hank Paulson: AIG has collateral; they have assets. Lehman didn’t! We couldn’t lend into a Hole – it’s not the same story. (Lehman Brothers was allowed to FAIL!)
Man: Nobody’s gonna care – it’s another BAILOUT! With no legislation, the Hill’s gonna go crazy – the country’s gonna go crazy!
Hank Paulson: The plane that we flew in on this morning, leased from AIG. Construction downtown, AIG! Life Insurance, 81-million Policies with a face value of $1.9 Trillion! Billions of dollars in Teachers’ Pensions; it’s everywhere! You want Too Big To Fail – here it is!
Got a better idea? The Suggestion Box is wide open!
Woman: I hate to do this right now, but I’m gonna have to have a Press Call first thing, and I really don’t know what I’m gonna tell them.
Man: Tell them Lehman exacerbated AIG. The simultaneous payouts of CDOs and Credit Default Swaps put catastrophic pressure on –
Hank Paulson: Go back further!
Man: The global pool of investment capital –
Hank Paulson: She has to do this in English! Start with the homeowners!
Man: OK! OK! Here’s how you explain it! Wall Street started bundling home loans together – mortgage backed securities. And selling slices of those bundles to investors! And they were making big money. So they started pushing the Lenders saying, “C’mon, we need more loans!”
Hank Paulson: TheLenders were already giving loans to borrowers with good credit, so they go bottom feeding – they lower their criteria.
Man: Before, you needed a Credit Score of 620 and a Down payment of 20%; now they’ll settle for 500, no money down.
Man: And the buyer, the regular guy on the street, assumes the experts know what they’re doing. He’s saying to himself, “If the bank’s willing to loan me money, I must be able to afford it!” So he reaches for the American Dream – he buys that house!
TABACCO: Here’s where the Banking Industry Apologists are wont to say, “The guys, who took those mortgages were greedy; they should have known better!” Republicans are always ready to BLAME THE VICTIMS! But this film tells the Truth!
Man: The banks knew securities based on Shipegg mortgages were risky.
Hank Paulson: You work on Shipegg!
Man: So to control their downside, the banks started buying a kind of insurance. If mortgages default, the company pays – “Default Swap”. The banks insure their potential losses to move the risk off their books so they can invest more and make more money.
Hank Paulson: And when a lot of companies insured their stuff, one was dumb enough to take on an almost unbelievable amount of risk.
Man: And you’ll work on “dumb”!
Woman: When they ask me why they did that?
Man: Hundreds of millions in fees!
Hank Paulson: AIG figured the housing market would just keep going up. But then the unexpected happens.
Man: Housing prices go down! (pointing with finger)
Man: The poor bastard, who bought his dream house – the ‘Teaser Rate’ on his mortgage runs out; his payments go up, and he defaults!
Hank Paulson: Mortgage backed securities tank; they asked AIG to pay off the Swaps – All of them, all over the world at the same time!
Man: AIG can’t pay! AIG goes under!
Man: Every bank they insure books massive losses – on the same day! And then they all go under!
Man: It all goes down!
Woman: The whole financial system?!
Man: (silently “Yes”)
Woman: And what do I say when they ask me why it wasn’t regulated!
Hank Paulson: No one wanted it! They were making too much money! (Paulson walks out of the room, goes to men’s room to put water on his face)
Man: You work on “They were making too much money”.
(END OF SCENE)
NOW LETS BACKTRACK TO AN EARLIER SCENE IN FILM, WHICH IS ALSO EXTREMELY INFORMATIVE!
Hank Paulson: I spoke to Greenspan. He says there’s too much housing supply; that’s the problem! So we should buy up all the vacant houses and burn them! (Greenspan’s SICK JOKE!)
Hank Paulson: What do I have to tattoo on my forehead “We are not bailing out Lehman. Wall Street has a gambling problem. If the government keeps covering their losses, they never learn anything!
We need to keep them at the Table until they come up with a Private Sector Solution. (Paulson is attempting to get the other Scumbags to write Multi-Billion Dollar checks to cover Lehman’s ‘TOXIC ASSETS’ ($70 Billion without any Collateral) to protect themselves as well as Lehman (We’re talking Dominoes here, folks), but without another government ‘BAILOUT’! That’s a word these folks would rather not use. ‘Welfare’ is another one of those words they always euphemize – except when talking about the Poor. Say ‘Corporate Welfare’, and you are escorted out of country, not just the room)
We’ll keep Barclays in the mix but BofA is still our best bet. We’ve got the CEOs of every major bank coming here tonight. We have to make it clear that this is their problem! We are their advisors and their allies, but we are NOT their Safety Net!
Man: What should we expect from these guys?
Hank Paulson: (a stern look, but no response)
Hank leads a government group into the Big Boardroom Meeting
Thanks for coming down here on such short notice! Monday morning, Lehman will no longer be able to honor its obligations! We have two potential buyers, BofA and Barclays! Neither will take the Company unless someone else finances part of the deal.
The government is NOT in a position to step in! I did the last one; you’re gonna do this one! (Paulson means Bear Stearns)
Man: If Lehman files for bankruptcy, we need to figure out how to contain the damage to the rest of you!
Government Hack: Gentlemen, you are great Americans, undertaking a patriotic duty. Your travail will earn you the love and gratitude of your country. I think it was Thomas Paine, who said –
Hank Paulson: (cutting through the BS) Lehman is a trading partner for every bank in this room! Their failure will be a massive blow to all of you! This is your problem! We can argue about how we got here, Deregulation, Derivatives, Dick Fuld (Chairman/Lehman Brothers CEO) made bad decisions! We’re all responsible, the catastrophic mess! The government’s done whatever it can do – it’s on you now! You need to fix it, and you need to pay for it!
Let me be clear: we will remember anyone who’s not helpful! (Threatened like a typical powerful Republican Politician)
TABACCO: In the end, we got T.A.R.P. We paid for it with Chinese Loans, and nobody is saying what happens to the REPAID T.A.R.P. Loans when the Government gets the money back! If you know, please tell me – but supply your information sources in detail!
Do you know? I do not! And I have never heard any TV Talking Head ask that question! If every penny is NOT used to pay down the National Debt (increased dollar-for-dollar by T.A.R.P.), then we have been DOUBLE SCAMMED!
Tabacco: I consider myself both a funnel and a filter. I funnel information, not readily available on the Mass Media, which is ignored and/or suppressed. I filter out the irrelevancies and trivialities to save both the time and effort of my Readers and bring consternation to the enemies of Truth & Fairness! When you read Tabacco, if you don’t learn something NEW, I’ve wasted your time.
Tabacco is not a blogger, who thinks; I am a Thinker, who blogs. Speaking Truth to Power!
In 1981′s ‘Body Heat’, Kathleen Turner said, “Knowledge is power”.