Early in “Money, Power and Wall Street,” a two-night, four-hour investigation by “Frontline” into the 2008 financial crisis, former JPMorgan Chase & Co. (JPM)’s investment bank Co-Chief Executive Officer Bill Winters recalls a 1994 staff retreat in Boca Raton, Florida.
The gathering was as boisterous as it was momentous.
“I went into the pool fully clothed,” says Winters. “So did my boss.”
More than alcohol fueled the high spirits. A team of JPMorgan bankers, all in their 20s, had just dreamed up a new insurance product for loans that would bring absurdly huge profits. Their invention of the credit default swap set in motion a path to untold riches and global crisis.
Frontline certainly isn’t the first to report the Boca Raton tale -- “Fool’s Gold” author Gillian Tett receives on- air credit -- or the “too big to fail” days of 2008. But the series’ first two hours (parts three and four were not finished in time for review) do an exemplary job of walking viewers through a 14-year saga defined by daunting complexity.
With access to Wall Street players -- and the top reporters who covered them, including Joshua Green of Bloomberg Businessweek -- “Frontline” assembles a compelling history. “Money, Power and Wall Street” is demanding -- this isn’t Finance for Dummies -- but it’s a compact and thorough lesson.
Series producer Martin Smith steers a first hour highlighted by interviews with the JPMorgan bankers who created those profitable new financial tools. Blythe Masters, for one, recounts the company’s first credit default swap (for Exxon (XOM), stung with billions in losses from the Valdez oil spill). Derivatives trader Terri Duhon details JPMorgan’s expansion of the practice to multi-investor portfolios.
Other banks soon joined the unregulated free-for-all, with an increasing reliance on risky but profitable credit default swaps tied to home mortgages. Politicians of all stripes turned a blind eye.
Financial consultant Satyajit Das tells “Frontline,” “We were just moving the risk from one party to another party.”
“You could just about drive by a bank and they’d throw a loan paper in your car as you passed by,” says Roy Barnes, the Georgia governor routed from office in 2002 after angering the banking lobby with a tough (and soon gutted) predatory lending law.
“Frontline’s” first hour concludes with scenes of the devastation Barnes feared: Entire Atlanta neighborhoods pocked with boarded-up homes.
In the second hour, Michael Kirk examines the 2008 bail- out, beginning with the implosion of Bear Stearns & Co. and ending with the government’s injection of $125 billion of public money into eight banks. Despite some initial reluctance, the banks, says economist Robert Reich, “were sitting fat and pretty and happy.”
Though the events chronicled in Kirk’s hour will be familiar (from HBO (TWX)’s adaptation of Andrew Ross Sorkin’s “Too Big to Fail,” for starters) the program feels fresh and vivid - - and takes no prisoners.
A highlight: A blow-by-blow account of the White House meeting in which President George W. Bush briefed Congressional leaders and presidential candidates on the bail-out. Observing a grandstanding Barack Obama and a bumbling John McCain, Bush, says “Frontline,” whispered to House Speaker Nancy Pelosi, “You guys are going to miss me.”
Plenty of Blame
“Frontline” finds plenty of blame to go around (Goldman Sachs (GS) and CEO Lloyd Blankfein take a particular bruising), but is most devastating in its dissection of the chummy collusion between bankers and the government leaders who should have been watch-dogging them.
“It’s quite clear that there was massive illegality going on” during Wall Street’s boom and bust years, says Dennis Kelleher, a former Skadden Arps attorney who now serves as president of Better Markets, a nonprofit that promotes public interest in financial reform.
Parts 3 and 4, airing May 1, will focus on the Obama White House and current Wall Street practices.
“Money, Power and Wall Street” airs Tuesday on the Public Broadcasting Service’s “Frontline” at 9 p.m. New York time. Rating: ***1/2
What the Stars Mean: **** Excellent *** Good ** Average * Poor (No stars) Worthless
(Greg Evans is a critic for Muse, the arts and leisure section of Bloomberg News. Opinions expressed are his own.)
To contact the writer on the story: Greg Evans at firstname.lastname@example.org.
To contact the editor responsible for this story: Manuela Hoelterhoff in New York at email@example.com.