The real truth about the 2008 financial crisis | Brian S. Wesbury | TEDxCountyLineRoad

Translator: Queenie Lee
Reviewer: Peter van de Ven I’m about to tell you some
unconventional wisdom, alright? I called my talk today “The real truth
about the 2008 financial crisis.” So, I guess what I ask you
to do this morning is to think about what you believe what the conventional
wisdom is about 2008, and I’m going to put some words
in your mind or describe it this way, and that is most people believe that the free-market capitalist system,
especially bankers, are greedy, they go through periods
of excess speculation, and then the world collapses and the government has to
come in and save us. By the way, this is the story
that was told about the Great Depression, and it is also the story that is told
about the 2008 financial crisis. Now, before I get into the meat
of my presentation, I want you to think about something else, and that is that the Federal Reserve controls the level of short-term
interest rates in our economy. Everybody knows that today, they’re holding
those interest rates at 0%, trying to get the economy moving again. What lots of people don’t remember
is that back in 2001, 2002 and 2003 the Federal Reserve dropped
interest rates to 1%. I want you to think about this. Because when you make
a decision to take out a loan, when you make a decision to buy a house, what is the most important
ingredient of that decision? I mean, obviously,
whether you have income, whether you like the house, but one of the most important
ingredients of that is the level of interest rates. Alan Greenspan pushed interest rates down to 1% in 2003 and 2004. In fact, interest rates
were below inflation for almost three years –
below the rate of inflation. Now, how do you think about this? So, when you’re looking at a house –
can I afford this house, the payment? Obviously, those payment streams are determined
by the level of interest rates, and when interest rates are low, you’re going to buy a bigger house, you’re going to buy
in a better neighborhood, buy cherry cabinets
and granite counter tops because you can afford it. So, let me put this into a story
that I know you can understand. And that is, when you come
to a green light in your car – you’re driving along,
there’s a green light – how many people in here actually
have ever stopped at a green light? I’m not talking about senior moments. (Laughter) I’m talking about stopping
at a green light, getting out of your car
and walking around to the other side, just to make sure
the other one really is red Because, obviously, if it was green too, it’d be dangerous to go through
that intersection. So what happens when Alan Greenspan
or the Federal Reserve holds interest rates
all the way down at 1%? You get a green light. You get a green light to make a purchase that’s bigger than probably you should, and by the way, the financial system
is no different than you. Bankers, they’re no different
than individuals. They would say, “Hey,
with interest rates so low, leverage, borrowing doesn’t matter
as much, it’s cheap. So, why don’t we
lever up a little bit more? After all, it’s Alan Greenspan,
the smartest man in the world, that tells us interest rates are 1%; in other words,
all the lights are green.” And, so what happens when you
hold interest rates down like this? You cause people to make decisions
that they wouldn’t otherwise make. Now, let me put this
in a different perspective. House prices went up 8% in 2001. By 2004, 2005 they went up 14%
in 2004, 15% in 2005. So you could borrow at 1%,
especially with those teaser loans, and you could have a house
that was appreciating at 14%: what a great deal! And, so what happened is we
encouraged more people to buy homes, bigger homes than they
should have at the time. We also encouraged bankers
to take on more leverage, and make more risky bets
than they would have if interest rates were higher. In fact, if interest rates
would have been 4 or 5%, I don’t believe we would have had
the housing bubble at all. Now, let’s go back in time
just a little bit, because this has happened before. The last time the Federal Reserve really
held interest rates too low for too long was back in the 1970s. In the 1970s, farmers
bought too much land, we drilled too many oil wells, we were betting on oil prices
going up forever, and in the 1980s, when farmland
prices collapsed and oil collapsed, banks collapsed too. By the way, the entire savings
and loan industry also collapsed in the 1980s because of the same reason: they made too many loans
when interest rates were low, and then, when interest rates
went up, they collapsed. At the same time, we made big banks make huge loans
to the Latin and South America. And so, if you go back
and look at the 1970s, banks expanded, they made loans to farming, housing,
oil, Latin and South America, and all of those parts
of the economy collapsed in the late of 70s, early 80s, and the banking system
was in monster trouble. In fact, the eight biggest banks
in America in 1983 had no capital – zero capital – because they had lent too much
to Latin and South American countries that all collapsed. And here’s my point of going back to that. That is if you go back
and look at the 1980s, the problems of the 1980s –
the banking problems – did not take down the entire economy. This time, they did. And so, the question is why, and we’re going to deal with that
in just a minute. And so one of the things
that I want to do is tell you something I just did, right? This is the picture of the S&P 500 – the 500 largest companies
in the US stock market. It’s a picture from 2008 all the way
through the first half of 2009. What I just recently did is I went back, and I read the verbatim transcripts of all the Federal Reserve
meetings during 2008. Now, the reason I just did this is because they only come out
with a five-year lag. The Fed they released little statements, and then minutes, and then five years later, they give us the full transcripts
of what they’ve talked about, right? All of those red dots,
there’s 14 of them, are a Fed meeting. Normally, the Fed
has six or seven meetings, but that was a crisis year, right? And so the Fed had 14 meetings that year. Just to put this in perspective, it’s 18 or 20 people
sitting around a table, and the verbatim transcripts
are each of them talking for three or four minutes if they go around and they vote
and they go around again; they vote. These transcripts were 1,865 pages long, 559,000 words. Now, I read these for you,
just so you know. (Laughter) And some people have a hard time,
like, what is 559,000 words? Well, the Old Testament is 593,000 words. I mean think about that, we’ve built the universe, wandered around the desert
for 40 years, 50 years, built an ark … There is a lot of stuff
that happened in the Old Testament. (Laughter) The Fed used that many words for one year of US economic history. Now, I could head down this road – maybe that’s another TED talk –
because that’s one of our problems. Nonetheless, one of the things
I want to point to is this huge decline in the market that happened in September
and October of 2008. You know what happened
in September and October of 2008? Well, first of all, the bloody weekend,
September 13th, 14th, I think it was, when Lehman Brothers failed,
AIG, Fannie Mae, and Freddie Mac, and all of those things happened, and the Federal Reserve started a program
called quantitative easing; that’s where they started to buy bonds
and inject cash into the economy in an attempt to save us. At the same time, in fact,
just a few weeks later, on October 8th of 2008,
Hank Paulson, the Treasury secretary, President Bush, the Bush White House,
Congress passed TARP: the Troubled Asset Relief Plan, and it was 700 billion dollars
of government spending to save our banking system, okay? I want you to take a look
at this chart a little more closely. Quantitative easing started right here,
TARP was passed right there. Did it help? In fact, the worst part of the crisis
was after TARP was passed. The stock market fell 40%; financial-company stocks fell 80%
after TARP was passed. In fact, if I look at this chart
and kind of squint at it, look at all those red dots, I would say the more the Fed met,
the more the Fed did, the worse it got. So, something else
must have been going on, right? In my opinion, the government did not save us, and in fact, this is one
of the problems that people have when they’re trying
to understand the economy. You see, there’s an interesting fact
about our world, and that is the free market – capitalism – does not have a press agent; the government does. The Federal Reserve does. In fact, there are about 2,000 books
about the financial crisis, but there are three main ones
that have just come out. One is by Timothy Geithner, former Secretary of the Treasury
under President Obama. He was the head of the New York
Federal Reserve Bank during 2008. He’d written a book about the crisis; who do you think he says saved the world? (Laughter) Timothy Geithner, of course. Ben Bernanke. He doesn’t have a book out –
he has a book of speeches out – who do you think he says saved the world? Ben Bernanke. Hank Paulson has a book out, and who do you think he says
saved the world? Hank Paulson. In fact, it’s not really
that they take credit themselves, but they credit TARP and quantitative easing and stress tests; that’s what Timothy Geithner
takes credit for: stress testing banks,
so that everybody can trust them, right? This is where I want
to shift gears, just a little bit, because what I want
to tell you is why – or explain – is why I believe this banking crisis turned into a true
overall economic crisis, while if you look back in the early 1980s, where banks had more losses
than they did in 2008, the economy did not collapse, and in fact started
to accelerate without TARP, without quantitative easing. In fact, Paul Volcker was raising
interest rates in the early 1980s, and the economy recovered. Here we cut interest rates to zero, and the economy
has grown relatively slowly. So, what caused this problem? By the way, in those transcripts
that I said that I read, Ben Bernanke asks his staff to go out
and find out how big the problem is, how many subprime loans were made, how many losses could we face, and he has a staff
of about 200 Ph.D. economists, and they came back
with a number of 228 billion dollars. Now, don’t get me wrong, I’d love 228 billion dollars, right? But 228 billion dollars is small
compared to a 15 trillion dollar economy. So, how did that small problem
turn into a problem that almost took down
a 15 trillion dollar economy, and the answer is
mark-to-market accounting. It’s a little-known accounting rule that most people
know nothing about, right? It was put into place in November 2007 after being out of place,
not enforced, since 1938. Now, let me give you a little
bit of background on an accounting. In the 1800s, bookkeepers, they were bookkeepers. They weren’t the accounting
profession yet. They were getting
more and more sophisticated, but they usually marked
everything to market. So, if you think about this, if the farmland goes up in value,
if your machinery goes up in value, if your inventory,
if loans go up in value, you get to mark those up. So, in good times, things look better, but then, when you start
marking things down, things look worse. And I believe that if you
go back to the 1800s, this is one of the reasons why we have
very sharp dips and drops in the economy, panics and depressions and things like that. In the 1930s, mark-to-market accounting
actually took lots and lots of banks out. In fact, it was such a bad law that the SEC at the time
told Franklin Delano Roosevelt that he should get rid of it, and he did in 1938. It didn’t come back,
all the way till 2007. So, what does mark-to-market
accounting do? Well, let me give you a story. Just imagine you live on the coast
of Texas, in Galveston, Texas, and you have a $500,000 house
right in Galveston, near the beach, and you have a $300,000 mortgage, and there is a hurricane on the way. And it’s only four or five hours away, and they’ve told you
to evacuate your neighborhood, and you’re packing up your pictures, you’re packing up
your most important belongings, and just before you leave the driveway,
your banker shows up. (Laughter) And your banker says, “You have a $300,000
mortgage on this house, and there’s a hurricane coming. Your house is about to be destroyed. We’re really, really
worried about our loan. I know you’ve paid every payment, but we’re going to have to
mark this house to market.” And you’re like, “Well,
everybody’s gone, no one left. I saw the realtor leave.
Who’s going to bid on this house?” He said, “Don’t worry,
there’s a fire truck. Let’s get the fireman to bid on it. They stopped the fire truck, said,
“Hey, make a bid on this house.” Fireman says, “There’s
a hurricane about to hit. I’ll pay 20 grand for it,” and the banker says, “You know what,
you owe me $300,000, but the house is only worth $20,000 because that’s the bid. So, if you can’t come up
with $280,000 dollars right now, you’re going to lose your house. You’re bankrupt. That’s what mark-to-market accounting is. And so in 2008, what we did is we said – what people were doing is – they were saying a hurricane is heading,
that no ones are worth nothing, and so, banks couldn’t sell assets,
they wouldn’t buy assets, and in reality, what happened
is their losses spiraled out of control, and it turned to a $300 billion problem
into a $4 trillion problem. Now, the amazing thing is,
right at the bottom, March 9, 2009, something changed the world. There’s a little-known –
well, actually he’s not little-known, but he’s retired now –
Congressman named Barney Frank. His financial services committee
actually held a year, and he brought the accountants in and said, “We don’t think
this rule is right,” and they changed the accounting rule. On March 9, 2009, they announced the hearing,
held the hearing on March 12, changed the accounting rule on April 2, and from that point on,
the economy has grown; the stock market is up 200%. And, what I’m getting to here is the fact that I believe this crisis
was not generated by over-speculation, well, in fact, was caused
by the Federal Reserve in the first place, and by changing this accounting rule, we brought about a recovery in our economy
that most people don’t understand. What they do believe is that the government
has caused the recovery, especially the Federal Reserve
through quantitative easing. I want you to think about this
for one second, and then I’ll close. That is that what the Federal Reserve does
is they go out and buy bonds, and when they buy bonds,
they inject cash into the banking system, and typically, banks will
take that money and lend it out, but in the last five years, banks haven’t. What banks have done is they’ve begun
to sit on excess reserves. And so, when you look at the economy today
and see how it’s growing, what’s fascinating about this is that this growth is actually coming
from entrepreneurship. I want you to remember one thing, and that is Ben Bernanke and Janet Yellen
have never stayed up all night drinking Red Bull,
eating pizza and writing Apps; (Laughter) they’ve never fracked a well; they haven’t ever built a 3D printer. And so, when you look at our economy,
what I’d like you to do is have faith that the free market actually works, and realize that many many times, government, rules,
regulations and actions, especially with interest rates,
have major impacts. I think the understanding of 2008
that people have, the conventional wisdom, that banks lost control
is actually the wrong thing. I believe it’s government
that lost control, and by fixing that rule, we actually started
the recovery that’s underway. Thank you very much. (Applause)

Comments 100

  • What… Plotted meeting dates with financial data…! Sheer bonkers

  • At least 5 years old! He says " Allan Greenspan — the smartest guy in the world … ". Yeah, right!

  • Back in the day you used to be able to buy a house either cash or pay it off within a few years. Now everyone is in your pocket. The government, the banks etc. The realtor and lawyer then take their cut to walk you through the tangled web and by the time you move in the cost is way over valued. You then sell, the government steps in the lawyers the realtor etc and you get screwed again

  • Don't trust this guy. Half-truths and whitewashing of history.

    Barney Frank was one of the causes of the GFC.
    Government twisted the arms of lenders to loosen their credit-worthiness standards.
    They did this in many ways, mostly through Democrats in the House and Senate accusing lenders of discrimination against POC.
    Democrats throughout the early and mid 2000's had a platform of trying to get more POC into owning their own homes. Immediately after the GFC, the Democrats, who pushed so hard for this, changed their platform and deny ever having a platform of twisting the arms of lenders to drop their lending standards.

    Democrats have a bad habit of rewriting this history. There were other groups putting pressure on lenders to drop the credit-worthiness standards, but Barney Frank and folks like Maxine Waters were instrumental in the pushing of bad government policy in the name of social justice.

  • No talk about the Tech Bubble crash, the repeal of Glass-Steagle, or why that “market-to-market” rule was put into place. And what about the lying of the ratings by the financial sector??

  • Alan Greenspan admitted he was wrong. This guy didn’t mention that.

  • Look at this guy. I could watch this on mute and know he's a shill for big banks.

  • How the fractional reserve system works:

    A farmer grows a tomato, tending to it carefully day after day until the day of ripening. He harvests it and transports it to the marketplace. A buyer yells out, "How many tomatoes did you grow?" The farmer replies, "I grew only one tomato, ma'am." A Manhattan farmer* later shows up at the same marketplace with only one tomato. Putting it out out for display, the same buyer asks, "How many tomatoes did you grow?" The Manhattan farmer says, "I only grew ten tomatoes, ma'am," when the truth is he obtained** his only tomato from the other farmer. The moral of the story is: nine out of ten economists recommend tomatoes over farmers.

    * Manhattan farmer = Wall Street banker
    ** gouged, manipulated, or purchased at fair market rate, it doesn't matter which

  • Nic speech….still greed!

  • In response to his last inspirational statement: it's too bad that banks own our government. We don't have capitalism. This is an important
    fact. When the government decided which banks will fail (Lehman) and which will get help to stay in business, it's called crony capitalism.
    The only good thing about 2008, is that we found out which bank owns Washington. Goldman Sachs. I find it difficult to believe an educated
    economist can talk more than 5 minutes about 2008 and not mention that Paulson, Bernake, and Geitner were ALL ex goldman CEO's. Further, that the institutions that they decided to save had Billions of dollars worth of credit derivatives with Goldman. Why did we bail out AIG? Which was an insurance company, not a bank. Because most of the cash (tax dollars) given to AIG went to pay off Goldman. Follow the money.

    He's spot on except for the example of mark to market accounting. His fictitious scenario was only from the borrower's perspective. Banks benefited by being allowed to keep their assets on their books at over-inflated 2007 values! Also, the banks did not sit on "reserve capital". Reserve capital at that point in time was tax payer dollars lent to them. But instead took our tax dollars and did mergers and acquisitions. Therefore became "too bigger to fail"!

  • Skip the talk; read the comments. Lots of very smart, well-educated people watched, and then shared their insights and experiences.

  • Hogwash

  • The comments saved me 20 mins. THANK YOU guys

  • So, from the comments, looks like most everybody agrees this perspective is, at best, very incomplete.

  • Markets fail. Governments fail. Both the banks and the federal government had a part in creating the Great Recession. The Congress enacted policies to encourage home ownership among people with little or no credit. It deregulated the financial sector encouraging the marketing of new and risky assets. Members of Congress in response to lobbying pressure badgered regulators to stop hounding the banks. Greedy bankers took full advantage of the incentives built in public policy to make risky loans (bundling mortgages into securities and the derivatives).

  • I could almost mistake this guy for an Austrian except for Ted's endorsement…

  • I just wanted him to chuck something at the large lady in the front row who was texting every time they panned to her.

  • inflation has averaged 5% per year since we got off of the gold standard in 1972. If the interest rate is less than 5%, the lender is losing money. That cannot continue. Eventually, the lender will run out of money (unless he prints more of it, which means more inflation).

  • I was a loan officer from 2003 to 2006. My wife ran the place and we put hundreds of people into homes that had no hope of making the payments. This replicated millions of times and of course it led to collapse. There was no way that could continue

  • He wrong about the "green light". A green lights give a guarantee that the other light will be red. There is no such guarantee to bankers that low rates will stay low.

  • PBS recently ran a documentary that started by showing a banquet in 2018 where all the principles (Bernanke, Geithner, Paulson, Summers, etc.) from the 2008 banking crisis got together to celebrate how they "saved the economy". Caviar was eaten and fine wines were consumed as they patted each other on the back. Omitted was the fact that they are the ones who caused the crisis in the first place.

  • M2M is the reason?!

  • I see you didn't mention the Glass-Steagle act that was repealed by congress in 1999…Contributing factor? Are you an industry schill?

  • "After TARP was passed the market down…" But it's not like a light switch -it takes time to take effect and longer to ripple through, doesn't it?

  • The banks caused the crash on purpose, had nothing to do with 911, and it's also starting right now

  • Lenders and government is the same bird, with different wings. The average person is clueless.
    Driven by ego and low self esteem, this is what fuels the American economic interests!

  • I can’t find any info about the dips in the interest rates before the Great Depression. I think Google may be broken

  • Thanks for sharing 👍🏆🏆🏆🏆

  • Cure all your ills abolish the federal reserve banking cartels, and their collection agency the IRS.

  • This not truth, he uses single isolated non-related examples to justify his "twisted narration of events"…Deregulation caused
    the calamity, 800,000 loans were made by banking officials without properly qualifying buyers, they were even lending thousands of dollars mortgages to peopple without jobs and 520 FICO scores…they push and push this crazy lending because someone figura out (banking industry) that could bundle high grade mortgages with extremely "junk" mortgages and SECURITIZE in bundles of thousands and sell them in the open market as REITS. Under this system, fraud individuals just lent and lent until market players noticed that it was a "house of cards" that lender had gone crazy and this WHOLE mess was caused by the lack of controls on the parts of the BANKERS….THIS GUY IS ON DRUGS

  • I think that our problem began when Congress repealed Glass-Steagall signed into law by BillClinton and allowed the banks to gamble with their funds. That there was both carelessness and malfeasance in the financial industry because of it and we were ruined because of it. No, I wouldn't place all the blame on the Board of Governors, but I would place a great deal of blame on Congress and our President for not realizing the effects of their actions.

  • This is only a part of the story. One tiny aspect of the event. Told from a traditional economist point of view. The low interest rate was just part of the cause. Most people in this comments section seem to know more about happened. Maybe they should be on Ted Talks.

  • In 1996 President Clinton ordered HUD Secretary, Henry Cisneros, to provide loans of $1 Trillion to borrowers who would not otherwise qualify. Fast forward years later, roughly $1 Trillion in home loans were in serious default. The mainstream media covered it up to cover for the Dems.

  • 10:24 Have you ever heard the phrase "correlation isn't causation"?

  • 10:42 Oh the government didn't save US. They saved the bankers.

  • I’m a college student in business and even I hear how much of a reach this guy is purporting. I guess I should stick to official TED vids 🙃

  • Paul Volker ftw. He also smoked cigars like a savage

  • This guy pisses me off. It was Dodd/Frank who started the whole mess in the first place!!!!

  • The banks had the responsibility to lend according to peoples real incomes.

  • the crisis was created by the global banking cartel to steal 10 trillion dollers of homes ..buisnesses… 401ks retirment funds from the world

  • The truth is it was all orchestrated like the Great Depression. Basically stealing money openly.

  • Shameless plug for unregulated banking with blatant manipulation of basic cause/effect principles. The wave of poor lending practices and ensuing foreclosures was well on its way before mark-to-market was reintroduced; reinstating just revealed the problem (likely intentionally) and shifted the blame from the lendee to the lender. No longer could overblown loans be so easily underwritten to under-qualified lendees (without providing proper due-diligence and ethical guidance), seize the assets, and then resell them at bubble prices on the market. Without the appropriate checks a repeat, if not rhyme, of history can be expected.

  • So , what this guy is saying is that , we all got loans and spend more than we can afford and when the unavoidable crisis came we were caught with the pants down .My theory is that the capitalist system came to a stage when it needs fundamental changes . The financial system that was establish after ww2 and runs today no longer works , either we transform it in something else or fundamentally change it or it goes down in flames , is as simply as that . The problem is , US financial oligarhy that keeps the grip on world finance won't let it go so , down in flames is what is coming to us .

  • 6.5k thumbs up, 3.5k thumbs down. That's a bad ratio, must be BS.

  • He's circling the truth here. He's certainly identified the villains – the Federal Government, and the private banking conglomerate that controls our interest rates (the "Federal" Reserve). And while I'm sure he didn't want to go too far down the rabbit hole in this talk, he fails to mention the mechanics of what caused this to happen, and that is, the unchecked power of the FDIC – which caused the S&L crisis and the first bailout under George Bush Sr., and the second bailout, which occurred in 2008-2009 on the watch of his son…and resulted in two of the largest government forced wealth transfer events in human history. I personally lived through this as a real estate developer and residential home builder and saw exactly how this all played out. And this economy is still at risk to a similar implosion as long as the FDIC maintains its unchecked ability to order banks to recollateralize loans because the FDIC perceives they (or anything else) may be risky to the "financial system" in an economic downturn.

  • Can see through him like a pain of glass.

  • It's funny that he wants to blame Greenspan and the Fed (obviously the banks are forced to make bad loans when rates are low) and the people for wanting a better life, and yet he also cites historical examples of low rates that led to financial collapse. What happened to taking responsibility for your actions?

  • Just look this clown up on google. His agenda is immediately obvious.

  • Nature goes on forever for everyone and everything to return as everyone and everything an infinite number of times. 😢 😢 😢

  • I completely disagree with the argument presented. It is in the speakers own interest to say that the crash couldn't be predicted by the banks because he didn't predict it himself. Of course governments played a part in the disaster but the banks caused it in no small part because of their greed and the fact that they were egged on by advisors who were motivated by self interest instead of looking at what was actually happening Vince Cable predicted it and so did Mark Carney

  • nonsense. housing bubbles and collapses are entirely intentional and by design. its big business.

  • what's the difference between the truth and the real truth?

  • If someone says he will tell the "real truth" you just know a bunch of bs will follow. In this case you will not be dissapointed

  • Prior to the lowering of interest, Congress had many public discussions about taking away the mortgage interest deduction. Think about it.

  • That is the truth and how they did it.

  • I have had the opportunity to listen and read a lot about the reasons that caused the financial crises of 2008, many say that it was because of the regulations issued since 1977 as the community reinvestment act under Carter's administration, because of the excessive speculation of the mortgage backed securities credits, supported by the Standard and Poor's risk rating agencies, Moody's Ratings, which were providing greater facilities to grant loans to people without guaranteed income the famous subprime loans.

  • Government intervention in markets typically causes distortions, or at the very least makes recessions far worse than they would have otherwise been. We don't currently have a free market system in America. It started out that way, but has become grossly corrupted. We now have a "hybrid" system of capitalism with a huge amount of government intervention. Some call it "Crony Capitalism". All laws (like all politicians) are bought and sold daily.

    My only point in commenting is to say this: This guy misstates facts in his very weak presentation here – namely, he says that mortgage interest rates around 2004- 2005 were 1% and houses were appreciating at an annual rate of 14% (at 4:33). Complete nonsense. Mortgage rates were averaging 6.5% during that time period. Look it up for yourself.
    And you can't make broad generalizations about how much "houses were appreciating" in America during a certain year. Why? Because rates of appreciation are different in San Francisco than they are in Detroit.
    Once someone grossly misrepresents factual data that is easily available to anyone – they loose all credibility with me.

  • People need to watch this video and not pay attention to the comments. Here is a summary : 70% personal responsibility. 30% big bank aggressiveness & FED.

  • Assets. Stocks are assets. Property’s are assets. Commodities are assets. Assets equate to a currency valuation. Currency valuations for assets fluctuate. If you borrow 100k of currency to purchase an asset, regardless of what a future valuation of the asset might be, your on the hook for the 100k. Buyer beware.

  • Watch THE BIG SHORT pls.. This guy is bs

  • From what I've heard the story goes like this: under constant criticism for not alleviating poverty (slums and rundown housing), the government then put tremendous pressure on banks to, against their better judgement, grant mortgages to "subprime" borrowers, i.e. high risk, lower-income, working-class individuals. The rest is history.

  • You decide. Brian Westbury wrote an editorial for The Wall Street Journal on January 28, 2008 titled “The Economy Is Fine (Really)”.

  • This is a circular argument. Banks know how money supply work, banks know about negative equity, banks know about affordability, banks know about leverage, banks know about bubbles and banks know about leverage. So if banks are incapable of making the right lending decisions even with all that knowledge then the regulators have to regulate banks; but banks always argue against regulation. And the most important argument is still that these banks hedged themselves when they knew a crash was coming and sold their clients junk bonds as triple A rated investments, which was a lie. This spiraled the process into the collapse.

  • I think the speaker got his point, although exaggerated as 'RT'.
    But nevertheless, Americans will find it out soon, because the rate is going back very low again

  • They do not make homes for single people any more. All they are making are Mc Mansoins.

  • If "mark-to-market" is no longer used to value assets what is used? He doesn't answer that question. Maybe we should let banks value their assets themselves, like they did in the 80s, and cause another banking crisis. But he is correct in critiquing the low interest rates, below inflation, as being a big part of the cause of the financial crisis.

  • Long story short: The Banks got bailed out because the have to power to create "Reality"

  • Wow, you may be a chief economist but your hypothesis about gov't actions on your chart (9:50) is simply flawed logic. Pointing at the action date of a new variable applied to a complex system (global economy) and then using a 5-month latency for the markets to stabilize as proof the Gov't actions had no impact is both illogical and oversimplified. Eco-propaganda. Keep shoveling.

  • I thought that everyone knew this.. It’s obvious isn’t it? Alan Greenspan holding interest rates at 1% for so long was a big mistake. Basically 9-11 kicked off the housing boom. I didn’t think that this was anything new.

  • I somehow know less after watching this. His original premise is wrong. It was greedy bankers. Some of them were in the government.

  • The problem with capitalism is that the bankers eventually run out of other people's money.


  • Every time there is a fire the fire service meet. It takes time to stabilise the fire. Therefor the fire service didn’t put out the fire. Ridiculous logic.

    Capitalism doesn’t have a press department? The reality of our media is at odds with this.

  • Had the Glass Steagall act not have been repealed the likelihood that the economic collapse would have occurred would have been like me hitting the Powerball jackpot

  • What a nut-head. He starts by assuming the government is wrong and then after a lot of words comes to the conclusion that … the government is wrong. In between he claims Greenspan was the smartest man on earth (hilarious), policies that do not have effect instantly are not helpful, and Ben Bernanke never ate pizza while working long days, and therefore …. what exactly? Here again we have a guy who builds his own brand selling nonsense that is popular on Fox.

  • What a bunch of 🐎 💩

  • red alert alarms go off in my head when someone promises "The Truth" – the alarms were correct regarding this presentation – i'm a capitalist too – but i'm not paranoid about the Fed – and i don't look at the 2008 recession without considering the effect of subprime mortgages – which was a leftist policy starting with Clinton – that brought about massive investments – spurred on by new investment packages (eg CDSs) – and to some extent by the Fed's loose money

    would the subprime investments have been less with a stricter Fed policy – that's the question – in other words – how much did the Fed contribute to the damage – but remember – encouraging subprime buyers to buy directly triggered the crash – and derivatives amplified the effect – and the Fed's policy may have too – but it didn't start the entire thing as this guy is claiming – Clinton & the DEMs did that

  • Gretchen, stop trying to make libertarians happen. It’s not going to happen.

  • Ted Talks is lying about bank loans.

  • Take into account that for every one million the bank has it lends it out 9 x they rely on everyone not withdrawing
    their cash so for every million they actually get 10x the interest on that one million. The hole Federal banking system is a big scam.

  • Federal Reserve is not a government organization.

  • Banks did loose control and were bailed out by a bankrupt government. In a couple years, this house of cards is going to crash worse than last time.

  • The central banker globalists control it all… yes out of greed

  • This is the stupidest TED talk ever. This would fail any logic test even at the grade school level. First you create a gigantic forest fire and then when the first firemen arrive you blame them for the fire.

  • It seems he’s saying the low interest rate causes the problem, I feel that the low interest rates were most likely the reaction to the economic problems.

  • He's sweating like aaaaaaa…liar?

  • After the savings and loan crisis in late 80s/early 90s bankers blamed the accounting rules for bank failures because they said the rules did not reflect market prices. 25 years later and the accounting rules are blames for the 2008/2009 financial crisis because they do reflect market prices. Accounting rules are just a convenient excuse for bankers to blame.

  • Disappointing that TEDx Talks also contain pro-banking propaganda titled as "truth". I feel that the TED brand is damaged here.

  • There is a one-word answer that explains the problem: capitalism.

  • Brilliant! But of course you can only explore so many things in a 20 minutes presentation. What is missing here is the unintended effect affordable housing laws had. Through AIG, Freddie Mac, and Fannie Mae the government, in an effort to make houses available to everyone, started reducing the requirements they made to guarantee loans. When I bought my first house 35 years ago the bank had a list of requirements you had to meet to qualify for the loan: you had to be gainfully employed by no less than two years, your mortgage payments could not exceed thirty some percent of your income, both to be proven by submitting a copy of your tax filings for the two most recent years, you could not be under bankruptcy protection or have filed for a number of years, etc. You also had to put down 10-15% of the amount you wanted to borrow in the form of a down payment. This all guaranteed that people could no buy houses they could not afford.
    Add to that the most devastating financial tool ever invented: the ARM (Adjustable Rate Mortgage), with now loose requirements that included, in many cases, just a nominal down payment (sometimes as low as 3%). The only situation an ARM made sense was if you intended to buy a property, sit on it for a couple of years to realize a whopping annual appreciation of 14-15% as it happened during 2004-2005, and then turn around and sell to realized a very nice profit, before interest rates on your ARM started to climb, up and you couldn't afford the monthly payments.

    The only thing required to get a loan being having a pulse, and people getting ARMs with ridiculously low interest rates and down payment caused a very large number of people to buy houses they couldn't afford and should have never bought in the first place. As the A (adjustable) part of the ARM started causing the interest rates to go up many people found themselves unable to make the mortgage, and mortgage defaults began, and as the rates of the ARMs hit a critical mass of mortgages defaults cascaded. People started walking away from properties and banks started foreclosure procedures, and as the supply side of the market grew dramatically Real Estate prices collapsed.

    I agree with the presenter, the people who claim to have save us are precisely the ones who pushed us over the cliff: The Federal Reserve and the Federal Government.

  • The real problem is humans, they're gullible enough to believe a piece of cloth masquerading as paper has any real value to it at all. Humans ruin everything they touch.

  • 9:13 "In an attempt to save US?" Give me a break. Your explanation of Mark to Market is pathetic and nonsensical. They changed FASB in '09 to allow Mark to Model and we've been lied to ever since. And spare me your sentiments about "free markets"……they don't exist and you know it. That's why your speaking to the audience like they're 2nd graders. 2008 was a coup, and the pillage of the country continues to this day. By the way, the Fed did not just purchase Treasuries….they printed 2 trillion to buy non performing MBSs, which is completely outside their illegal 1913 charter. You thieves are uncloaked now….we see you.

  • Just saw this and think this man missed 99.999% of all the other bank controlled problems, and wall street selling the loans which they knew were bad off to the rest of the world. Less we forget the government bailing these crooks out when it failed so nice try Sir. I forgot to add I made it 3 minutes in and could see right through the BS.

  • I understand what this speaker is saying but I can't entirely agree with his analysis. Yes, mark-to-market contributed, but to say that was the only problem is a bit naive. wulf67 and the themikeaustin and their commenters make some excellent points and basically show that the problem evolved in many areas (a real "comedy of errors"). And yes, greed in many of those areas played a big role. Certainly, there is plenty of blame to go around on all sides of the argument.

    Also, I've always said that banks didn't really do anything they weren't allowed to do. In other words, our government played a big role in the whole mess yet, you never heard that get acknowledged by anyone in government. I remember also how naive it was of Greenspan to think that shareholders of the big corporations were going to be the people that "right the ship" out of concern against the lousy business practices the shareholders' companies took part in. That was a huge joke. And even worse, Greenspan, ignoring and even scorning the advice of Brooksley Born (who rightly warned of impending doom in the derivatives market) urged Congress to limit her oversight of the derivatives market – which they did. I've always felt that had Brooksley Born been allowed oversight, the problem, though it may still have happened, would not have been anywhere near as bad as it was.

    Further, I sincerely believe that a crisis will also develop out the Trump administration as a consequence of his massive deregulation and skirting of proper oversight. It will not be a matter of if, but when.

  • still on crisis you MF!

  • Thought this was going to be INTERESTING. This guy sucks. Who made the risk assessments on all those loans…??????

  • TED Talks, you should be held accountable for spreading this bs.

  • "Now, follow my hand…"

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