We sit here and stare at the bad news, see big corporations in trouble, banks going bankrupt, bankers going home with insane bonuses although they cost their companies and thus US money, billions of money. We sit here and try to understand what is going on here. Try to understand the gambling with credit default swaps and toxic assets, subprime mortgages and other risky financial constructs.
Although some call this phenomenon a “black swan“, something totally surprising this is no explanation to me. For everybody involved in this game, all of these investment wizzards, who came up with these supercomplex derivates, at some point at least, they MUST have seen a small glimpse of the risk they are putting us all in. The vicious cirlce which was going on here. Insurance companies betting on their great ratings should have been NOT aware of what would happen if they lose this reputation, that they put their whole business and thus the business they are constantly insuring to a fatal risk?! No way. In this case they must have been smart AND stupid at the same time.
So what’s the learning from all this? We must know more. We must learn. All of us must try to understand what was going on here and be able to talk eye to eye to politicians, to journalists, to bankers. There is a program on American Public Broadcasting System (PBS) which seems to bring a great deal of learning: Frontline – Inside the Meltdown. A very well done site and a very insightful documentary about the crisis. Interviews and original clips put together to understand the dramaturgy of the crisis: Bear Stearns, Fanny Mae, Freddie Mac..
Here is one of the clips: