HBO's ‘Too Big to Fail’ – A Reality Check

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“Fascism should rightly be called corporatism, as it is the merger of corporate and government power.” ~ Benito Mussolini

Now that we are pushing the three years anniversary of the dramatic financial events of September 2008, it is fair to say, for anyone who has researched the subject on their own, that this movie is nothing but a popularization of the mainstream version of a crisis that only has been postponed and worsened. It portrays the criminals of the revolving door between Washington D.C. and Wall Street as heroes, without so much as touching upon the real reason for the boom and bust phenomenon.

Let's dissect the movie scene by scene.

The introduction shows the Clinton administration repealing Glass-Steagall and how home ownership all of a sudden became a part of the American dream. How Bush Jr. meant that inflating the largest mortgage bubble in history was "good not only for the soul, but also for the pocketbooks of the country." Several news clips are shown, none of which include the accurate warnings given by free market economists such as Peter Schiff or Jim Rogers. Surprised talking heads announce how Bear Stearns are being sold for pennies on the dollar to JP Morgan before the story kicks off in Lehman Brothers' CEO and Chairman Dick Fuld's office.

Fuld seems surprised with the situation of his financial Titanic, which makes little sense considering the outrageous repurchase transactions he undertook prior to September 2008 to cover for the bank's true leverage ratio. Fuld's scapegoat is instead the police of the markets, the short sellers!

Morally correct Hank Paulson can't recommend private investments, when being asked by Fuld to get in touch with Warren Buffett. Paulson's advisers work hard throughout the story, but as Dennis Kucinich has pointed out in Congress, the question is who they are working for…

Value Warren doesn't like what he sees unfolding in the banking sector (until he gets a friendly phone call from Blankfein later in the film) and refuses to touch Lehman at the current price. Fuld jokes about how no one forced mortgages on home buyers, but we all know of one institution that highly encouraged the credit mania with artificially low interest rates for years.

During Hank and Helicopter Ben's weekly breakfast Hank says he has just spoken to Alan Greenspan who complains about the over-supply of housing, a problem which, according to Greenspan, easily can be solved by buying up all the houses and then burning them. This is a wonderful example of the broken window fallacy these people seem to live by. Letting the artificial bubble burst would make housing affordable, but burning houses to encourage economic (GDP) "growth" is seen as a better idea.

The Bernank mostly eats porridge throughout the movie, besides claiming he has spent his entire academic career studying the great depression. The detail that not unexpectedly is missing in this Krugmanian porn flick is that the measures now being implemented are strikingly similar to the ones that accelerated the JP Morgan margin call-triggered crash of 1929 into a depression that lasted until the central planning of WWII loosened its grip of the US economy in the late forties.

Back at Lehman "it's not just a bad quarter" and management is panicking. Dick Fuld blows the deal with potential Korean buyers by trying to convince them that the firm's portfolio of asset backed securities isn't as bad as it appears. Fuld calls Kashkari at the Treasury out of desperation, but refuses to listen to his advice of selling at a lower price.

The following day, Timmy Geithner is "managing" the collapse of Fannie and Freddie from the squash courts. Obama is giving empty campaign promises of stability, which in all other languages than doublespeak means further instability, saying that nationalization of the two mortgage lenders may be an option. On his trip to the Beijing Olympics, Paulson receives a warning from the Chinese that they and the Russians might trash the entire mortgage market unless the US Treasury takes action (to prop up the phony credit-based economy).

It seems this sequence is supposed to justify breathing tax payer air into the corpse that is Fannie & Freddie.

Paulson scares Bank of America by sending a message that bailing out Lehman is not an option. When telling Geithner there is no legal support for the bailout, even though they just helped Jamie Dimon pick up Bear Stearns, Geithner replies that "legally, we haven't figured out how yet" — a statement that should make red flags fly all over the place.

The Lehman stock keeps sliding and Paulson orders the Bernank to summon all the banks' CEOs to a lockdown meeting at the Fed, where they surely already know their way around. At the airport Hank and his team meet with Christopher Cox from the SEC who asks whose private jet they're flying. "That's a rental, Hank put it on his card," is the reply from another former (current) Goldman (Government) Sachs employee. SEC asks with authority if there's anyone in the Treasury who isn't from Goldman, whereupon we get a reassuring: "Chairman, just to be clear, there's no conflict of interest here, Hank sold all of his shares in Goldman before he took office. Thanks for clarifying this, script writers.

The reproduction of the infamous mahogany meeting at the Fed is as full of clichés as it was in Wall Street II and climaxes when Cox from the SEC reaches out to the banksters: "Gentlemen, you are great Americans undertaking a patriotic duty." This statement is so laughable that even Jamie Dimon cracks up.

After BofA decides to take a stake in Merrill Lynch, it becomes evident that Lehman has to go. But there is another problem arising, namely AIG "running out of cash." The same fear mongering we were delivered through the media is being presented here; everything from airplanes to construction projects to life insurance relies on AIG in one way or another. The world would practically freeze unless AIG gets bailed out. We're all familiar with the billions of dollars of CDS-related obligations the insurance giant held toward Goldman. The rest is unfortunately left to speculation, as the US justice system refuses to touch GS even when being handed rock solid proof on a silver platter by Carl Levin's recent Senate hearing.

Other critics have mentioned how Paulson is portrayed as a financial Jesus in Too Big to Fail, an image that becomes embarrassing when he nearly cries to his wife over the phone about how the fourth largest investment bank is about to go down "on his watch." The next day however, Hank and his team celebrate how media and Congress respond to "his decision" to let Lehman go.

Now the toxic assets really hit the fan and even IMF candidate Christine Lagarde complains to poor Paulson, "how did you dear to let Lehman go." General Electric makes it clear how business in America will shut down unless the economic overlords take action to stimulate the banks. This is the build-up to the justification of the TARP bill. Paulson's team basically comes up with the official version of the financial crisis in less than three minutes, again without mentioning the main facilitator behind the mortgage madness. "The whole financial system?," asks the press secretary in awe after the briefing, almost in tears. "And what do I tell them when they ask why this wasn't regulated?" "You tell them it's already been overregulated through price control and subsidies for decades, you ignorant economic hitwoman," is the reply she should have gotten in the movie…

One of the most shocking statements comes from the porridge-eating Bernank on the day of introducing TARP. The breakfast club partners in crime realise they can't keep blatantly dumping money on companies of their liking, so they have to come up with a way of doing it complicated enough for the alphabet soup illiterate public not to understand that the exact same thing is going on: "This is a democracy. We cannot be men behind the curtains pulling the strings," says the chairman of the unconstitutional creature from Jekyll Island which, according to Greenspan himself, is above the law.

The first draft of the TARP legislation is three pages long. Way too short for lobbyists who prefer bills to be at least a couple of thousand pages, but two pages too long for Ron Paul who has suggested new legislation should be readable for the people voting on it. When it comes to the size of TARP we learn the exact calculation behind 700 billion dollars. In reality, a Treasury spokeswoman told Forbes.com; “It’s not based on any particular data point. We just wanted to choose a really large number.”

Paulson tells Bernanke before meeting with the legislators that the only way the bill will go through is "to scare them shitless." The Bernank doesn't think this should be a problem. In Too Big to Fail, Paulson kneels before Nancy Pelosi, before having to beg the banks to receive more money. In reality, Paulson did scare members of Congress shitless and threatened with "martial law in America if this bill didn't go through." After the Bernank lectures the financial sub-committee about how the great depression did not play out, and after some spin management and additional fear mongering from the White house, the bill passes and Paulson saves the day, the economy and the world.

The only question left is whether the banks will start lending again, which Paulson confirms they will. In closing, we learn that after the passage of TARP, banks made fewer loans and the markets continued downwards. Unemployment rose to ten percent and millions of families lost their homes, but that in 2009, the markets stabilized and "the slide into a global depression was averted." The biggest banks even repaid their TARP loans. In reality, all economic indicators are down, price inflation and unemployment are at record levels and the banks have ironically gotten away with the largest bank robbery in history.

Too Big to Fail expectedly ignores most of the issues that Austrians have been pointing out all along. In addition to completely misleading the viewer when it comes to economic facts like the catastrophic consequences of monetary central planning and expansion of the money supply, the criminals behind what to most people appears to be an orchestrated bank robbery are shamelessly portrayed as heroes. I'd rather recommend picking up Meltdown by Dr. Thomas Woods for a proper understanding of the events presented in this establishment fairy tale.

Jens C. Kolbjrnsen [send him mail] is a finance student at Lancaster University, England.

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