If you want to know how long ago the seeds of the current financial crisis were sown, definitely listen to this episode of Fresh Air. Terry Gross’ interview of Frank Partnoy reveals not just how derivatives came to be unregulated, but who some of the players were in making it possible. What may disturb you is how many of the people who made the current situation possible are playing key roles in trying to fix it. Partnoy also authored F.I.A.S.C.O.: Blood in the Water on Wall Street. He first wrote this book 12 years ago–before the collapse of the internet and telecom bubbles, before Enron, and the subprime mortgage meltdown that triggered our latest financial calamity.
If you’ve been listening to NPR’s Planet Money, you already know about BailoutSleuth.com. But in case you don’t, it’s a creation of Mark Cuban (owner of the Dallas Mavericks) to report on how the money allocated by the bailout bill is being used.
They’ve already discovered that we taxpayers won’t know how much the companies working on behalf of the Treasury Department are being paid because that information is redacted.
I heard about this site on the financial crisis during an episode of the Planet Money Podcast. They interviewed Simon Johnson (one of the co-founders) during “A Very Scary Cut–In The Interest Rate”. The Financial Crisis for Beginners may be the best place to start. Right near the top of that page, you’ll see links to both shows from This American Life I blogged about October 8 and May 28.
The best explanation of collateralized debt obligations (CDOs) I’ve heard so far comes from the latest episode of the Planet Money podcast. I was driving to work at the time, so I don’t have the exact time index of it, but I think it starts at the 16 minute mark. The whole episode is worth hearing too.
Wikipedia has something to say about CDOs too, but I prefer the Planet Money explanation because it does a great job of showing how just one CDO can connect widely disparate parts of the economy.
According to this story in the Wall Street Journal (it’s subscriber-only, sorry), AIG just got another $37.8 billion from the Federal Reserve. That puts the price tag for just bailing them out at $123 billion. This may be a sign that the $700 billion $850 billion may not be enough.
In other news, the national debt is now so high that the US debt clock has run out of digits. I don’t know if the figure includes the spending on wars in Iraq and Afghanistan.
The reporters who did the Giant Pool of Money story have followed up with Another Frightening Show About the Economy. Like the first show, this one is well worth setting aside an hour to listen to–much more worthwhile than the same amount of time spent watching network or cable news on the same subject. The explanations of precisely what frightened the U.S. Treasury and the Federal Reserve into begging for new legislation are especially worthwhile.
Other worthwhile stories on this topic include:
Having listened to a number of episodes of Planet Money, it’s proving to be a good podcast. Each one is a lot shorter than the stories I mentioned earlier, so they’re especially convenient if you haven’t got a lot of time.
The “Giant Pool of Money” episode of This American Life I blogged about in May has apparently spun off an entirely new podcast called Planet Money. If that first story is any indication, the new podcast will definitely be worth listening to.
For a great explanation of the current meltdown in mortgages, definitely check out this podcast. The two reporters put together a narrative that covers everything from a homeowner with a sketchy loan, up to a Wall Street exec who creates collateralized debt obligations (CDOs).
That’s how much one (1) euro cost me yesterday when I was converting currency with Chevy Chase Bank for an upcoming trip. You know things are bad when even the branch manager is surprised by the rate of exchange. The exchange rate is probably even worse today. Even if I took out the fees they charged, the exchange rate is probably 20-30 cents worse than it was when I first went to Europe in 2005.
It reminded me of economics classes in business school, and what we learned about what countries do to defend their currency. The Fed is doing the opposite of those things right now, so between that and deficits our government runs, I expect the dollar to be worth less and less in the near term.
A very interesting take on Universal offering DRM-free music directly instead of through iTunes. I think the writer is on target in describing the motives of Universal in cutting Apple out as a distribution channel.
If memory serves, the big record companies tried to push Apple into variable pricing not long ago. That move didn’t seem to work, as the 99-cent single is alive and well on iTunes.
The idea of Apple signing artists directly is an interesting one, but I don’t see Apple signing artists anytime soon. Artist management is quite far afield from what they do best. It might violate their recent deal with Apple Corps too. That said, if Apple could make it easier and cheaper for indie bands to put their music out without violating that deal, they’d probably make some money they aren’t currently getting. It might even help them sell more iPods (which is really the whole point of iTunes anyway).