we'll look at the causes of the calamity and what went down on that rough and rocky road to ruin and how it incredibly impacted the u.s. the eurozone and the rest of the world plus we'll look at where we are now how safe are we from another monstrous economic meltdown and what might be the next financial crisis ready let's go we start with bill clinton a democrat who was u.s. president and his financial policies clinton nomics which began in one nine hundred ninety three when he took office and lasted until he left in january of two thousand and one he started following the single term of george herbert walker bush a republican now known by many as bush forty one or simply forty one president clinton was handed a growing economy from bush forty one with annual gross domestic product g.d.p. rate of three point five percent the good economy was however partially premised upon years and years of increasing spending and rising us budget deficits clinton

nomic sought to keep the economy going while balancing the deficit and with the help of congress which was then controlled by democrats legislation was passed to increase taxes on the wealthy furthermore defense spending was cut from five point two percent of g.d.p. in one nine hundred ninety to just three percent in two thousand the house passed the tax increase without a single republican vote that vote was particularly difficult for democrats after bush forty one has popularized this phrase. push and i'll say no and they'll push again and i say to them read my lips the law and candidates for congress were asked to take no new tax pledges and while the bill passed it cost many democrats their election in one nine hundred ninety four republicans won control of the house and clinton nomics faced tougher hurdles in congress clinton omics was for. kept the us

economy moving along in addition to policies put in place like welfare reform and free trade deals such as the north american free trade agreement and significantly financial deregulation was taking place within the clinton administration and then through the nine hundred ninety nine gramm leach bliley law which repealed the glass steagall act a law enacted the in one nine hundred twenty nine after the stock market crash as banks were being destroyed during the great depression the last stigall importantly separated investment banking from commercial banking the concern was the improper speculating role commercial banks were playing in the stock market using in part their own customers money they were seriously self-serving some said greedy and place not only the financial sector but the entire economy and per carry a spare and when those banks speculative bets went bad the markets melted down crashing with contagion not only amongst the banks but other companies and other

sectors of the economy for the last years of the clinton administration the economy was booming with excellent growth the last year in one nine hundred ninety nine g.d.p. was four point eight percent but the us federal government actually had a budget surplus it had been two decades since that occurred but one not so notice thing was this thing taking place at a little agency that was pretty memorable rather it's called the c f t c the us commodity futures trading commission the c f t c chairwoman brooksley born who had come into the clinton administration late in one nine hundred ninety six saw a problem with financial deregulation and critically had huge concerns about unregulated markets called o.t.c. markets or dark markets that sound scary as it should because these were bets on what a stock might be worth in the future be it a day or year or a month or more regulators or had no view was taking place they had no view as to what was taking place and nobody knew what or how much was being wagered nor the x. . the risk that is of the entities engaged in the trading so chair borne work with

the p.w.g. the president's working group which included the secretary of treasury and chairs of the federal reserve securities and exchange commission and herself the c f t c but none of the others were concerned about dark o.t.c. markets after all clinton nomics was about deregulating not regulating but chair borne didn't let up to see if he issued a proposal just a proposal on how the dark o.t.c. markets might be regulated in a thoroughly unusual unprecedented fashion the other members of the p.w.g. trashed it within hours of its release for her troubles president clinton replaced or the new chair had no issues with these dark o.t.c. markets and fast forwarded past two thousand and the us has a new president george w. bush bush forty two and he takes over great really a great economy with budget surplus u.s. g.d.p. fell in the wake of nine eleven but recouped in two thousand and three through two

thousand and five which saw three point five percent rate the deregulation of the financial sector continues with laws and various rules and then the housing market starts to go gangbusters and here to talk about what was taking place is kathy feherty the co-founder of real wealth network kathy welcome being here what was going on with housing then regarding prices in particular up into the crash and with foreclosures cathy. i was a mortgage broker at the time and i can tell you it was very very easy to give anyone a loan i was shocked and i wondered and i kept asking who is approving this you know who is sitting in a boardroom saying sure we can give you a nina loan and no income no assets needed to anyone and so when you have an abundance of money that can be given freely to anyone without any background checks really no credit checks you're going to you're going to see people take that

money and borrow it and buy things that they probably can't afford especially as you know when nobody was really checking to see if what they were writing on their loan applications was true it was a stated income loans so what we were seeing was anybody being able to buy a house a brand new house you had new homes selling like hotcakes hotcakes it just lines out the door of the subdivisions because you could just walk in and actually get money back that is crazy programs too right kathy i mean balloons and and arms and all the sudden somebody who could barely afford to maybe make a few payments after a certain time you know they were going to be underwater in a heartbeat right. you know and so you hear it from my perspective as a mortgage broker i could make on a million dollar loan which in california was fairly common i could make ten to thirty thousand dollars on that on that loan and at the time these were stated income loans that meant an application where they didn't need any follow up

documentation it was easy money so pretty soon everyone was a mortgage broker and everyone was getting their friends loans you could you could be an investor you could be as you saw and movies about about this crash you could be a hairdresser and own ten or twenty investment properties with no money down and in some cases money back it's really not me was it yeah the big short they had that great scene in the woman who's the steve croes character talking to you you could have a balloon rate and she's and he's she says on all of my properties he said all of them is yeah i've got five just nobody i mean i like to say when i was. back in the day when as a governor i say oh homeownership rate was great the homeownership rate did increase but not necessarily the right way correct. right i would sit in my office and people would come in and say you know i want i want this loan i want to buy this house and i would say well you know your mate worries fame is going to be

about two thousand dollars a month and you make about two thousand dollars a month so that's not going to work and she said well i thought there was a starter loan and that's what they were called teaser rates and you could actually qualify based on this teaser rate which wasn't a real rate so all she needed really was to prove. that she could pay a two hundred dollar a month payment or something but when it adjusted it would be two thousand it would be more than she made completely and i looked at her and said what are you going to do in three years when you when the payment adjusts and she's all worry about it then i'll just revive the house will be worth more and i'll do what everybody else is doing refight take the money out and live without having to work for a year you know crazy stuff thanks for sharing kathy appreciate you being with us. thank you. and then the financial players and prominently the big bank which no longer had speculative trading restrictions upon them since that glass steagall act we talked about had been repealed back in ninety nine they began

speculating in earnest in those dark o.t.c. markets about which chair brooksley born had warned they traded the mortgage bundles through these new products called credit to swap default swaps or c.d.s. says and they were betting if the c.d.s. would fail or not and when the value of these products was whatever the traders deemed appropriate so if a trader traded one thing in value did it x. and the other trader might value with it why the problem was these things were traded among thousands of traders and financial firms and they were broken apart sliced indicts to the point where nobody knew what the risk was for anyone and regulators had of course not a clue it was the exact type of risk crazy risk in the spring of two thousand and eight the seventy five year old firm bear stearns one under bankruptcy it was a shock to many that this well established firm would take such a deep and devastating dive and it had many of us me included at the time to see if

to see wondering what it might mean was there more to come and there was. and it was lehmann brothers which became the financial straw which broke the economy's back for more here's our chief national banks what over six hundred billion dollars in assets and a little over six hundred billion dollars in debt lehman brothers had to file bankruptcy making it the largest bankruptcy filing and u.s. history in the first week of september lehman brothers management made unsuccessful overtures to many potential partners as a result their stock plunged by seventy seven percent the company would continue to see this trend to as its hedge fund clients started pulling out and it short term creditors began cutting credit lines by the end of the second week in september early man brothers was left with only one billion dollars in cash leaving the company desperate for any help it could get and during the weekend of september

thirtieth two thousand and eight lehman was in talks with barclays p l c and bank of america corp hoping one of the banks would take over unfortunately lehman brothers was out of luck and declared bankruptcy on monday september fifteenth two thousand and eight women brothers was the fourth largest u.s. investment bank at the time of the collapse having twenty five thousand employees worldwide that day twenty five thousand employees lost their jobs and poise had been following the news over the weekend when they arrived to headquarters on monday they cleared out their offices aware of what was to come seven days after the collapse in a movie holdings incorporated announced and would acquire lehman brothers franchise in the asia pacific region and clued in japan hong kong and also. at later also announced it would acquire the company's investment banking and at goody's businesses and europe and the middle east this deal became effective on monday

october thirteenth two thousand and eight barclay also acquired a portion of lehman brother. following the collapse surely after the collapse took place many question why the federal reserve didn't bail out lehman brothers during the time of the collapse timothy geithner was the president of the new york federal reserve and two thousand and fourteen he said the bank wanted to assess lehman brothers adding quote we explored all available alternatives to avoid a collapse of lehman but the size of its losses were so great that they were unable to attract a buyer and we were unable to land on a scale that would save them despite the federal reserve's inability to save the lehman brothers the collapse left to many employees and customers uncertain of what the future would hold and washington actually banks art. and what the future did hold it also ahead treasury secretary hank paulson and federal reserve

chair ben bernanke really critically concerned with lehmann did what was next with contagion from lehmann and perhaps others who could fall destroy the economy and still nobody knew the financial risk of those dark o.t.c. markets with those bundles of bad mortgages in the credit default swaps fearing the worst total economic destruction paulson and bernanke headed to capitol hill with a three page document seeking more than seven hundred billion dollars to buy what they called troubled assets held by large and small banks and insurance giant ai g. which shouldn't should be o.t.c. dark market products for many of the banks and it did become law for more we're joined by legal journalist molly barrows at the ring of fire network molly some of our viewers may have only a really a vegf recall of tarp or know the acronym the history is pretty muddled take us back to a tarp one hundred one if you would. sure have our will as you said secretary

paulson and fed chair ben bernanke frame this as dire and urgent it's a must pass the house initially thought that that bill but effectively they needed it to enable this bailout so the senate revive the package ultimately tarp was born to essentially buy and hold these assets that seem to become worthless until some time in the future when they expected normalcy to return yeah and bush forty three he was in office a republican but tell us how this actually got passed congress. who was voting which way was interesting and it was one hundred seventy two democrats only ninety one republicans who actually supported the president's request to do this and enable it to become law some of those democrats who voted for tarp however they lost their next election so it seemed like as popular as it was it certainly cost them and ultimately did tarp work out pretty well it certainly did financially the money was eventually repaid to the treasury the financial system us as well as globally did not collapse so even though it was one

of the most unpopular ideas alternately it was extremely successful an extremely successful economic program one of the most successful ever mark thank you molly appreciate it molly barrow that the ring of fire network preceded molly. thanks bart. and there is much more to explore with the crash it will do so in sixty seconds back in a flash. a statistic from a couple weeks ago came out that showed the wealth and income gap around the world in different countries and then there's there's the u.s. there's there's france and then there's the u.k. oh it's like wow this stuff incredible spread between this concentration and then you've got the royalist there are people there in the tory party who support the queen whose whole point of breaks it was to support the clean ok so they just

aerialist and a moron a policy because incredible poverty breaks it's all about supporting the queen and getting rid of their world contacts. dollars. dollars. dollars. dollar by dollar what are the. we got carried away here we care the music with us. we are here we were dragged here. by you know going to get rid of those who will not go away we will not die quietly. real the hard work we do is the truth.

and. i think that i would want to go fast but inside i'm on. dockside i think. going down to your backside you who. you are so. that it's all in sort but. i really believe that the bottom that we show up side is that we and the band. was. a lot like.

welcome back well the impact of the great recession upon the crash that was huge in the u.s. the g.d.p. began retracting during the third quarter of two thousand and eight and ended up negative point one percent for the year followed in two thousand and nine by a negative two point five percent rate unemployment for two thousand and eight was seven point three percent but went up to nine point nine percent the next year home foreclosures jumped by eighty one percent in two thousand and eight up two hundred twenty five percent from two thousand and six as over eight hundred sixty thousand families lost their homes just in two thousand and eight and another two point eight million families received at least one foreclosure notice in two thousand and nine and for more on the impact we are joined by john grace president of investors advantage corp and henry ford which are from the c.e.o. of straw mark john thanks for being here both of you thanks for being here john what happened in the u.s. stock markets were generally overall not good but explain. well i had started out

a good year two thousand and eight part and by the end of the year the s. and p. and the dow according to yahoo finance rough about thirty seven percent their draw down did not stop there i believe it stopped around late march early. to a total decline for stocks of about fifty seven percent for two thousand and eight indeed in march march thirty first two thousand and nine and john open which were sort of the worst sector stocks hit. well it was a broad brush bart so it probably led with the financials given all the drama that you're just reporting on that we all remember so vividly i mean i happen to be at goldman sachs it was around november just before thanksgiving two thousand and eight and i will tell you coming out of a conference meeting a meeting in the conference room it didn't feel like a library felt like the morgue i mean that's just what it was on the fiftieth floor so nobody knew what was happening as the market in that day was off i think nine hundred points in one day so it just got worse and worse and worse day by day by

day so i mean i love the question that you're posing here because the answer the best answer i see is brian sozzi who was a lehman analyst in two thousand and eight and his answer is are we better prepared today than we were then in the end his answer is we've learned squat to use his words. that may be true in some cases for sure and hillary talk about contagion talk about the u.k. and the e.u. first yes ok with regard to contagion you know that was the greatest fear was the spread of course across all of europe and one of the differences is people talk about like the integration of monetary policy but not the disintegration it's right tough to break up so what you saw across europe of course was this entire dependability now you look at what was happening as well as like an unintended consequence there was a flight to safe havens one of the reasons that london rose even more so as a global financial state sector was this rise of the the flight to free havens you

also having europe on the biggest difference you mentioned top of the it was this a lot of a strongest a strong central bank so you have to have a lender that is the like willing to be the lender of last resort a strong central bank and that did not exist in your. the e.c.b. was not strong enough to kind of stop this in europe so that's why you saw the ramifications through spain and cyprus of course the devastation in cyprus off towards the other issue in europe of course is the debt that the banks hold of government debt the percentage in germany and greece it was about twenty percent and in spain thirty percent you don't have that in the u.s. and that was what was part of that contagion in europe and reminded by the way you know when barclays was trying to buy lehmann that fateful weekend it was actually the regulators in the u.k. who said no they didn't want this contagion but they seem to get it right well actually barclays only then they actually caused it by lehmann in the end but off the bankruptcy polson in his memoirs you probably saw that also you know he

actually said that the the u.k. really and he used different language i'll just say did is over but i think a lot of it was due to the shareholders concerns because they also couldn't vote on it but yes that was a situation the they wanted a guarantee from the fed was saying no we can't do it it's questionable whether or not they have the authority i saw warren buffet say i don't care if i if i were fed chair even if i didn't have the authority i would have done it dealt with it in court because as killer talk about what was the impact of the recession in asia i know it was less but what do we know now actually when it was it was less i think the difference was because you know asia is always somewhat more conservative particularly china china and japan i think they're one step removed and they don't have the same structure they don't have the same structural weaknesses when i just mentioned strong central bank i mean you can't get any stronger than china and also of course don't forget that a lot of it was caused by panic and the reaction and lack of confidence so you had a run on the banks not of course like the great depression that was what didn't

occur in china as much and john thought finally i mean you always talk about active investment this was certainly a time where investors need to be active in these markets right. absolutely let me just say to do. it would be absolutely one hundred percent appropriate for the same investors to go back to see how bad it was in two thousand and eight if you were making contributions who cares but let's suppose you started the year with a million dollars in your traditional retirement account and you only took out three percent thirty thousand dollars and then the market washed away fifty seven percent so that's maximum drawdown of sixty percent which means one million dollars suddenly becomes four hundred thousand right before your very eyes and guess what you can't buy and hold in this equation is the retirement accounts and you must take increasing withdrawals for the rest of your lives so that means that the odds of getting what is now four hundred thousand back to a million when there's a nother withdrawal because you have to make those withdrawals is probably pretty

slim and so what we're saying is go back to see what you can learn from two thousand and eight look to see where you could have applied active management strategies to all things liquid wherein they work so that maybe you were fully invested in risk assets where the one of the percentage the stocks and bonds might be at the beginning of the year but if it was there a system that would have kicked in no matter how busy you are that might have pulled your assets out of risky assets into cash or alternatives by year in limiting your loss for two thousand and seven being off thirty seven you're only off twenty if we're off twenty we need twenty five to get back to even as that loss gets greater certainly become more challenging to try to get the account back to the starting balance thank you so much john gray said help your time guys. are playing with fire. and the financial crisis led to a regulatory revolution with the passage of the two thousand and ten wall street reform and consumer protection act otherwise known as dodd frank it sought to address things like those dark o.t.c.

markets and under-capitalized financial institutions for more on this we're please be joined by bartlett naylor of public citizen bartlett thank you so much for being here again three hundred ninety eight rules county i know nobody will how many of these were actually completed well bit about eighty. had been completed the two areas most dramatic discrepancy with executive compensation and credit rating we think that. executive compensation was very much central to the crash these people bankers didn't do this because they were playing some sort of video game or toy kids throwing their toys out of the pram they were doing because they were being paid up mortgage backed securities they were getting bonuses and so for those those rules have not been completed credit rating agencies those collateralized mortgage obligations were very complicated to understand and so they relied on credit rating agencies well they were they were in on the scam they were in on the

scam used to be that investors paid for the credit ratings because a photocopy machines they couldn't make any more money because people were basically giving them to their fellow investment friends for free and so the issuer began to pay for them and the credit rating agencies began to look to the issuers and giving them basically inflated grades so those are two of the basic areas where the regulations remain unfinished and we talked about we did cover o.t.c. the dark markets that's regulated now and talk about glass steagall that was sort of redone partly as this thing called the bowker rules part of dodd frank that changing the difference between commercial and investment banking explain where that is well where that is is that the regulators did approve a rule that became final in two thousand and sixteen you worked on that i voted on it you voted on it it's a very complicated rule public citizen and the progressive organizations did not like that rule in particular it was overly complex again this rule says that banks

should not gamble especially with taxpayer backed f.d.i.c deposits they should be engaged in the difficult boring business of making loans. the the the liquidity that was threatened hasn't really appeared and yet the bang. swamp this relaxed and as we speak the five agencies including your former agency are busy at work relaxing that rule hope it doesn't happen i want to ask you about the future what do you think might be the next big crisis difficult to say. if i knew i would make a beeline to the regulators and make sure there is they are aware you're different such a different fellow people would say i'm headed to my investor you say go to the regulators we've got in the last mess because some of your other guests point out we were giving away mortgages like can't like free free candy we are also and we have too much student debt we're also using all this corporate tax tax cuts to do buybacks

and we are have corporate leverage and so i'm not sure if it's going to be junk bonds corporate debt student loans auto loans it will be something we have a crisis every decade decade and a half and we're we're going to have another one i think it's going to be something that we do not see now where the folks in the financial sector as he is they are trying to make profits will figure out some way and the regulators will again like they did when brooksley born brought this up look the other way and not figure it out. thank you so much appreciate your up. that boom bust we try to be nimble and quick and those aren't traits which come easily to financial regulators but we'll keep doing our part right here and try to help us look at look out for the next financial crisis and of course for all of the booms and the bust that's it for now see you next time.

fracking gave americans a lot of. opportunities i needed to come up here to make some money like me. only five thousand dollars was a teacher or i could make fifty thousand dollars a year truck so i chose to drive truck people rush to a small town in north dakota was among the rate of zero percent was like gold rush is very very similar to a gold rush but this beautiful story ended with pollution and devastation a lot of people have left here i don't know too many people here and just slow down too much they lost their jobs got laid off the american dream is changing that's not what it used to be. and that's a tough reality to deal. on this on the line circumstances. loud for these emergencies of this very very lengthy violence

i think that we may get the sons and even grandsons of died at some point in the future it's primarily a political issue in iraq that has taken on minutes really. an army for occasions. thousands are protesting in paris against the ever increasing price of fuel these are live pictures from that police have used to gas and water cannon against the demonstrators. not a bit of difficulty opening my eyes right now and that's because we've just been in the midst of all of this tear gas.

to come this hour documents placed online via hacking group suggest that britain's government.