In this rather excellent 4 part series the Frontline team from PBS documents the events surrounding the global financial crisis told through the lens of 17 interviews from insiders to give a unique first hand view of how it all unfolded.
The first part covers the build up to the 2008 crash. The repeal of the Glass Steagall Act by the Clinton administration allowed investment banking to merge again with everyday public banking. This helped create the “too big to fail” financial institutions central to the crisis. New fields of financial engineering in derivatives trading created new products such as credit default swaps and collateralised debt obligations (CDO’s) in turn created a new market that was hugely profitable and totally un-transparent. The rational behind it was distribution of risk that would help lower the banks exposure and allow for greater levels of lending. In plain english they created a very complicated means to gamble on both real world market changes and positions that other organisations were taking. Like betting on a football match and then betting on whether your friends would lose money too. This of course did not reduce risk to the system but rather spread it around so that everyone would be exposed as well as create the illusion that the risks were lower than they actually were. The banks loved them and the bubble grew and grew until one day it popped.
I should also add from my energy point of view it was a shame that oil prices were not mentioned once as the pin that burst this bubble, but the mainstream media is still way behind on a lot of things.