Wild swings in the stock market are fueling concerns over a potential new economic slowdown. The Dow plunged more than 550 points Friday, partly in response to rising trade tensions between the U.S. and China after the arrest of the CFO of the tech company Huawei.
It’s been a decade since the last major economic crisis, when about 8.7 million Americans lost their jobs and some of the world’s biggest banks collapsed.
The men who worked behind closed doors in 2008 to stave off another Great Depression (they’re nicknamed the “Three Amigos”) are featured in a new documentary from HBO and Vice, “Panic: The Untold Story of the 2008 Financial Crisis.” The film delves into what really happened during the financial market meltdown, a crisis caused by irresponsible mortgage lending and a subsequent bubble-burst in the housing market.
Now, 10 years since the Great Recession, they spoke to CBS News about the personal toll the crisis had on them.
“I felt very, very alone and very, very disconsolate,” former Federal Reserve Chairman Ben Bernanke told Alex Wagner. “We really felt like we were kind of out on an island there.”
Former Treasury Secretary Tim Geithner admitted to “just having that crushing sense of responsibility and fear.”
His predecessor, former Treasury Secretary Hank Paulson, said, “The scariest times for me were never during the day. We were too busy, we were talking to each other. It would be waking up in the middle of the night.”
“You had nightmares?” asked Wagner
“Oh gosh, yes.”
Bernanke said, “Tim worked in the Treasury on the Asia crisis. Hank was in markets for many years. I was, as an academic I worked on the Great Depression, and so in a way we were prepared, and that was fortuitous. And we were complementary to each other. But I have to say, it’s not something that, you know – they train for war, but you don’t necessarily wanna be in combat!”
“I didn’t feel particularly prepared,” Geithner laughed. “I think that we had the constant, relentless experience over and over again of facing something that was existential in its effects on people’s lives without being completely confident that we were gonna be able to fix it.”
While some credit them for saving the country from a worst-case scenario, there are those who felt the decision to save the “too big to fail” banks came at the expense of the average American.
Geithner said, “The things that were deeply unpopular and seemed deeply unfair were the necessary, essential thing to prevent damage. It would’ve been dramatically worse for the economy if we had indulged the natural instinct of people, which is to let the thing burn.”
Wagner asked, “The thesis of this project, this documentary, is that the after-effects of the financial crisis led to a rise in populism. Was the financial crisis a tipping point for American populism?”
“Financial crises do tend to lead to populist reactions sometimes, and this didn’t help, obviously,” Bernanke replied. “We had a crisis, we had a Great Recession. But we’ve had structural issues in the United States for many, many years, at least 30 or 40 years – increasing inequality, declining ability for people to get ahead.”
It’s an inequality that still persists. For example, black home ownership is at levels not seen since the era of segregation. Wagner asked, “Is the idea that you live the American dream and you get to buy a house, is that gone?”
“No, I don’t think it’s gone,” Bernanke said. “I think that it was exaggerated. I mean, one of the reasons that subprime lending got so popular was because it was expanding the American dream. And that turned out to be a mistake.
“And the truth is that home ownership is important, but it isn’t the only way to build wealth. It isn’t the only way to have a stable community. There’s this sort of idea that buying a home is the thing that every family should do. Some families don’t need to buy a home. Some families are better off with rental or other kinds of arrangements.”
Wagner asked, “Do you think the president and his policies are strengthening and making the American economy more resilient? I mean, we are in a trade war with China. Populism is fierce. Does that concern you?”
“I would say gravely, yeah,” Geithner replied. “You know, no country can be stronger than its political system. And the political system of the United States today has lost the capacity to govern.”
Paulson said, “I’m, for one, relatively optimistic that what you’re going to see is the Trump administration and China on tactical issues come to an agreement, [and] end the tariff war. But even when that happens, there are going to be significant structural issues. And this is going to be a very difficult relationship between the U.S. and China for some time. And I don’t attribute that to the Trump administration. There’s nothing that unites Democrats and Republicans today like anti-China rhetoric and sentiment.
“We need to find common ground with China for a global economic system to work, for us to have peace, prosperity, stability. We don’t need another Cold War.”
Wagner asked, “Are you confident that if the next financial crisis was on America’s doorstep, that this president and this Congress could handle it?”
Bernanke said, “I don’t think we have a system in place to deal with the crisis once it happens. We have a lot of things that make a crisis less likely, so the fire is less likely to occur. But if it does occur, I think we have fewer fire hoses than we had even ten years ago.”
The “Three Amigos” say they hope the new documentary helps people better understand what went wrong and the decision-making inside the Bush and Obama White Houses.
“Panic: The Untold Story of the 2008 Financial Crisis” airs tonight at 10 p.m. ET on HBO. To watch a trailer click on the video player below.
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