I have decided that my Wednesday posts for the foreseeable future will be reviews of some kind, whether they be movies, books, or something else, possibly podcasts. Since I haven’t finished reading any of the three books I am currently reading, I will review a movie that I watched last night for the second time. As the title indicates, that movie is Too Big To Fail.
This movie was not a theatrical release; it was a movie made specifically for the premium cable channel HBO. It is a movie based on the book of the same title, though the book is subtitled “The Inside Story How Wall Street and Washington Fought to Save the Financial System — And Themselves,” which in my opinion better presents the premise of the film. While the phrase “too big to fail” is said in the movie, it is more about the situation leading to the TARP “bailout” in 2008, a move that may have prevented another Great Depression. Regardless of how you felt or currently feel about TARP, it probably did save the world from total financial collapse, even if the banks (spoiler alert) didn’t exactly loan out all the free money that the government gave them.
The movie begins shortly after the assisted purchase of Bear Sterns by JPMorgan Chase, which was facilitated to prevent Bear Sterns from completely collapsed. The movie opens with Lehman Brothers looking for a similar deal as they tried to save themselves from bankruptcy by convincing Bank of America to buy them. However, there is trouble once Lehman’s assets are reviewed by Bank of America, with billions of dollars in sub-prime mortgage securities on their books, most of which were completely worthless. However, the deal is further burdened when the Chairman and CEO of Lehman Brothers, Dick Fuld, cannot bring himself to sell the company when it is very low compared to previous highs in the market. This includes turning down a favorable offer from Warren Buffett, as well as ruining a deal with Korean Development Bank.
While this was going on, Henry Paulson, the Secretary of the Treasury asks many of Lehman’s competitors to assist in purchasing some of the sub-prime assets on the Lehman balance sheet to assist in a sale to Barclays, a London-based bank. Paulson refuses to assist in any way, leaving it up to Wall Street to assist in fixing the problem. Even with a deal between Barclays and the other investment banks, Lehman is unable to sell due to the banking regulators of the United Kingdom not approving the deal, which ultimately leads to Lehman filing bankruptcy.
The Lehman bankruptcy sets off a cataclysm in the financial services industry, making it difficult for even non-banking corporations, to include General Electric, from getting money to finance their operations. To make matters worse, AIG, an insurance firm that insured many of the investments the banks had made in mortgage-backed securities, is close to failure as well as they are running out of money to meet their obligations. This near failure, and subsequent “bailout” to the tune of $85 billion, leads to even more shakiness in the market. Paulson and his team struggle to come up with a plan to help fix the problem, developing what is ultimately called the Troubled Asset Relief Program, more commonly referred to by its acronym as TARP.
This $700 billion plan to help ease the credit markets is passed on the second try after pressure from President Bush and other political leaders. Paulson is given the authority to spend the money, and decides that the best way to do so for the short-term is to purchase stakes in nine of the nation’s largest banks, infusing $125 billion into the credit market, which Paulson hopes the banks will start lending. Unfortunately, this does not immediately occur, though all of the banks that had received money from TARP ended up paying it back.
When TARP was passed, the Dow Jones closed around 10,500 points. It is currently trading at around 12,000, so in the long run, it appears that TARP ended up staving off the financial depression that many were predicting. However, it did not particularly change the way that the banks did business, and a post script from the movie mentions record compensation on Wall Street in 2010, as well as the largest banks in America being responsible for 77% of the money in this country. The final line sums up the point maid in the title: these banks are now truly “too big to fail.”
As for the movie, I think there are many great performances, including William Hurt as Henry Paulson. Many of the other major players have small roles, except for Billy Crudup as Timothy Geithner, who would go on to become President Obama’s Secretary of the Treasury (Geithner, not Crudup). The actors portraying the bankers successfully made me hate them, and the other supporting actors helped round out the story. HBO typically does pretty well on their Original Series and Movies, and this one, at least visually, is no exception. It does get a bit long, and maybe tries a little too hard to get you to hate the bankers, but ultimately I would rate it around 8 out of 10. A decent movie to watch, though Capitalism: A Love Story is also very good. I might enjoy this movie a bit more with my interest in investing and whatnot, but it is a decent picture about how sometimes our elected/appointed leaders can actually get something done, even if it is not always a popular decision.
Regardless of your opinions on the corporate bailouts of 2009-2010, if you even have an opinion, I personally think the alternative would have been a lot worse. Ben Bernanke, as portrayed by Paul Giamatti, says in the film that while the Great Depression was ultimately started by a stock market crash, the subsequent inability of anyone to get credit was a bigger problem that caused the Depression to engulf the world. If AIG and other companies were allowed to fail, the impact would have been pretty severe. Even though my request for a personal bailout was rejected, it ultimately was the better plan.
Until next time…