Wha' happened?

So we all know that Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc. and Bear Stearns paid out a record $39 billion in bonuses last year, presumably because everyone did a heckuva job. And now some of these firms have been reduced to smoking ashes, the banking industry is asking those of us who weren't in on the $39 billion money train to please do our part and pony up $39 billion plus another $661 billion so that the banks can fix the mess, Treasury Secretary Henry Paulson is essentially asking for unchecked power by Friday or else terrible things will happen ... but do we have a clear picture of how this whole mess came about? I mean those of us aside from Wanda Sykes?

Below, the links I found that help explain what just happened and what it means.

Start with Kiplinger's "15 Things You Need to Know about the Panic of 2008." This article lays out, in chronological order, exactly how we moved from "Everyone gets free money when they buy a house!" to "Oh, God! There is no more money!" in the span of five years.

Then, go to NPR and put the following on your playlist:

The governmental angle:
"Lawmakers Skeptical of Bailout Plan" (Sep 23, 08)
"Why Congress Objects to the Bailout Plan" (Sep 23, 08)
"Reid: Congress Won't Rubber Stamp Bailout Plan" (Sep 23, 08)
"Bailout Seeks Broad New Powers for Treasury Chief" (Sep 23, 08)
"Senators Skeptical of Bailout Package" (Sep 24, 08)
"Congress Irked by Lack of Help for Homeowners" (Sep 24, 08)
"Paulson, Bernanke Lobby Senate for Bailout" (Sep 24, 08)
"Bernanke Testifies Before Skeptical Lawmakers" (Sep 24, 08)
"Senator Shelby Against Current Rescue Package" (Sep 24, 08)

The industry angle:
"Financial Firms Eye Chance to Cash In on Bailout" (Sep 23, 08)
"Bad Mortgages Taking Down Good Loans Too" (Sep 23, 08)
"Blackstone's Peterson: Bailout Size Is Mind-Numbing" (Sep 23, 08)

The international angle:
"Europe Balks at Helping U.S. Dig Out of Financial Hole" (Sep 23, 08)
"Foreign Markets Mixed over Bailout Package" (Sep 23, 08)
"U.S. Image Tarnished by Financial Meltdown" (Sep 24, 08)
"U.S. Meltdown Scared World's Financial Centers" (Sep 24, 08)

I vouch for these only because I've listened to them all, and found them useful in framing questions relevant to the bailout. To understand the principles that are at stake in this whole thing, I suggest reading "Experts See a Need for Punitive Action in Bailout" (NYT, Sep 22, 08).

And then ... well, we all sit tight. And try not to be outraged that the Lehman Bros. New York staff will still be swimming in a bonus pool worth $2.5 bil despite driving the company into ruin. Even if they recognize that U.S. taxpayers are p-i-s-s-e-d that millionaires will get their bonuses while the rest of us watch our property values plunge, why would they bother giving up those bonuses? $2.5 bil is but a drop in the bailout bucket.

Besides, as both Bernanke and industry insider Paulson said when testifying before Congress, there's no need for Wall Street to apologize for their actions because technically speaking, Wall Street is more of a concept than an accountable entity. Like love, being a concept means never having to say you're sorry.

Comments

[sam]

I would also recommend This American Life's Giant Pool of Money episode from earlier this summer. It's pre-current crisis, but it's a really really good primer on exactly how all of these securities worked (or didn't work, for that matter). I'm a corporate securities lawyer, and it even helped me figure some of this crap out. I've been recommending it to everyone I know.

[Lisa S.]

Thanks. I left it out because TAL is not the show for me. Ira Glass's delivery just hits my last nerve. It's aversion therapy!

[sam]

if it helps at all, the bulk of the show involves people who are not Glass. It was actually a joint project with another show (I think marketplace).

[sam]

if it helps at all, the bulk of the show involves people who are not Glass. It was actually a joint project with another show (I think marketplace).

[Jecca]

Man, you are a superhero Lisa. Never let it be said that you don't use your powers for good. THANK YOU!

I'm looking forward to checking out the TAL link, too, esp. if it even looked in Marketplace's direction. Marketplace is my v. favorite NPR show ever. I was sad when David Brancaccio moved on, but I like Kai and the other folks, too.

[Neil]

I am so confused with what is going on, that I am glad that I stumbled onto this. I am going to go through all these links to learn where all my tax money is going to go.