THE 2008 FINANCIAL CRISIS / LEHMAN BROTHERS
Episode 228 | Historical Events
In this History episode we focus on the 2008 financial crisis — the mortgage-backed securities, the credit rating agencies that rated them AAA, Lehman Brothers' $613 billion bankruptcy, the bailouts that saved the institutions, and the 3.8 million American homeowners who lost their homes. We trace the specific mechanism: the separation of origination from risk that removed incentive for lenders to assess borrower creditworthiness; the CDO structure that theoretically diversified risk but practically concentrated it in ways the models didn't capture; and the rating agencies that rated securities their own analysts described as "rubbish" as AAA because they were paid by the banks issuing them.
The gap between the people who structured the securities and the people who bought them on the strength of AAA ratings is the architecture of this story. The bailout saved the institutions. The $700 billion TARP program stabilized the banks. Median household net worth fell 39 percent between 2007 and 2010. Black and Latino families lost an estimated 50 to 67 percent of their household wealth. No senior banking executive was criminally convicted. The credit rating agencies are still rating the securities of the institutions that pay them.
This podcast features narration with a synthetic AI voice.
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