Extra Credit 5: Money, Power and Wall Street Episode 1

            I finished episode one of the documentary Money, Power and Wall Street. This was a documentary I wanted to watch because I know that Wall Street and the economy are a major problem in society today but I never really understood why the economy was so bad and how Wall Street works. This documentary went into the history of what had happened and what led to the recent fall of our economy. Many of the problems leading up to the problems with the economy started before I was even born. It was interesting to see how through out my childhood the changes that were taking place in the economy. The economy and the things that take place on Wall Street are important for me to understand as I’m older now and will be graduated and looking for a job in three years.

            The main part of the documentary was spent discussing Credit Default Swaps and the idea of eliminating risk. In 1994 a group of JP Morgan workers went on a weekend getaway to the Boca Resort in Florida. The objective of this trip was for the collection of workers to make it safer to trade loans and eliminate risk. The workers were young, many of them in the twenties. By the end of the weekend the idea of credit default swaps was invented. Credit Default Swaps allowed banks to share the responsibility of credit. Credit became more readily available which fueled a worldwide credit boom. It was an immensely profitable market and was unregulated, it was basically just betting. The fact that it was unregulated caused so many problems. Greedy banks and companies were taking advantage of the fact that it was unregulated. For example Goldman Sachs would actually bet against its own company so that its clients would lose money and it would gain money.

            The events that took place over the last couple of years are hard to imagine. Our economy is in serious risk of a depression. Eight and a half million jobs were lost in the recession and about eleven trillion dollars were lost. The banks have recovered but the economy hasn’t and citizens are outraged by it. Some serious action must take place in order to save this economy. The past eighteen years have led to the recession of the American economy and sounds like we might be headed to a second depression. I’m interested to see what happens in the other episodes of Money, Power and Wall Street.