DIRTY MONEY

“DIRTY MONEY”

The global economic crisis of 2008 cost tens of millions of people their saving, their jobs, and their homes. But in 2000, Iceland's government began a broad policy of deregulation that would have disastrous consequences, first for the environment and then for the economy. In September 2008, the bankruptcy of the U.S, investment bank Lehman Brothers and the collapse of the world's largest insurance company, AIG, triggered a global crisis.

Part I: How we got here. After the Great Depression the United States had 40 years of economic growth without a single financial crisis. The financial industry was tightly regulated. Most regular banks were local businesses prohibited from speculating with depositors' savings. Investment banks, which handled stock and bond trading, were small, private partnerships.

Part II: The bubble (2001-2007). Suddenly, hundreds of billions of dollars a year were flowing through the securitization chain. Since anyone could get a mortgage, home purchases and housing prices skyrocketed. The result was the biggest financial bubble in history.

Part III: The crisis. As early as 2004 the FBI was already warning about an epidemic of mortgage fraud. The reported inflated appraisals, doctored loan docuentation and other fraudulent activity. In 2005, the IMF's chief economist Reghuram Rajan, warned that dangerous incentives could lead to a crisis. Then came Nouriel Roubini's warnings in 2006, Allan Sloan's articles in Fortune magazine and The Washington Post in 2007, and repeated warnings from the IMF.

Part IV: Accountability. The men who destroyed their own companies and plunged the world into crisis walked away from the wreckage with their fortunes intact. The top five executives at Lehman Brothers made over a billion dollars between 2000 and 2007. And when the firm went bankrupt, they got to keep all the money. Between 1998 and 2008, the financial industry spent over $5 billion on lobbying and campaign contributions. And since the crisis, they're spending even more money. The financial industry also exerts its influence in a more subtle way, one that most Americans don't know about. It has corrupted the study of economics itself

Part V: Where we are now. The rising power of the U.S. financial sector was part of a wider change in America. Since the 1980s, the United States has become a more unequal society, and its economic dominance has declined. Companies like General Motors Chrysler and U.S. Steel, formerly the core of the U.S. economy, were poorly managed and falling behind their foreing competitors. And as countries like China opened their economies, American companies sent jobs overseas to save money.

The Obama administration resisted regulation of bank compensation even as foreign leaders took action. In September of 2009, Christine Lagarde

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