Reason.tv: Filmmaker Michael Covel on Broke - The New American Dream

"[Politicians and the Federal Reserve] rigged the market," says financial author and filmmaker Michael Covel. "They rigged the market through interest rate manipulation and we're still paying for it today." In his documentary, Broke: The New American Dream, Covel explores the roots of the financial crisis, which he traces back to Netscape going public in 1995.

Covel sat down with Reason.tv's Ted Balaker to discuss the role politicians, the Federal Reserve, Wall Street, and media figures like CNBC's Jim Cramer played in the financial meltdown. Topics include: why Covel is down on "buy and hold" as an investment strategy and the differences between state lotteries and poker.

Approximately 9.18 seconds.

Shot by Alex Manning, Hawk Jensen, and Paul Detrick. Edited by Detrick.

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Comments

[R C Dean]

The politicians and the Fed are still rigging the market.

There's a reason I never buy any security without putting a trailing stop on it.

Every single thing that contributed to the Big Dump of 2008 is still out there, still going on, as bad or worse than it was then.

The fact that some of the air has been let out of the housing bubble is irrelevant; it is still overpriced and (what is worse) it looks like CMOs based on those overpriced houses are, for lack of a better word, invalid, because too many of their "assets" were never properly assigned to them.

[shrike]

The market is "rigged" by inept pols or the Fed?

Dean is lapsing into degenerate conspiracy theories now.

Yeah - flash trading and hedge funds who naked short FTD's are all done by those nasty pols like Michelle Bachmann or Maxine Waters who can't pick their nose without a reporter blogging it.

[R C Dean]

The market is "rigged" by inept pols or the Fed?

Well, the Fed has an overt policy of manipulating the interest rate and bond markets, so I'm pretty comfortable with that.

Politicians rig markets all the time. In fact, you can make a pretty good argument that's basically what they do, all the time.

[TANSTAAFLusa]

"Politicians really add zero value..."

Never was a truer word spoken

[Spiny Norman]

Approximately 9.18 seconds.

That's a short video.

[The Other Kevin]

One thing that is continually overlooked in our discussions about Fiscalpocalypse 2008 is the role of interest rates. The reason any argument about Greedy Banks and Free Market Failure falls flat, is because interest rates are set by the government. For a long, LONG time we've had rock-bottom interest rates. Which encourages people to spend instead of save. So now we have a majority of Americans in debt and without any savings, and when times get tough they have no resources to ride it out.

[?]

Approximately 9.18 seconds.

It seemed longer. I guess that's because the guy's voice is so annoying.

[shrike]

What simplistic drivel.

Netscape and low interest rates created the mortgage crisis?

No mention of the lack of risk analysis by lenders? No mention of liar and NINJA mortgage loans that were pushed through the system like shit through a goose in order to sate the investment banks thirst for MBS that the rating agencies slapped phony AAA's on?

Pass.

[DG]

Let's welcome back the MSNBC viewer.

[TANSTAAFLusa]

"No mention of the lack of risk analysis by lenders? No mention of liar and NINJA mortgage loans that were pushed through the system like shit through a goose in order to sate the investment banks thirst for MBS that the rating agencies slapped phony AAA's on?"

And just why were these loans allowed to happen? I'll give you a hint, it has to do with two GSE's that were willing to insure or buy them all up...

[shrike]

Total horseshit.

The GSE's were only allowed to repurchase conforming loans. In 2005 the maximum for such was $330,000.

The MBS portfolios of Wall St houses were stocked with loans Fannie/Freddie couldn't touch by law.

[TANSTAAFLusa]

Being government backed and subsidized Wall Street couldn't compete with Fannie and Freddie in the Housing bubble they started and so turned to sub-prime lending. Also, it was the Federal Government that pushed for subprime lending by pushing home ownership for everyone - even those who could not afford it.

Geez, Shrike, you statists. You see no problem with the Gov. turning the gas on, putting matches on the table then standing there and watching as stupid people light up. Then, they blame the company that made the matches and the guy that built the house and sue them and insist that they need more authority to prevent such reckless behavior.

[Shrike]

Listen to me, Shrike, who has a bigger brain then everybody else. I think I'll watch videos of Keith Slobberman on PMSNBC, while eating my boogers and jerking off. Hey it works!

[shrike]

I never do the upper case - you fucking idiot.

Why me? Why do I draw out the wrath of the Redneckery most?

[Mr. FIFY]

There you go again, shrike... "anyone who is not like me = redneck". Knock it off, fuckhead.

[tkwelge]

It doesn't matter what kind of mortgages that the GSE's were securitizing. The impact that they had energized the market for mortgage loans across the board. Plus, the banks were free to take stupid risks, because everybody knew the fed would bail them out.

[tkwelge]

And Fannie and Freddi did dig pretty deep into the subprime market. Just because it wasn't securitizing a majority of the sub prime loans doesn't mean that they didn't have an effect. The combination of the Fed provided moral hazard and record low interest rates combined with government meddling directly into the home lending market, the writing was on the wall.

[TANSTAAFLusa]

There was never a problem too small that government couldn't make bigger.

--Mike Munger

[Robert]

He didn't actually say why buy and hold was bad strategy. All he said was that if you held for a long time without success, you should reassess.

[Douglas Fletcher]

I'd comment on all this but I don't know enough.

[MrGuy]

Then just say nothing.

[gaetano maersk]

yeh well you know its always something isn't it? there"s alot to be said for just getin by, what good is prosperity when theres noone left to share it with?

[donald masrich]

As soon as i get a chance,i'm gonna get me one of those new gadgets . you know ,the ones that make evreything nicer and life more livable. maybe general electric might want to team up with duracell and create the ultimate batery powered vehicle.

[Gilbert Martin]

"Approximately 9.18 seconds."

He must be a really fast talker.

[Gabe E]

I'll be honest. Although I naturally find myself inclined to agree with much of what is said here, I am also weary of any explanation of economic history, especially recent history, that sounds like a narrative.

There are so many factors involved in economies, and to just say: "Well, A happened, and then B happened, so now we have C" seems simplistic to me.

[Gabe E]

Also, he kind of looks like a douche.

[Mark Stouffer]

Mr. Covel mentions the .com bomb as the seminal event trigering a series of bubbles. Please include the DOJ suit against Microsoft as the seminal event that triggered the .com bomb. It is significant because Microsoft was the very pinical of cyber-independence. The largest independent software company supported the largest community of independent software developers and they were building systems for kings and queens and the president of the company was the richest independent person the world had ever known.

At the time this independent titan of this independent industry was the biggest problem for the DOJ. Their attack against Microsoft, to preserve a company some of you may remember called Netscape, was not just a cheap shot at a huge company that could suffer the losses. It is what lead directly to the subsequent declines and the government takeover of the banks.

It takes a lot of work to pile stones up, but only one fool to kick them asunder.

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