Watch IOUSA on CNN Today (Sunday)
January 11th, 2009 . by economistmomI should have posted on this before yesterday, when IOUSA the movie made its television debut on CNN, in a two-hour special, hosted by CNN’s Ali Velshi and Christine Romans, that interspersed chunks of the movie with expert discussion with Alice Rivlin, Bill Bradley, Pete Peterson, and Dave Walker. But maybe I can catch some of you in time to watch it when it’s shown again today (Sunday) at 3 pm EST.
The discussion was great and showed a lot of agreement among the panelists. I’ve seen various shorter versions of IOUSA, including the 30-minute YouTube one linked here (the full version being about an hour and a half long), but seeing it on TV with commercial interruption was a first. I got a big LOL when one of the first commercials came after the historic footage of Pete Peterson announcing the formation of The Concord Coalition, warning of the fiscal challenges and saying “you ain’t seen nothing yet”–immediately cutting away to a woman in a bikini–in a Sandals resorts commercial. And then there was the Cialis commercial a bit later in the broadcast, immediately following Ron Paul’s questioning of Alan Greenspan and…well…LOL.
There’s been plenty of discussion/critiques of IOUSA out there in the past few months, but here is a link to (the esteemed) Roger Ebert’s (nonpartisan) review of the documentary when it first came out in theatres in August.
The program on CNN was fabulous. It is the best explanation I have ever seen on finances and debt. The commercial and SNL clip were great.
Only saw part of this program and it was great. Is it going to be rebroadcast? If so when.
How can I get a video copy of your 2 hour program. The commentary was just as good as the clips from the IOUSA documentary. I wish to share it with my grown married children.
I haven’t heard about any rebroadcast or looked for an online copy of the 2-hour CNN program. If I learn anything about either, I’ll post about it. I’m glad to hear lots of positive comments about it.
saw the cnn program iousa over the week end and was fascinated by the topic so googled “cnn iousa” and thats how I found this page.
Anyway I got a question that’s been bugging me for a few months now and after watching the program I thought about it once again.
The question I’d like to know is what is the “economic” justification for “credit default swaps” owned by individuals/hedge funds or some other third party institution that does not own the underlying security?
I’ve read CDS contracts have been widely used by hedge funds and others to speculate on the viability of banks, other financial institutions such as brokerage houses, and auto manufactures.
These bets on various companies were not made on any regulated exchange and no one knows the exact size of the problem; I read that said “Credit default swaps” are similar to homeowners insurance, because the buyer pays a premium and, in return, receives a sum of money if a specified event occurs. However, unlike homeowners insurance the buyer of a CDS contract does not need to own the underlying security, in fact the buyer does not even have to suffer a loss from the default event.
I’m not an economist but I’d think that third party CDS are inflationary and add LOTS of uncertainty in the market.
If third party CDS are inflationary and add uncertainty in the market, I’m wondering why not have a well crafted tax rule which would nullify the value of the CDS, in other words have congress make a special tax law that states the profits of a third party CDS is 100%.
Personally I’d think a carefully drafted rule would not penalize owners of CDS contracts who own the underlying security; yet would also act as something akin to a smart bomb that
can destroy a bunker without much surrounding collateral damage.
So is this a good idea or a bad idea…
economistmom, along with “Janice and wayne” I’ve got something ya all might want. I just happen to have a copy of the CNN program on DVD (I have a PVR with a built in hard drive and a DVD burner) so I the entire CNN program minus all advertisements which I’ve edited out.
(about my post above) If EconMom sends me an eMail I’m willing to “mail” a copy of the DVD I made for personal use, so she could dissimate the info as she sees fit.
Ben can you please get me a copy of that? I missed the cnn broadcast. You can reach me at on aim as zennode
ben wrote:
Anyway I got a question that’s been bugging me for a few months now and after watching the program I thought about it once again.
The question I’d like to know is what is the “economic” justification for “credit default swaps” owned by individuals/hedge funds or some other third party institution that does not own the underlying security?
I’m not an expert on credit default swaps but I think that’s a valid question. Buying such swaps on securities that one does not own seems like speculation that should be restricted to Vegas. At the very least, it should not be allowed to endanger the entire financial system. I was glad to read in an Economist.com article that a report titled “Financial Reform: A Framework for Financial Stability” was published today that, among other things, “advocates a formal system of regulation for over-the-counter derivatives, such as the type of credit swaps that sank American International Group, an insurer”.
In a similar vein, I’ve wondered whether the shorting of stocks should likewise be limited to those who own the stocks. Shorting stocks which one owns allows one to temporarily limit their exposure without having to sell the underlying stock. Except in regards to tax treatment, it’s not much different than selling one’s stock, a right that every owner obviously must have. Limiting shorting to owners would limit the possibility of “bear raids” where non-owners short a stock mercilessly in order to manipulate its price. Of course, I’m sure this limitation of shorting would be very controversial. Also, the shorting of stocks based on fundamentals rather than momentum or manipulation may have some useful purpose. Perhaps a good compromise would be to only allow the shorting of stocks whose owners explicitly allow their stocks to be borrowed.
In any event, the ban against naked shorting (shorting without actually borrowing the stock) should be strongly enforced. Also, it seems that most all commentators who I’ve heard address the topic have been in favor of reinstating the uptick rule. The strongest argument that I’ve heard against doing so is simply that it is ineffective. However, it and other rational regulations may be helpful in restoring some confidence to the markets. As long as there is a perception that the markets are somehow flawed and/or rigged, it will likely be difficult for them to recover.
Here’s a 10-minute snippet from the 2-hour CNN special, from CNN’s website:
http://www.cnn.com/video/data/2.0/video/business/2009/01/15/iousa.panel.money.crisis.cnn.html
B Davis wrote:
I’m not an expert on credit default swaps but I think that’s a valid question. Buying such swaps on securities that one does not own seems like speculation that should be restricted to Vegas.
IMHO I don’t think anyone with the power to set policy really has a grasp on the whole picture because the math and hedging strategy of CDS were done by some of the brightest math and physics refugees from places like MIT and Oxford, the contracts were written up by lawyers the best law schools around like Harvard, and the selling of these financial instruments of mass destruction were sold by what could be best described as used car sales people who could sell the proverbial refrigerator to the proverbial Eskimo. Essentially the way I look at it is, its a case of too many cooks creating a complex dish that the global economy at first thought tasted out of this world, but now that it has consumed the clusterfuck souffle it is now getting a really bad case of food poisoning.
What kinda blows my mind is how unregulated CDS are like a nonsensical perpetual motion machine. Basically from what I can gather is the put and call net position strategy employed by the trading desks such as Lehman Brothers, is kinda something akin perpetual “fractional reserve” credit creating machine that is now blowing up and causing all kinds cascading damage in the real economy with it. But what do I know I’m just a knuckle head trying to survive the wild ride.
Personally I think a few things do need to be done to promoting long term stable markets, and to prevent rampant market manipulation. If it were up to me I’d look into having a hard and fast rule of 3 day settlements with proof that securities were actually owned no matter if the the security or commodity contract was resold in that time period… combine that idea with a three strikes and your out of the game if a person violates a hard and fast rule of 3 day settlements with proof that securities were actually owned, is something that I think would be to prevent the problem of naked shorts.
BTW if anyone is interested, I was able to get technical help converting the content saved on my PVR of the cnn news brodcast to something that could be viewed on a laptop. In case ya missed the live brodcast, check out:
part 1 of 2 of the IOUSA television premiere on CNN
part 2 of 2 of the IOUSA television premiere on CNN
Thank you, Ben, for uploading the CNN version. It was very frustrating to view only the first 9 min which CNN published on the web. Why would they bother… Much appreciated. M.