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Trillion dollar bill

There are two books and two podcasts that explain how the financial crisis was created between 1991 and 2007.

  1. The “Giant Pool of Money” explains how the growth in worldwide demand for fixed income securities (the giant pool of money) doubled from $36 to $75 trillion between 2000 and 2008 and that Just as this demand was beginning to increase, the Federal Reserve Bank decided to keep Federal Funds rate very low – near 1%. This made Treasury bills look very unattractive to fixed income investors. Something was needed to fill the gap. Demand was huge – a golden opportunity that any capitalist worthy of the name would find irresistible.
  2. Reckless Endangerment” byGretchen Morgenson and Joshua Rosner shows how, during the 1990s, CEO Jack Johnson exploited Fannie Mae’s unique position in the home mortgage business to stifle all efforts to rein in banking and laid both the political and regulatory groundwork that enabled the subprime fiasco.
  3. The “Big Short” by Michael Lewis shows how Wall Street, took advantage of the environment created by Fannie Mae to connect demand from the Giant Pool of Money with unqualified home buyers, using new kinds of investment securities that obscured their inherent risk.
  4. Another Frightening Show About the Economy provides a spellbinding description of the 36-hour period in 2007 when credit markets froze, scaring the wits out of the Treasury Secretary.