Curtis Hanson
Il crollo dei giganti

Another unfortunate Italian title – “Too Big to Fail”, the beautiful original title – for an HBO television film in which Curtis Hanson tells the true story of the real estate bubble that led to the 2008 economic crisis.

A TV movie featuring James Woods, William Hurt, Paul Giamatti, Matthew Modine and other excellent actors, and frankly, it's unclear why it wasn't released as a feature film. Five full stars for rhythm, depth, technical skill, and acting (even though we didn't watch it in the original language). A sure Oscar nomination.

Let's start from the beginning. The American dream starts with the house. You can give up everything but not a home. In the 1980s, 1990s, and early 2000s, the real estate market reached gigantic levels: buying, selling, and building were happening at full tilt. Wall Street banks collected mortgage money and reinvested it to make mountains of dollars. Then came the temptation of greed. More mortgages mean more interest and hence more money. So, let's lend money to anyone, even to couples who want the house of their dreams but can't guarantee they will pay us back. An absurd risk. But in the case of risky mortgages, banks take out insurance policies with AIG (the largest insurance company in the USA). AIG agrees because it believes the real estate market will never collapse… Instead, at a certain point, housing prices drop and mortgages skyrocket. Many families can no longer pay them. No problem, banks think, because we're insured. If only AIG weren't unable to pay all the insurance claims, because part of the policy money had gone into the pockets of their managers: fees of hundreds of millions of dollars. AIG collapses. And so do the banks that were insured with it. It's the Apocalypse. With this premise, you will understand the rest and I hope you get angry seeing what a trivial and infamous reason created the bubble.

The original fault lies in the wild deregulation of the banking market allowed by Reagan, Clinton, and Bush Jr: “Handing victory to the banks, Congress passed a law allowing the merger of commercial and investment banks, thus forming institutions of unprecedented size in the world”. For the banks, it's apotheosis.

The party ends on May 23, 2008. That Friday, something happens that brings everyone back to earth: “Lehman Brothers” (the fourth investment bank on Wall Street) collapses. 90 million dollars are lost in one day. But the president (James Woods) doesn't want to sell because the real estate market must return to growth.

The Treasury Secretary and former Goldman Sachs executive (William Hurt) must do something. But his hands are tied. Lehman deserves to fail but he is a former Goldman executive. If he doesn't do something, everyone will say he let it fail because, in reality, he's still working for Goldman even as Treasury Secretary. But he's not interested in the malice and refuses to play the savior: “Wall Street has a gambling problem and if we save them, these gamblers will never learn their lesson”.
Meanwhile, other banks, less strong than Lehman (Fenny and Freddy) collapse by 60 percent in two months. China warns: we will dump hundreds of bonds on the market, and your economy will collapse.
The situation gets heavy, and on September 12, 2008, all the CEOs of the most important American and British banks (Merryl Lynch, JP Morgan, Citigroup, Morgan Stanley, Goldman Sachs, Barclays, etc.) gather to save Lehman, whose shares are now quoted at 4 dollars each. Initially, Bank of America agrees to make the sacrifice. But seeing the situation (in one day Lehman goes from 30 to 70 billion in garbage mortgage securities), it prefers to save Merryl Lynch.
At this point, the British bank Barclays steps forward to acquire Lehman, but it refuses the real estate sector. No problem: the other banks decide to buy the toxic mortgages. It seemed settled, if it weren't for the fact that the UK regulatory authority can prevent the signing. England doesn't have a free banking market like the American one. And the English don't want to import the American cancer into the United Kingdom. The deal is off. Lehman must declare bankruptcy. We all remember that day (September 15, 2008), with all the news opening with this story and images of laid-off employees leaving the institution's offices.

Now that Lehman has failed, people lose confidence in other banks as well. It's a domino effect. The French Minister of Economy is out of his mind: “You've made an unforgivable mistake. By allowing Lehman's bankruptcy, you will destroy Europe”. The head of General Electric can no longer get credits and can't even finance routine activities.

AIG needs to be saved. The Federal Reserve (the State-managed Federal Bank) provides a temporary loan of 85 billion dollars. But it's not enough. Something still needs to be done to fix the real estate market. The watchword is only one: buy the debt contracted by the banks. On September 18, 2008, the Fed director (Paul Giamatti) gives his “bottom-up economy” lesson to convince Congress to buy 700 billion dollars of toxic securities: “People need to have access to credit. The economy is driven by ordinary citizens, and citizens must have money for a home, but also to supply their businesses, expand their stores, etc... Without credit, the economy is over. So either you give us the money, or it will be worse than the Great Depression. On Monday we won't have an economy anymore.” No use. Congress does not approve.

There's only one way left to save the place, the one no one wanted: injecting liquidity from the State into private banks. An anti-American remedy. Saving those who have failed and making the private public. It's nationalization. The Undersecretary of Treasury, with a lump in his throat, talks to the big shots: “The Treasury will be able to acquire preferred shares. We will give you the money (125 billion), and you will invest it.” The president of Merryl Lynch (Matthew Modine) knows the side effects. He knows well that if the State enters a bank, “politics” will enter board meetings: “I run a company. If the Federal Reserve tells me I can no longer pay salaries based on merit, you'll start the greatest brain drain of all time. Is that what you want?”  They all sign.

The real estate bubble did not weaken the banks. On the contrary. The fear has led them to understand that storms can be faced and overcome only by staying united. Moral: the giants have merged, and today 10 financial institutions own 77% of the entire US banking system. These behemoths have been declared “too big to fail”.