I’ve had to watch a few programmes about how finance works. There is a simple rule to them. They are ALWAYS rubbish. This is certainly the case for the Beeb’s ‘definitive’ documentary about the big Lehman’s crash – or at least the first 30 minutes that I could bear to watch.
The people who make these programmes always assume that the people who watch are far too thick to actually understand anything about the complex business that is banking or finance. The way that a bank can be a solvent, AAA-graded, money-churning giant one minute and a wreckage of paper, computer screens and weeping employees shortly afterwards. The sheer magic and lunacy of finance – the maturity transformation, the way massive long-term investments are financed with short-term flighty obligations, the self-fulfilling equilibria of confidence or despair – all of these take a nuanced approach.. But, instead, you get talking heads, talking about how exciting it was, who said what – looking for a moment in history, explaining nothing.
So it is with the Beeb. I know about it from the inside because I was involved in a couple of programmes they made: filmed and followed in Gambling on the War, and then as an advisor to Suicide Trader**, a mock-documentary showing how a trader might have blown up the world’s financial system. In the first, the catchphrase of the original producer was “no PhD thesis please” – every time we tried to explain anything. Every issue had to be in black and white, personality terms. A market that did X had to mean Y – like it was a toddler mouthing one-word sentences rather than a complex amalgamation of millions of traded views.
So, on Lehmans, you just get: “Lehmans – big bank -ooh, really difficult weekend – really important – look at Dick Fuld, what an angry, mean, greedy man – wanted to make a lot of money* – made a lot of money – took RISKS – lost lots of money . . . ” Nothing much is really explained, but the unwary viewer will walk away thinking that he has learned something – Lehmans went down because Dick was a rude, nasty greedy man with bad manners (he did not wave at his secretary). While it is likely to take PWC half a million man hours to get through the bank’s books, the BBC are confident that the whole thing can be explained as a sort of morality tale.
No explanation for why it was Lehmans rather than any of the others. None for why it was that particular weekend. No discussion of the difference between liquidity and solvency – just the phrase “Haemorrhaging money”, used interchangeably for either (a) the depositors or short-term paper holders fleeing or (b) the trades Lehmans making turning out bad. Lots of “colour” (the Mets were losing at baseball; the place smelt of pizza and sweat, etc).
I may sit down to watch the rest, some day. I doubt it will really explain why the collapse of a bank can cause car factories in Peroria, toy shops in China and practically everything in Iceland to go to bits. Instead, the naive viewer will be left with the impression that it is all because of predictable wickedness, because that is as complicated a story as the BBC can trust us to understand.
Yes, things went wrong a year ago because of the particular timing with which wickedness comes home to roost. End of fairy tale.
* I have done little to get acros how ponderous and banal were the truisms that the narrator chucked at us. For example, Dick Fuld was apparently the reason Lehmans had grown so rich – because he wanted to make loads of money – cue video of DF saying as much – as if other CEO’s might have wanted to make something else, like, I dunno, daisy chains, and Dick’s evil genius was necessary to realise that it was money that banks want
** to give you an idea how bad: the nightmare scenario was a trader’s derivative positions causing a bank to go bust when oil spikes to . . . .$40. Yes, $40, in this documentary, had people queuing round corners at banks. They had no idea.