375: Bad Bank

375: Bad Bank

Feb 27, 2009
The collapse of the banking system explained, in just 59 minutes.
Our crack economics team—the guys who explained the mortgage crisis, Alex Blumberg and NPR's Adam Davidson—are back to help all of us understand the news. For instance, when we talk about an insolvent bank, what does it actually mean, and why are we giving hundreds of billions of dollars to rich bankers who screwed up their own businesses? Also, two guys go to New Jersey to look at a toxic asset.

Download a transcript.

Other shows on the financial crisis: Giant Pool of Money and Another Frightening Show About the Economy. And you can get daily updates about the financial crisis on Alex and Adam's Planet Money podcast and blog.

These episodes of the Planet Money podcast go into more depth on the issues in this week's show:

2/9/09 Get Tougher Please—especially the interview with Adam Posen
2/27/09 He Nationalized a Bank
2/2/09 Japan's Lost Lesson

Simon Johnson, the former IMF official on this week's show, has a blog called BaselineScenario.com.

Also, on C-Span—Treasury Secretary Tim Geithner praises this episode:

View the full video here.

  • Alex Blumberg and Adam Davidson tackle a very tough subject: Trying to explain exactly what a bank is and does. They talk to a number of experts about what has gone wrong in banking, but not before bringing us all up to speed on some banking basics, like understanding a bank balance sheet, and a bank's assets and liabilities, and the squishy business of what banks say about their balance sheets compared to what they are.

    Alex and Adam walk us step by step through the complications of the US government buying up bad assets from banks, and explain why, when it comes to footing the bill, the government might just prefer to not be in charge of the very banks it is having taxpayers bailout. From a dollhouse, to a hypothetical bank worth tens of dollars, to the trillions of dollars being spent to keep banks afloat, Alex and Adam talk economy, and where we might be headed. (39 minutes)

    Economics

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