this hour the story of the man who crashed the world the billionaire morgan seller who fooled millions everybody wanted to go to these are real estate to get into the game the high rolling banker with a fatal weakness j twenty ten the same model is followed for a new investigation of a new financial economic crisis and he has taken sworn testimony from a parade of government and bank official the consequences of this financial crisis have been graham also twenty seven million americans who are either out of work can't find full time work or stop looking for work millions who have lost their homes and millions more who are in the foreclosure process trillions of dollars of wealth loss i think one of our jobs is to try to rationally explain to people what the heck happened people want to know how did it all go so wrong the key trigger of the two thousand and eight financial meltdown was easy lending in the u s housing market in an air of very low interest rates and reduced bank regulation there was an astonishing building boom across the united states in california banks decided that virtually anyone could qualify for a home lo kling has been a real estate agent in san diego for over twenty years and really in two thousand and four two thousand and five if you could fog a mirror you could get a loan that's how bad it was they didn't really i know or care about the qualifications of the buyers and whether those people could make those payments or not apparently wasn't much of a concern is getting to be more than you can manage a whole should look at it has a whole range of solutions geared to especially if house prices never went down the one man who could have stopped the practice was then u s federal reserve chairman alan greenspan for twenty years the world's most powerful bank greenspan was revered in washington his power feared even by presidents the federal reserve was the one agency that had the full authority to regulate subprime lending and despite all the evidence despite all the yellow and red lights going off they chose not to staff reports i mean would you want to just ask you would you put this under the category of ups should have done i mean my experience has been in the business i was in i was right seventy percent of the time but i was wrong thirty percent of the time and there are an awful lot of mistakes in twenty one years and i would point out that the captain as i tannic was ninety nine percent right and one percent wrong as a size of the mistake that matters we now know that banks and mortgage companies were indulging in all sorts of fraudulent practices to pump up their mortgage business many of the loans were extremely complex and the terms hidden from borrowers there were low teaser rates that would automatically reset to much higher payments after a few months it was no accident that the most complex mortgages were sold to the least sophisticated buyers especially in poor and minority neighborhoods like this one in south central los angeles congresswoman maxine waters has represented the district for nineteen years in the u s house of representatives information you know i've seen mortgages that were given to seventy year old people who want to take their income whose income was never going to increase but that market was going to reset within a few years where was that money going to come from mortgages that i think a criminal was the undisputed king of the us sub prime market he was called the golden boy because of his permanent ten and because of the height of the sub prime real estate boom he was making about one hundred million dollars a year an lending practices were helping scores of americans at named the dream of homeownership it's one thing for him to say that he was a friend to the poor but in the final analysis when you say that these poor people are now  foreclosure now cannot get out of occasions now ending up on the streets then certainly that defies how he could have been sold to bank of america and almost immediately plunged in value angelo mozilo was placed under investigation by the securities and exchange commission p s e c uncovered very damaging private e mails  expressed his true feelings about the dangerous sub prime mortgages he was peddling he wrote in all my years in the business i have never seen a more toxic product at the same time as  reassuring all his investors and clients countrywide views the product as a sound investment for our bank and a sound financial management tools for consumers it does appear that there was a private view of the markets and there was one that was a spouse to borrowers rating agencies the investing public the f c c has now charged mazola with insider trading and securities fr lenders like angelo mozilo really didn't care if people ever paid their mortgages because those loans did not stay on the mortgage companies books mortgages were bundled together with other loans from across the country and moved to b there they were packaged up into complex new financial products bankers went wild for these financial securities who were really just stacks of bio use there was almost no government regulation of this market it became a massive system of buying and selling these ious with fees being charged on each transaction it was just all the way to make fees and to package up these streams of suppose and cash flows and sell them off to investors i mean for a while there anybody who touched the mortgage made money it was like the most perfect product i once had this view that when people start talking about toxic assets that somehow they are like a good piece of fruit that had turned bad all turns out they were rotten piece of fruit from day one and all along the way whether it was the broker the lender the securitize or the market maker everyone seems to have taken the view that they had no responsibly for the product that they were moving along a system that became unfortunately this cancerous material that was injected into financial institutions all over the world of the first places these toxic products landed was the financial district of london england nicknamed the city there was a golden age here in the years before the meltdown garrett anderson arrived in the city as a young trader in why i mean you have to wear a saints and things like that he said i'll tell you why it's quite simple you'll have about three four hundred thousand pounds within about four or five years and then you can go off and if the if you want you want to live since the setting of trinkets wasn't going down to wild atmosphere in britain was brought about because chancellor of the exchequer gordon brown was easing financial regulation there he called his new approach the like touch we will advance if there is light touch regulation a competitive tax environment finance minister in those years he says deregulation came about because of a competition between new york and london to become the financial capital of the world the race to become number one was very very important but how do you attract a financial industry with the most logical champagne fact catalysts it was a joyous time everywhere you look there was a great big new offices being put out statues being put in the full course people building great monuments to themselves in terms of the building so in the way that they behaved by two thousand and four guarantee henderson was making a salary of three hundred thousand dollars a year plus an annual bonus of seven hundred thousand the only he was invited on to business television shows as an analyst strong we had profit before tax crisis call for nine and a half percent the home again is increasing your bonus you don't go into the city to do the world some good you go there to make money as quickly as possible and if that means lying cheating and stealing that's what you do if one country could be the microcosm of everything that went wrong in the years before the meltdown iceland is it it is a place of staggering natural beauty geysers to its water one thing iceland was never known for was banking and high finance at least until a few years ago iceland was transformed through the ideas of one man long time prime minister davidowitz and he decided to shake iceland out of its popular political t v show the reaction was disbelief many for many people this would sound this it was almost surreal you take the fishing grounds efficient swims in the sea and you give it to a bunch of people who are on ships  for a good he says this is the main resource of our country this was the beginning of fa wilson's friends were father and son who came from russia with some money again he had made from a shady dealings in the brewery business in st petersburg and suddenly neighbor upon themselves to be the owners of the oldest bank in iceland these guys didn't know the first thing about banking and in retrospect their eyes of greedy criminals or complete fools the newly privatized icelandic banks embarked on an orgy gets dangerous financial practices bankers sold securities back and forth to each other in vast markups the falsely inflated their value all icelanders were encouraged to buy a house or even to the central bank lowered interest rates flooding the country with easy credit as in the united states this triggered an unprecedented real estate boom i saw the first living and working abroad came home to take advantage of the wild market i lived in the u k till two thousand and three thousand and four when i came home i bought a flat for nine million kroner here downtown almost close to where we are now one and a half years later i sell it for almost fifty million for i like what's what's going on i've done nothing to th but here we are six million kroner in my pocket just for keeping it for one and a half years and of course when you're when you're benefiting from it you're sort of ok well this is great there's a saying now if something seventies having fun john and your fiftieth birthday party as one of the business cycles did people just want to fart people to one too many people bought one car many iceland was not its reckless financial planning during the boom y champion of the global real estate bubble was surely dubai in the united arab emirates money was no object as every local shake and every blooming company competed to see who could direct the most austin texas building no idea was considered too outlandish when waterfront property rose dramatically in value by decided to make more ships vacuum sand off the ocean floor to make the famous palm island or built an endless line of luxury condominiums and hotels that were snapped up by wealthy investors from across europe africa and the middle east canadian robert levy went to work for dubai's leading real estate company ten years ago to divine its hay days we used to call the sale center the fish market it's just you know people could come and say give me an apartment any apartment i don't care what two bedrooms we've got and just give me an apartment because in a way people buying options because most people are buying things with zero intention of actually living it so they are buying coupons to resell somebody else would be selling billion dollars was a real estate in one day all of this flowed from the vision of one man to buy ruler shaikh mohammed bin rashid al maktoum when he saw the first plans for what would become the world's tallest building the burj khalifa he had only one the fall but at the same time you live here for a few years you basically buy the story the drink the kool aid and i say hey we must be  different shaikh muhammad apparently believes the party could go on forever some began to wonder when the global real estate bubble would burst and to the man who would become the central laughter in the meltdown took his position on the stage in two thousand and six former goldman sachs c e o hank paulson was one of the toughest of the wall street titans that he accepted the invitation of george w bush to become the u s treasury secretary it was a controversial choice pauls n was not universally loved on wall street he was probably in the now these guy of all they used to call him the snake and this is coming from the wall street executives themselves you know you know you really can't believe everything he tells spots i mean you know why the scorpions sting they sting because that's their nature and you know hank paulson didn't change his nature when he went to washington shortly after hank paulson arrived in washington the prices of california houses began to slow sales of existing homes are down a full twelve percent just two years prices dropped overextended homeowners through more properties on the market triggering a downward spiral paulson called me and started talking about some prime mortgages in the united states there was a general consensus that there was too much credit and too much money sloshing around globally we had had discussions about where this excess credit was likely to show itself and it was showing itself and sub prime mortgages in the united states and that was a a large prob although few seem to realize the world was now infected with the toxic financial products that depended on the u s real estate market it was inevitable that someone somewhere was going to blow the whistle and question what these financial products were actually wor from those funds it was all that like an old fashioned movie where the bank president locks the door and tells people they can't get their money it's kind of it doesn't exactly make you feel good about the face in some of the foundations of twenty first century finance began to crumble september two thousand and seven and cracks were appearing in the foundations of the global economy the titans of the anglo american financial system began to trump the first stuff was britain's adam applegarth a true superstar in london's business days was very damaging to the reputation of british banking not a matter of garth was hauled before a british parliamentary investigation of the failure of his bank but he was characteristically defi the northern rock crisis in britain could have been taken as a serious warning on wall street but it was not i think people saw this as that's happening over there that's not happening here i think that the sense of interconnectedness was not realised in told the very last moment through the spring of two thousand and eight u s treasury secretary hank paulson was constantly reassuring his international colleagues that everything was fine with the u s economy and that only mild tinkering was required with the global financial system in private first major u s casualty of the financial crisis came with the dramatic fall of one company and one man the richest c e o on wall street jimmy cayne was a legend he had come up through the ranks to become president and chief executive officer of america's fifth largest investment bank bear stearns he was famous for his back slapping hard drinking and high living st jimmy is really out of central casting i mean i've described him as a as you know an amiable role got me he's does definitely can be quite charming definitely can be quite ruthless has a twinkle in his eye and i think that combination of ruthlessness and charm that people get to the top with that combination jimmy cayne was a flashy risk taker business and in his personal life in two thousand and seven he was worth over one billion dollars and he wanted everyone to know it every thursday afternoon after the stock market closed he would board a private helicopter a few blocks from his manhattan office and fly off to his country house on the jersey shore for what looked like a joint i'm like a king's pot smoking became public at the worst possible time for his firm in the fall of two thousand and seven bear stearns risky bets on mortgage backed securities began to go wrong started to hemorrhage money then in november the wall street journal carried a front page story which portrayed jimmy cayne as an absentee landlord he was always out of touch at either golf games or bridge tournaments while his firm was in crisis to top it off the journal publicly revealed his taste for marijuana joke earning who's my colleague on c m b c says hey charlie what do you think about that hatchet job that that the journal just did on jimmy came and i don't know why d it stop it i said i said listen who cares i mean you know it's do you know you're not breaking the law and how it's kind of a harmless crime which is laugh it off and i'll never get what he said to me he goes yeah he goes laugh it off you try to laugh it off you're not running a company you know jimmy had made a lot of enemies on wall street it was very competitive darwinian place if they smelled oh you know chum in the water the sharks are going to circle rumors he told his washington staff this will be over within days he knew that bears clients would immediately pull their cash out of the bank causing it to collapse we have some breaking business news tonight the story of the investment bank bear is reportedly close to selling its paulson was right on sunday march sixteenth bear stearns was taken over by rival j p morgan in a deal bankrolled by the u s government just one year earlier fair share price had been a lofty one hundred  friday and so you know the idea that it would be worth two bucks a share was impossible to fathom commonness even though it was unjustified irrational it became a self fulfilling prophecy when i hear a lot of the people come before us i'm struck