Slate Money: "The Shaky Ground Edition" – September 15, 2018

Episode Overview

On the 10th anniversary of the Lehman Brothers collapse, this episode takes a sweeping look at the aftershocks of the 2008 global financial crisis, its unresolved consequences, and the seismic shifts in finance and energy that followed. Host Felix Salmon (Axios), with regulars Anna Szymanski and Emily Peck (Huffington Post), are joined by financial journalist and author Bethany McLean ("All the Devils Are Here," "Saudi America") for an in-depth, sharply critical, and at times wryly humorous conversation. Major focuses include:

• The legacy and fairness of the financial crisis bailouts
• Why solutions for “regular people” floundered while banks thrived
• How fracking became a surprising – and problematic – economic engine post-crisis
• The overlooked fragilities and changes in today’s financial system

Key Discussion Points and Insights

1. The 2008 Crisis: Bailouts, Fairness, and Fallout

• Did We Dodge a Bullet or Take One to the Head?
  • Bethany McLean argues both: “It’s both possible that they chose to do the right thing and we needed to bail out the financial system and that it was horribly unfair and an absolutely awful thing. And the problem is both those things are true at the same time.” (03:02)
• Technocratic Decisions, Political Failures
  • Felix: The technocrats (Paulson, Bernanke, Geithner) “utterly failed to sell it on a political level. And that failure was way more consequential than anyone could have ever imagined.” (03:42)
  • Bethany: “I don't think there was a way to sell it and make it palatable…We had to bail out the financial system…I don't think there's a good way to sell that.” (04:07)
• Alternative Bailout Strategies
  • The crew debates managed bankruptcies, nationalization, and whether Europe’s tougher approach fared better (spoiler: no).
  • Anna argues consequences stretched beyond the banks: “The lack of faith in institutions is clearly tied partly to the financial crisis…Does that mean the financial crisis is what led to Donald Trump? I think that's a bit of a jump.” (05:34)
• Credit, Inequality, and the Masked Decay
  • Bethany: “The run up in mortgage credit…was used mostly to mask the underlying economic weakness…I think that's the real problem.” (06:55)

2. “Bailouts for People” vs. Banks

• Why Wasn’t More Done for Homeowners?
  • Emily: “There was a lot of help given to the financial institutions and very little help given to, you know, regular Americans. And income levels are pretty low. They barely recovered.” (08:54)
• Political Will and Paradox
  • Bethany: “Banks got bailed out and people did not. Right. That is awful…it gave rise to the Tea Party in many ways…It’s way more controversial than that and really hard to figure out.” (09:50, 10:27)
  • Felix: “We would have been much better off, certainly on the political level and as a society, if we’d done some unfair bailouts of individuals, because God knows we did a whole bunch of unfair bailouts of banks.” (10:48)
• Lehman as the Outlier
  • Emily: “There was no problem with fairness in bailing out the banks. The one time there was a problem was Lehman.” (11:27)
  • Bethany: “After they didn't bail out Lehman, both the New York Times and the Wall Street Journal wrote favorable op-eds…So…complicity there that we all have to be…” (11:54)

3. America’s Debt-Driven Growth and the Limits Thereof

• Living Standards and the Debt Trap
  • Anna: “We have underlying issues with how do we sustain a standard of living…We've achieved it through debt fueled growth. We don't know how to achieve that standard of living without having debt fueled growth.” (12:25)
• Deleveraging, Dissatisfaction, and Populism
  • Felix: “The past decade has been a story of deleveraging…And the result has been this wave of populism…” (13:35)
  • Bethany: “There isn't a lever left to pull…I'm not sure what levers we have left to pull at this point. And so it's not surprising that there's some widespread disillusionment.” (13:59)

Fracking: From Crisis to the Shaky Ground Under America's Economy

4. How Fracking and Cheap Money Changed the Map

• Fracking’s Rise Tied to the Financial Crisis
  • Felix: “The whole fracking industry, in a weird way, grew out of the financial crisis.” (01:54)
• Bethany’s Book "Saudi America"
  • Author Bethany McLean discusses how the fracking boom has made the US a global energy powerhouse—on paper.
• Petrochemical Boom and Cheap Gas
  • Felix: “There's like $130 billion of new chemical plants…The reason that it’s so cheap here is fracking.” (14:33)
• Fracking's Paradox: Reshaping the World But Not Profitable
  • Bethany: “Despite the fact that fracking is changing the world, reshaping geopolitics, the industry does not make money. It’s never produced free cash flow.” (16:54)

Memorable Quote

“How can you have this industry that is reshaping so much and yet it doesn’t make money?”
— Bethany McLean, (17:56)

5. The Real “Bailout” Was Cheap Money

• The Fed's Indirect Role in the Fracking Revolution
  • Anna: “A lot of this actually has to do with what happened after the financial crisis and specifically having extremely low rates, low interest rates.” (18:18)
  • Bethany: “The real enabler of the fracking revolution was the Federal Reserve…Capital to me is the key ingredient in fracking. It's not chemicals, it's capital.” (18:29)
• Low Rates, High Debt, and Fragility
  • Anna: “A lot of pension funds have had to shift into alternative investments…as a result, you've had just a wall of money coming into PE and hedge funds that are then investing in these fracking companies.” (23:01)
  • Bethany: “The reason the whole thing has worked is that publicly traded fracking companies have been valued not on a multiple of the profits they produce, but rather on a multiple of the acreage they own. It’s a little bit like the old dot com days…” (23:39)

6. Is a Fracking Crash the Next Crisis?

• Could It All Fall Apart?
  • Emily: “So what's going to happen when the whole thing falls apart? Because, I mean, it just seems like it's a matter of time.” (24:24)
  • Bethany: “Thus far, the Frackers have defied every attempt to kill them…they've been far more resilient than even their proponents dreamed…capital supply hasn't dried up…” (24:53)
• Implicit Bailouts Continue
  • Emily: “Is there a fracking bailout ahead of us?” (25:49)
  • Bethany: “In a weird way, there kind of was a fracking bailout…you could almost view the Federal Reserve's continued low interest rate policy as a bailout of fracking companies.” (25:54)
• Energy Independence Is an Illusion
  • Bethany: “The price of a barrel of oil is set globally…What people pay at the pump…is going to be shaped by global events no matter how much gas and oil we're producing.” (19:58)
• America and Short-Termism
  • Bethany: “No substitute for hydrocarbons in certain key areas of life. And why are we so eager to drill it all out of our ground and export it and sell it to other countries? Why is that…when we might need it ourselves one day?” (26:26)

Timestamps for Major Segments

• Lehman Brothers/Legacy of Crisis: 00:10–08:28
• Debate: Homeowner Bailouts: 08:28–13:35
• Consumer Debt, Standards of Living: 12:25–14:33
• Fracking’s Economic Role: 14:33–19:43
• Fracking's Perpetual Unprofitability: 16:54–18:29
• Wall of Capital, Pension Funds: 23:01–24:53
• Is a Crash Inevitable?: 24:24–26:59
• Long-termism & Political Myopia: 27:04–31:14
• What Could Cause the Next Crisis?: 30:41–35:22
• Complexity and System Risk: 36:24–37:40
• Final Thoughts & Numbers Round: 38:22–43:32

Notable Quotes & Memorable Moments

• On Bailouts and Fairness

  • “It's both possible that they chose to do the right thing and we needed to bail out the financial system and that it was horribly unfair and an absolutely awful thing.” — Bethany McLean (03:02)
  • “We would have been much better off, certainly on the political level and as a society if we'd done some unfair bailouts of individuals, because God knows we did a whole bunch of unfair bailouts of banks.” — Felix Salmon (10:48)

• On Fracking’s Fragility

  • “Despite the fact that fracking is changing the world, reshaping geopolitics, the industry does not make money. It’s never produced free cash flow.” — Bethany McLean (16:54)
  • "The reason the whole thing has worked is that publicly traded fracking companies have been valued…on a multiple of the acreage they own…like the old dot com days." — Bethany McLean (23:39)

• On Panic and Financial Crisis

  • “What happened in the end was panic. It was panic. And so…you know what? It doesn't always have to be that, that big because in the end, right, it's confidence and the root of credit is confidence.” — Bethany McLean (34:51)

• On Long-term Thinking

  • “When we had the technocrats in charge…they were trying to make decisions that were in the long-term best interest…The rise of populism and nationalism…has shortened time horizons enormously.” — Felix Salmon (27:04)
  • “Let me promise people all sorts of goodies that I don't have to pay for today…That attitude…is landing us in a really big pickle today.” — Bethany McLean (29:03)

Numbers Round (38:22–43:32)

• Bethany McLean: 11 million – barrels of oil per day produced by the US in July and August, making the US the world's largest oil producer (38:30)
• Emily Peck: 92% – the share of time men speak on analyst calls (39:08)
• Felix Salmon: $200 billion – the size of Turkey’s sovereign wealth fund now run directly by its president, Tayyip Erdogan (40:11)
• Anna Szymanski: 35% – prior tax deduction rate for unfunded pension liability contributions, now lowered with tax changes (42:13)

Closing Thoughts

The episode is a sweeping, skeptical, and sometimes darkly humorous examination of the post-crisis world. It interrogates the superficial stability in financial systems and energy markets, exposes the unresolved structural inequities, and highlights the dangers lurking beneath both political short-termism and the speculative financialization of new “miracle” industries like fracking.

The resonance of the episode’s title—"Shaky Ground"—rings through every topic, from household finances to global energy politics, leaving listeners with a sense of uneasy wonder at how much risk lies in what seems, on paper, like a robust recovery.

Recommended for:
Listeners who want substance, unvarnished critique, and some sharp wit—whether they remember 2008 or want to understand why its shadow persists.

Notable for:
Bethany McLean’s insight and candor, illuminating why “unfairness” and fragility remain the economic order of the day, and why America's newfound “energy independence” is far less solid than it appears.

[Quotes are attributed as per speaker markers and timestamps from the provided transcript.]