The economic collapse of September 2008 was largely rooted in the subprime mortgage market. I wonder what triggered the 1998 collapse w/Long-Term Capital Management (LTCM)? The documentary never says. What it does say, however, is that fourteen of this nation's biggest banks put up $400M each in an effort to stop the bleeding. It worked. So, my questions are:
1) Why didn't the fed tell the banks to do this again - pony up funds to bail out themselves?
Because we're talking trillions, not billions, is my understanding. And who were they going to borrow from? They were all swimming.
2) What was so different about the derivatives structured in the 90's versus those structured in the years leading up to the economic collapse in the fall of 2008?
Volume is my guess. Didn't they mention that derivatives were spawned from 'futures', which were regulated. Derivatives were not regulated, but were not a huge portion of the global economy. The housing boom basically rode on magic carpet of derivatives (among other things like speculation, etc.)
Remember, these were lauded as new instruments and new uses of those instruments...they evolve at a staggering pace. Of course, one might assume conservatives...staunch opponents of progressiveness and change, would want to temper wall streets light-speed progressive actions. But since when did average voters have to be consistent?
3) Clearly the fed (treasury) knew of the problems an unregulated derivatives market would have on this nation's economy. Why didn't TPTB do more to stop this eventuality 11 yrs ago?
We're mortal. Ultimately what you term as a "problem" made a great many people very wealthy, wealth that they did NOT lose even after the collapse. Was that the conscious reason? not really, but it's the root cause. We have to accept that people will run over grandma to make a fortune before they die...and put guard rails up so they don't.
However, what I don't know exactly is how much debt our nation's banks were carrying at that time in light of what I now know from the Frontline documentary. So, what I'd be interested in knowing is how deep was the 2008 banking debt? Remember: 14 banks paid $400 million each to avoid a $1 trillion economic disaster in 1998. Just how far did this debt go in 2008 and how many financial institutions were actually involved?
$400M x 14 banks? That's pocket change to this crisis.
The New York State Comptroller's Office has said that in 2006, Wall Street executives took home bonuses totaling $23.9 billion. "
Just the executive bonuses in one year exceed what you remarked as the 1998 ante.
As to debt, here were some numbers, but it seems like bank debt related to consumers...still gives some insight.
[ame=http://en.wikipedia.org/wiki/Subprime_mortgage_crisis]Subprime mortgage crisis - Wikipedia, the free encyclopedia[/ame]
The total amount of mortgage-backed securities issued almost tripled between 1996 and 2007, to $7.3 trillion. The securitized share of subprime mortgages (i.e., those passed to third-party investors via MBS) increased from 54% in 2001, to 75% in 2006.[74] American homeowners, consumers, and corporations owed roughly $25 trillion during 2008. American banks retained about $8 trillion of that total directly as traditional mortgage loans. Bondholders and other traditional lenders provided another $7 trillion. The remaining $10 trillion came from the securitization markets. The securitization markets started to close down in the spring of 2007 and nearly shut-down in the fall of 2008. More than a third of the private credit markets thus became unavailable as a source of funds.[91][92] In February 2009, Ben Bernanke stated that securitization markets remained effectively shut, with the exception of conforming mortgages, which could be sold to Fannie Mae and Freddie Mac.[93]
Neither did I. And I suspect no one outside of the world of finance will understand it either. Hence, the constant arguement by Wall Street that they need to retain their ability to recruite "the smartest men/women around" to remain competitive. Honestly, I understand their need - no...despiration!!! - from the standpoint of being able to attract and/or retain the most knowledgeable people in the world of business accounting and investing. It's going to take several Mr. Wizards just to decode some of the complex mathmatics involved in some of these CDOs and credit default swaps that got us in this mess. 
