Inside Job

 

A movie for every day of the year – a good one

 

 

07 September

 

 

US government takes over Fannie Mae and Freddie Mac, 2008

 

On this day in 2008, the US government placed two national organisations, the Federal National Mortgage Association (aka Fannie Mae) and the Federal Home Loan Mortgage Corporation (aka Freddie Mac) into “consertavorship”, in much the same way that someone takes power of attorney over the estate of a relative who has lost their mind. Fannie Mae existed to lend out money to people who wanted to buy a house. Freddie Mac bought those mortages, repackaged them and then sold them on in a secondary market, thus increasing the amount of money available for mortgages. All well and good, until there’s a run on the market, as there was in the financial meltdown of 2007-2008. The federal government’s move marked an attempt by the US government to “backstop” the crisis and also indicated a dawning understanding that it, too, was a player in the “free market”. Action or not, within a week Lehman Brothers bank had filed for bankruptcy and Merrill Lynch bank had been bought by the Bank of America at a discount of 61% of its September 2007 price. The crisis, backstopped or not, went on.

 

 

Inside Job (2010, dir: Charles Ferguson)

Charles Ferguson’s documentary, narrated soberly by Matt Damon, sets out to explain how exactly the financial crisis came about. It kicks off in Iceland and shows us how a small prosperous country with regulated money markets became a basket case in short order. What happened, according to Ferguson and the plethora of highly qualified talking heads he calls in evidence, is that the country was the victim of a highly organised Ponzi scheme, one which also caught out the bulk of the developed world, a scheme, moreover, allowed by governments, run by banks, endorsed by auditing firms, encouraged by ratings agencies. And paid for by us. “The financial lobby captured the political system,” is Nouriel Roubini of New York University business school’s assessment. Among the film’s other worrying revelations is the fact that President Obama is employing the same people who caused the mess (and became billionaires in the process) and that there are five financial lobbyists for every member of Congress. So, unless things change, it’s going to happen all over again. Inside Job is an angry but admirably patient film. The bit about credit default swaps lost me, I must admit, but as a whole it is still probably the best explanation of how a “subprime” mortgage crisis became a global recession, for this layman at least. Though as the financial crisis proved, when markets get so complicated that only computers can understand them, perhaps everyone is a layman.

 

 

Why Watch?

 

  • Why we went bust – explained
  • How to stop it happening again
  • Not afraid to point the finger – we were gangbanged by the banks
  • Facts, figures, historical analysis – it’s got them

 

© Steve Morrissey 2013

 

 

 

Inside Job – at Amazon

 

 

 

 

 

 

4 thoughts on “Inside Job”

  1. Charles Ferguson's "Inside Job" is strong, fair, and rational. The director tries mightily to untangle the complex architecture of the financial meltdown that has cost millions their jobs, their homes, and their savings. If you consider skipping it because it sounds boring, please think again. My blood is still boiling.

    Why does this documentary leave us sunk in despair? Because it confirms the certainty that there is no one left we can trust. The fact that much of what brought the economy to its knees was legal, not criminal, signals a financial sector run by ethical nihilists who will pursue every legal loophole to enrich themselves. Human nature, you say? Then bring back the stringent regulation that gave the industry forty years of reasonable corporate success before Reagan era deregulation. The schoolyard bullies need supervision.

    America's bubble of private gain and public loss was pierced by the collapse of Lehman Bros. and AIG. Banks merged into "too big to fail" behemoths; safeguards were overturned; regulation of derivatives was banned; This vacuum quickly filled with money laundering, defrauding of customers, cooking the books, and stuffing of the pockets of top officers with money. Larry Summers took 20 million as adviser to a hedge fund. Lehman's CEO took 485 million, the CEO of the failing AIG 315 million. Fired by Merrill, CEO Stan O'Neal departed with a severance bonus of 161 million.

    When Mortgages were bundled and sold to the bloated investment banks, lenders no longer cared if they were repaid. Goldman, Lehman, and Merrill were all players. Summers, Bernanke, and Geithner all stood against corrective measures and would play pivotal roles in the Obama administration.

    Absent limits on the impulsive risk takers, Wall Street plunged into personal pleasure. There was never enough: penthouses on Park, private jets (six for Lehman alone), vacation homes, art collections, drivers, private elevators, drugs, alcohol, strip bars, and prostitution – one private supplier within spitting distance of the stock exchange counted 10,000 men among her customers..

    Three ratings agencies made fortunes bestowing unwarranted ratings right up to two days before Lehman failed, later testifying before congress that these were merely "opinions", not guides for investors. The crowning disgrace is the corruption of the universities. Business school professors consult with companies. Glenn Hubbard, dean of Columbia Business School, takes $250,000 as a board member of Met Life. Larry Summers, back at Harvard, continues to rake in consulting and lecture fees.

    The presidents of Harvard and Columbia refused comment. You will appreciate the honesty of Raghuram Rajan who wrote strong warnings and French Finance Minister Christine Lagarde, who spoke with disgust of the debacle.

    It used to be that respected academics could be counted on to be the conscience of democracy. Now they are reduced to being interchangeable components in the conflict of interest chain that links business/government/university. Credit Charles Ferguson with a superb investigation and give thanks that we still have a free investigative press to wake the sleeping citizenry.

  2. About 30 people at the 7PM show in the Music Box theater in Chicago last nite, and I was one of them.

    I am always looking for two things on this economic disaster: 1) A better understanding, and 2) a means of explaining it better to others. This film delivers in both counts.

    For me the key sequence came when the graphics, under solid narration, illustrated how 3rd tier investors were placing bets on bets. I.e., that's what derivatives are. I always knew this was happening, but the film made it very clear. That was the break point (in my analysis of the problem).

    The film was nearly void of political leanings, which made it an important contribution. The only part that bothered me is that Congressman Barney Frank was framed as an expert looking back with wisdom on the ill-conceived passage of the "Commodity Futures Modernization Act of 2000", and, behold! Barney Frank *voted* for it. It would be better to interview all 4 Congressmen who voted against it: Ron Paul, Nick Smith, Gene Taylor and Peter DeFazio. [2 from each Party! How's that for Bipartism opposition? It took me 10 minutes to confirm these names, and I'm not even making a movie.]

    It is significant that a continuum of hoodlums are seen on the podium with a continuum of Prsidents: Regan through Obama. The infestation of their ilk into the Political World is there for all to see.

    Please see this film any way you can, and lock it in!

  3. Inside Job is an enthralling documentary about how the reckless actions of Wall Street lead to the near collapse of the financial sector and subsequently the deepest recession since the 1930s. This is the second film by director Charles Ferguson, the first being No End in Sight an equally engaging indictment of the Bush Administration's handling of the occupation of Iraq.

    Ferguson focuses on the Wall Street culture and the blatant arrogance of a half dozen men as the main causes of the financial turmoil. Inside Job begins in Iceland where the deregulation of the financial system in the 1990s lead to three banks accumulating assets almost ten times the small country's gross domestic product.

    It becomes clear by the midpoint of the film that Iceland is a micro example of what has become a global problem. Runaway banks have been accumulating assets through toxic loans and other manoeuvres while paying themselves lavish bonuses.

    Inside Job is easily one of the most frustrating documentaries ever made. And that is undoubtedly Ferguson's intention. The film is critical of Wall Street executives, credit agencies and especially regulatory agencies for the crisis.

    Inside Job includes interviews from IMF head Dominique Strauss-Khan, congressmen Barney Frank, former New York attorney general Eliot Spitzer and many others. Ferguson traces the evolution of the banks from a small, largely local service to an out of control industry. He does not hold back criticizing every administration since Ronald Reagan in the 1980s.

    Ferguson argues that despite what most people think, there were many people warning of an impending crisis in global financial markets. Ben Bernanke, Alan Greenspan and Timothy Geithner ignored various signs of impending doom. Not to mention former treasury secretary and incidentally former Goldman Sachs CEO Henry Paulson.

    Inside Job makes the argument that the federal regulators are as responsible for the breakdown of the system as are the executives of Goldman Sachs, Lehman Brothers and Bear Stearns. More frustrating still is the revolving door between Wall Street and government agencies.

    As the banks became more deregulated, the more speculation became a problem. Derivatives, and credit default swaps, complicated trading schemes that most people do not understand is what caused the collapse of Lehman Brothers sending shockwaves through financial centres all over the world.

    Credit agencies like Moody's and Standard and Poor gave firms like Bear Stearns, Lehman brothers, and Morgan Stanley A grade credit ratings within weeks before they nearly collapsed. And also having one of their executives standing up in front of a congressional committee and telling congressmen that their ratings are just merely 'opinion'.

    It becomes clear that this is not a problem that emerged from the housing boom early in president George W. Bush's second term. Rather this was a systematic breakdown driven by a neoliberal ideology supported by Ivey league economic schools across the United States.

    Inside Job is simply a story of bankers more interested in collecting bonuses and making more money than providing what should be an essential service. What makes it even more frustrating is that many of the key figures behind the crisis are currently on Barak Obama's staff. The film leaves us with a bitter pill to swallow.

    As Ferguson notes, Wall Street has returned to normal with no federal prosecutions against any of the guilty. And one of the most poignant scenes in the film comes from Robert Gnaizda, the former head of the Greenlining Institute, a consumer lobbyist group who laughingly dismisses recent legislation to regulate banks with a simple 'Hah'.

    Inside Job helps explain many of the complex terms such as derivatives and insurance backed securities that confuse those not immersed in the banking community. It is essential viewing for any citizen concerned about our broken system.

  4. This film portrayed a horrific set of circumstances in a measured and brilliantly illustrated manner. The economic issues were explained by clear, understandable graphs. Many major players appeared on camera to their detriment. The few that didn't appear were shown through press clips.

    The most awful scene to me was the footage of the tent city with unemployed, lost and bewildered American workers, their jobs lost directly because of the antics of the Wall Street monsters. It could easily happen here in Godzone.

    Highly recommended.

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