As an outspoken critic of this year's Oscars, I'm happy to note they got one thing right: Inside Job won the award for Best Documentary feature.
As of last week, this first-rate expose of the root causes behind the 2008 financial meltdown became available on DVD.
Rarely do I resort to exhortations like this, but here is a movie that every adult American should watch, digest, and discuss... then maybe watch again.
Its impact speaks to the unique power of film to relate a compelling story in under two hours, and have it hit you like a sledgehammer.
Like many others, to deal with my own bewilderment in the wake of this crisis, I had consumed Andrew Ross Sorkin's much-praised book Too Big To Fail, and came away with a somewhat better understanding of what had gone down.
(I also felt oddly guilty that the book read like a thriller.)
Inside Job is not thrilling per se; A.O. Scott put it best when he described it as "infuriating".
Most thoughtful people know by now the broad causes behind this mess: a steadily growing pattern of abuses in the wake of financial deregulation begun during the go-go '80s.
Still- for context (and at the risk of over-simplification), I'll try to encapsulate the gist of what went wrong:
Before deregulation, a bank only sold mortgages to customers who were good risks and could pay them back over time.
With deregulation, obscure financial instruments were developed and promoted whereby high-risk mortgages could be packaged together and re-sold to large, speculative institutional investors. (Most of these investors never even attempted to understand these complex instruments or question their underlying value. All they knew and cared about was that they generated short-term profits.)
With their own exposure thus diluted, banks started selling mortgages with little regard for risk. It was like printing money: the more mortgages they could generate, the greater the short-term gains. Hence the housing bubble, built on mortgages sold to people who likely could never pay them back.
As this dense, elaborate house of cards gradually built itself up, the rich got richer, and the poor got set up. And when it all finally imploded in 2008, the reverberations were felt globally.
The outrage I felt watching Inside Job came from several key arguments, expertly presented:
First, there's the sad, recurring reality that the biggest victims in financial downturns are in fact our poorest citizens, not the people who caused the whole mess to happen.
It's also frustrating to hear that warning bells were sounded, but with so many people focused on getting filthy rich, they were simply dismissed or ignored.
But here's the worst part: there has been virtually no accountability for this disaster. Why? Because the ties between government and business have been so closely linked for so long, that to pursue real justice would be an incredibly ugly and disruptive affair.
Hank Paulson, Secretary of the Treasury when the crisis hit, was formerly head of Goldman, Sachs. His successor and the current man in the job, Tim Geithner, was previously head of the New York Fed. So perversely, the people appointed to oversee the soundness of the system are the same people who had a hand in undermining it in the first place.
Even academia gets into the act, with the heads of some of our foremost business schools teaching the benefits of deregulated markets while quietly making most of their incomes as board members of the major investment banks.
Conflict of interest anyone?
What's the worst punishment these CEOs have received? Inside Job rightly singles out Dick Fuld of Lehman Brothers. Having lived like a sultan, the poor man lost his job, but only after driving a once venerable company into the ground. And to ease the pain, he walked away with a severance paycheck in the hundreds of millions, while ordinary Americans were losing their jobs, their savings, and their homes.
Inside Job also focuses on once-revered and respected figures like Alan Greenspan and Larry Summers -- people who wielded immense power and influence on global markets, and who saw nothing amiss as the world approached a financial abyss.
How have they been held accountable? The short answer is not at all, though it's certain they've only gotten richer on book deals and speaking tours.
Then there's good old Ben Bernanke, undeniably in a position to spot the warning signs. It seems he simply had no clue. His punishment was a promotion to Greenspan's old job, heading up the Federal Reserve, a highly influential post he retains to this day.
A lot of supposedly brilliant minds seem to justify it all by claiming that our whole financial system-- the one they created, mind you-- has become so complex that nobody could have seen this disaster coming.
This is infuriating. After all, isn't their ability to manage this complexity the reason they're paid so well? And if they fall down on the job and betray the public trust, shouldn't their positions and their pay be affected?
I guess not. The word is that bonus packages are back and plentiful on Wall Street. And CEOs are still making a killing.
The basic, maddening, bottom-line truth is that nothing has really changed as a result of this cataclysm. And neither party can be singled out for this paralysis; as Inside Job aptly demonstrates, when it comes to abuses in the financial system, both Republicans and Democrats earn an "F" on their report cards.
After much bold initial talk from the current administration about financial reform, no substantive bill addressing it is on the horizon. And with a pro-business Republican House majority supporting smaller government, it's unlikely anything significant would pass anyhow.
I suppose Washington figures Americans have short memories. Once the recovery is truly underway and people get their jobs back, they will quickly forget what happened in 2008, and why.
Inside Job is a movie that challenges that assumption, that riles you up and makes you want to take action. Could average citizens use this film to inspire a grass roots movement that hastens a day of judgment for the various fat cats who got off scot-free, and demands real reform in our financial system?
It may sound far-fetched, but wilder things have happened. After all, they say it was the cell phone that toppled the government in Egypt.
Unsure what to choose on Netflix? Visit www.bestmoviesbyfarr.com To see John's videos for WNET-Channel 13, go to www.reel13.org
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C Pucket
Author of "Lady at the Club"
The last two year has shown us a hubris that boggles the mind. It matters not who lives at 1600 Pennsylvania. K and Wall Street make the rules.
I'm not a socialist but this corporate-ocracy is unacceptable.
I will see Inside Job (sadly not on my pay per view). But I already know. I worked for Lehman several years ago. It was ALL Wharton or Univ. of Chicago MBA (and white and male).
but that doesn't make it any less infuriating.
Nobel Prize Winner Joseph Stiglitz Calls for Jail Time for Corporate Crooks - DailyFinance
"...What should be done? "I think we ought to go do what we did in the S&L [crisis] and actually put many of these guys in prison," said Stiglitz. "Absolutely. These are not just white-collar crimes or little accidents. There were victims. That's the point. There were victims all over the world."
A Theory of Justice
Among the casualties of this whole mess, according to Stiglitz? Faith in the legal system itself. "The legal system is supposed to be the codification of our norms and beliefs, things that we need to make our system work," he said. "If the legal system is seen as exploitative, then confidence in our whole system starts eroding."
"When you say the Pledge of Allegiance, you say, with 'justice for all," Stiglitz said. "People aren't sure that we have justice for all. Somebody is caught for a minor drug offense, they are sent to prison for a very long time. And yet, these so-called white-collar crimes, which are not victimless; almost none of these guys, almost none of them, go to prison."
"Families are as important as corporations," he said. "Keeping kids in school, not forcing them out of their home, keeping the community together, is certainly as important as keeping a corporation alive."
Unless the financial criminals are prosecuted and punished, they will do it again. They must be have fear of loss of both money and freedom.
Abandonment of the Rule of Law can be used as an excuse for anything from vigilante justice to a military coup d'etat, both bad things.
http://www.project-syndicate.org/commentary/roubini28/English
Gordon Gekko Reborn - Project Syndicate
"...greed cannot be controlled by any appeal to morality and values. Greed has to be controlled by fear of loss, which derives from knowledge that the reckless institutions and agents will not be bailed out. The systematic bailouts of the latest crisis – however necessary to avoid a global meltdown – worsened this moral-hazard problem. Not only were “too big to fail” financial institutions bailed out, but the distortion has become worse as these institutions have become – via financial-sector consolidation – even bigger. If an institution is too big to fail, it is too big and should be broken up.
Unless we make these radical reforms, new Gordon Gekkos – and Charles Ponzis – will emerge. For each chastised and born-again Gekko – as the Gekko in the new Wall Street is – hundreds of meaner and greedier ones will be born."
The system is broken when bankers are only fined for laundering drug money:
http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=asU.b_fCjHTE
Wachovia's Drug Habit - Bloomberg.com
To explain the financial crisis--and not just describe its symptoms in an entertaining way--you need to explain the central issue--the highly leveraged systemic accumulation of non-prime residential mortgage backed securities mis-rated AAA. And you have to explain why it happened when it happened. The interaction of six bad government policies do that better than an explanation based upon business greed, deregulation and under-regulation. That is why the crisis should be understood as a government failure more fundamentally than a market or business failure. See here:
http://www.huffingtonpost.com/mark-j-perry-and-robert-dell/post_1596_b_810563.html
RD
Your "analysis"--like that of the movie--is both superficial and fallacious. No serious economist or policy scholar--right or left--argues that deregulation led to the financial crisis. The involvement by commercial banks and investment banks in high-risk/subprime mortgages and related securitization was in no way affected by deregulation. Certainly the banks could have done everything they did before Gramm-Leach-Bliley. In fact, deregulation served to contain the crisis by making banks more diversified and allowing troubled investment banks Bear Stearns and Merrill Lynch to become stabilized through acquisition by commercial banks.
RD
Do you agree? Or am I being too simplistic again?
The highly-leveraged systemic accumulation of subprime and Alt-A mortgage backed securities mis-rated AAA was INCENTIVIZED and DIRECTED by bad government policy. It is more truthful to assert that government MISREGULATION, more than under-regulation, was at the heart of the crisis. See here:
http://www.huffingtonpost.com/mark-j-perry-and-robert-dell/more-equity-less-governme_b_829216.html
We need to rely more on financial institutions being capitalized with more equity and the regulatory discipline of market competition. We need to rely less on government central planning (politicians enacting and updating complex regulatory regimes). Citizens tend to assume that regulation works as intended and that is never the case.
As a general proposition--something to think about: throughout U.S. history, who has been proven more worthy of public trust and confidence: the business professional competing for customers with a minimum of help or interference from government or the politician with regulatory power, competing for votes with help from the campaign contributions of regulated or subsidized business cronies?
RD
Another great PBS documentary is "the warning" where Commodity Futues Trading Commisioner Brooksley Born was testifying before congress about the upcoming meltdown and she was snowed under by testimony from Greenspan, Summers Levitt and someone whose name escapes me. All said "no problem here"
It's a great country if you own a congressman or two.
The financial earthquake which happened in 2008 was not a Nature´s plague but indeed the consequence of he behaviors of a lot of rogues belonging to the wealthiest : great banks, investment funds, economists with close links to the political class and even belonging to it.
And anyone knows that the one who suffered and are still suffering of this misconduct were not the very culprits but the middle-class .
The wealthier got more wealthy and the middle class had to suffer . And suffer in silence otherwise they were accused of derailing the economic recovery or breaking the law.
When Michael told that the scoundrels of Wall street had to go to jail and that the wealth done by the 400 richer was enough to prove that America is not broke, he was accused “Stalinism” by Fox News.
But we have the political system we deserve.
Why the word “revolution” is not once for all used by the middle Class.
I add this:
It was a perfect Storm....everyone got what they wanted across the board from borrowers and lenders to investors.....until it all fell in......
I do not buy the argument that the borrowers were duped, the viewpoint was by many if not most of them..the housing market will ALWAYS go up and IF in 5 years or down the road the mortgages become un-affordable they could simply turn over/sell the house and take a fat profit...good idea until you have more sellers than buyers...if was also the same common notion when it came to second mortgages...."hey I can ALWAYS sell!"...very few it seems had their own lawyers looking at the loans and advising them...
The Wall Street gang and investors thought maybe a few would go bad, but the market could absorb it...the Pols..as always never cared, they could hold hearings and point fingers....which is what we saw happen...
Shame on ALL of them...hire the retgulators in Canada to design a banking system for us....