The reviews were right: See Inside Job, the documentary about the Wall Street-driven financial meltdown of 2008, through which we're still suffering two years later -- and you will come out steaming.
In a two-hour cavalcade of cause and effect, the film charts the insane risk-taking, via voodoo financial products, that the vaunted "talent" of Wall Street undertook to aggrandize themselves and their firms, in the process blowing up the global financial system and throwing millions of "small" people (to quote another corporate titan) out of jobs, homes, and savings. While this story has been reported piecemeal, it's useful -- and steam-making -- to see the whole saga presented in cogent form, as this film does.
But what popped the cork of the audience I was with was seeing how our ostensible watchdogs are also on the take: regulators, ratings agencies, government advisors, and, most shockingly, economists. One would hope the independence of thought prized by academe would govern behavior, but watch economists from the most hallowed halls try on-camera to defend that independence when the filmmaker cites evidence they were paid $100,000-plus by Wall Street firms to write "research" papers that, surprise, reinforce those firms' rapacity. By this point the audience was hissing.
And throughout the film, never -- not once -- did any of this "talent" express concern for the calamitous damage their actions visit on Main Street and the nation. The film makes vivid how complete is money's thrall. Best way to break that thrall is criminal prosecution, yet the film shows precious little of that has occurred.
Once I could convert my own steamed reaction to reason, and reading that Wall Street is posting record profits and getting its swagger back (here) -- and, essentially unreformed, priming for another crash that again hurts Main Street more than itself -- two thoughts occur, both making the utility argument for ethical reform:
Appeal to Wall Street's survival instinct: Given money's blinding thrall, shame won't change Wall Street's behavior, but appealing to the instinct for survival may. Surely there are risk managers on the Street who recall that free-falling feeling of the '08 crash and understand that capitalism's "creative destruction" can overstep, take a risk too far, to become destructive destruction -- of the entire economic system. And if the entire economic system is destroyed, how can another dollar be made?
It seems screamingly obvious (though screaming from Main Street hasn't made it so): Protecting the economic system is in the interest of both Main Street and Wall Street. Understanding this, and acting on it, would mean Wall Street take a loyalty oath to Main Street and the nation. Whether such oath is extracted as a matter of ethics or utility, if Wall Street begins treating Main Street's interests as its own, it's a net advantage for all. (I blogged on these points earlier.)
Reframe the Wall Street vs. Main Street dualism: It follows that, if Wall Street's loyalty to Main Street is to be cultivated, then the current Wall Street vs. Main Street dualism works against that. Alignment was theoretically possible when Main Street came to Wall Street's rescue with the TARP and the bailouts. But Wall Street reacted churlishly---resisting all reform legislation; continuing to give itself outsize bonuses for failure; treating a true people's watchdog, Elizabeth Warren, as a meanie -- and now the two streets are seen pitted at war.
But wars have winners and losers -- and guess which street in the great game of Capitalism vs. Democracy always loses? American discourse too often is combative, framed as either-or; we need to get to conference, framed as both-and. For the benefit of both streets and to repair the economic system, we need to get away from the simplistic mindset of war (defensiveness is an easy out for Wall Street) and get to subtlety. Rather than Wall Street vs. Main Street, we need to get to Wall Street and Main Street.
Of course, the best mechanism for course correction -- promoting Wall Street's loyalty to Main Street, aligning the mission of both streets -- is the Obama White House, amplified by the commentariat. It remains to be seen, though, how Mr. Obama can use his bully pulpit after his "shellacking" in the recent midterm elections. I for one feel he's got room enough for maneuver if he channels his inner Main Street -- the one in Chicago, that is.
And should any more fraud be committed, Mr. Obama and his Attorney General should make it clear that, henceforth, wherever it occurs -- Wall Street or Main Street -- fraud will be prosecuted to the full force of the law.
Meanwhile, to correct the shameful fact of economists for hire by Wall Street, the American Economic Association needs to establish an ethics code, something that, astonishingly, as economics professor and New York Times "Economix" blogger Nancy Folbre notes, it lacks.
All this correction seems long on speculation -- very -- not remotely possible, given present realities. But if Main Street takes another shellacking from Wall Street, expect a revolution mounted by Main Street, one that will make the Tea Party's anger seem, in comparison, tepid.