Once in a great while there arrives an essential film that cuts through the fog of disinformation and punditry to expose the truth about a catastrophic event. Such a film is Charles Ferguson's documentary, Inside Job, which clarifies for the everyman the financial meltdown of 2008 that wrecked the lives of millions. You'd think this might be dry stuff, but in fact, it's beautifully shot and deftly edited, with a jazzy score and the pacing of a whodunit. And it's positively thrilling to hear Ferguson -- the off-camera interviewer -- grill government and private sector pooh-bahs, as he exposes with diamond-cutter precision who and what plunged the financial system into cardiac arrest. The packed house at the New York Film Festival screening sat riveted, and afterwards a stunning array of the film's participants assembled on stage.
The root cause of the meltdown was deregulation, according to Ferguson, a political scientist-turned-software entrepreneur, and now filmmaker. The policy was kicked off by Reagan, continued through the Clinton and Bush periods, and is currently powering on under Obama. (Interestingly, no one in his administration would even speak with Ferguson off the record.)
Adding insult to injury, the folks who promoted deregulation -- and, like Larry Summers, overruled the regulation of derivatives -- are precisely the ones in charge in Washington. One of the most scandalous things about the entire financial crisis is that the "gang of blue-chip ogres and world class motherf**kers" (thanks Jeffrey Wells) who caused it are not only still in power -- they have eluded criminal prosecution.
"This was the biggest heist of all time," says Ferguson of the financial crisis. "And I think many of the people who were involved in it were perfectly aware that that's exactly what it was."
In an environment free of accountability, guys who wrecked their companies walked away with fat pay packages; the head of AIG was kept on as a consultant for a million a month; investment bankers knowingly bet against the unreliable securities they sold to home buyers; Goldman sold toxic CDO's and bet against themselves; and in 2010 Wall Streeters will collect even higher bonuses.
So you out there, who each month are spending down your paycheck and struggling to keep teeth in your mouth and find a decent school for your kids; and you other 6.2 million who after six months are still unemployed -- you suckers who Did Everything Right -- Inside Job is your movie. Guaranteed you'll come away from it fightin' mad.
Last week at a festive after-party at Gabriels, I chatted with players in Ferguson's film, including economics superstar Nouriel Roubini and Lehman bankruptcy lawyer Harvey Miller (who believes Inside Job will stand as the meltdown's definitive historical account). I later caught up with Ferguson himself in the trendy Mercer Street hotel.
Erica Abeel: Did you consider the timing factor in the release of Inside Job?
Charles Ferguson: Obviously, if we could have miraculously released it the day after Lehman collapsed, it would have been nice. But the bad news is I think we're going to be living through this and debating it and fighting about it for years.
EA: Hope this doesn't sound presumptuous, but what am I going to learn in Inside Job that's new?
CF: It's a totally legitimate question. There are a number of specific things in the film that people didn't know before. Nobody had known before that the U.S. government didn't inform anyone else in the world about the Lehman bankruptcy till after the fact. And on the larger scale, the issue of the role that academia plays on Wall Street and the role that Wall Street plays in academia is not widely known. Plus the film attempts to provide a very broad, synthetic look at the whole story. Most people who've written about this have done it in a relatively compartmentalized way, and I felt it was important to tell the larger story in one place.
EA: You've described the financial crisis as a bank robbery, but by the guy who owns the bank. Could you clarify?
CF: It's not always by people who own the bank. In some cases it's people who work for the bank. The way people in finance tend to be compensated is with very large short-term cash bonuses for making decisions that could have gigantic losses seven years later. It's actually in people's financial self interest to do things that endanger and even destroy their own firms.
One of the clearest cases is AIG, where the people who sold these credit default swaps made 3 and l/2 billion dollars in bonuses in a very short time. And they did that by selling stuff that ended up costing AIG over a hundred million dollars. And in a number of cases it was clear that financial executives and traders knew this was going on; knew they were endangering their own institutions and possibly the financial system. If you knowingly, deliberately do that, then it's pretty close to bank robbery.
EA: And there were no claw backs?
CF: Essentially there were no claw backs in any financial services compensation contracts prior to 2009. Even now people still get paid very heavily in the annual cash bonuses.
EA: When you talk about this kind of behavior you use the word criminal class. One writer called it "criminogenic."
CF: There are a substantial number of financial executives who should be in prison. It's also important to say that there are many people in the financial world who do honest, legitimate work. But in a very big part of American finance, ethical standards deteriorated shockingly, and in this particular episode that lead to the crisis I think that there was criminal behavior.
EA: Under Obama the lack of regulation continues apace. What is your hope at this point?
CF: My hope is that the American people are going to get angry. And I'm somewhat optimistic that that's going to happen.
EA: They're already angry but in a misguided way.
CF: Unfortunately this is a difficult problem to deal with at the level of popular rebellion. Because it's a somewhat complicated problem and it's completely bipartisan. You can't just say, switch parties, candidates and everything will be better.
EA: Do you have any hope for the replacement of Summers as a corrective?
CF: Well, we'll see who gets appointed. The people whose names have been mentioned have not been impressive. They're Wall Street people. And there are another 40 people in the government who are kind of the same. Geithner is still Treasury Secretary; Mary Shapiro still runs the SEC, etc., etc. Until we see the appointment of an independent special prosecutor we can't say that Mr. Obama is really doing anything.
EA: How does one continue to support Obama?
CF: Well, I'm very disillusioned with him. I was very encouraged by the things he said during his campaign and thought that he would fix this. It's a great tragedy for our country when he didn't. When he was elected he had a mandate to do something about this. We were in the middle of a gigantic economic crisis. If he had decided to do something about it he could have. It was a world historical and tragically missed opportunity. And now to do something about it is going to be much harder. It's going to take time and popular mobilization. We're going to have to pressure our elected officials and educate the population.
EA: I got a kick out of the film's sequence about the Wall Street Madame and traders ordering up Lamborghinis along with the girls.
CF: But that element in the film is also there for a serious purpose. It's part of the story of how these people became so disconnected from the consequences of their actions and from anyone who would tell them, hey, this isn't okay. Because they'd insulated themselves -- with the money, the private elevators, the private jets.
EA: You're a wealthy man --
CF: Not by Wall Street standards, but by the standards of the average person, yes.
EA: -- and often the well-off align with their own economic class.
CF: Well, I come from a poor family. And -- forgive me if this sounds righteous or something -- I made my money by earning it. Y'know, I did something. I had an idea. I started a company. We developed a good product: a web development tool that allowed non-technical people to create websites that we sold to Microsoft. I spent a lot of time in the technology world. I have no problem with those people being wealthy, they do productive things. What I'm not okay with is getting incredibly wealthy by robbing people.
EA: How did you learn how to make a movie? Especially one laid out with such masterful clarity?
CF: The same way I learned how to start a software company. Which is if you can attract very good people to work with you and reward them fairly, they will teach you your job.
EA: How can that happen on a movie?
CF: I learned so much from the producer, cinematographer, sound people, editors. Explicitly telling me, Do it this way. I learned on the job. These great people were giving me and the film their best.
EA: Did you come to them with a script?
CF: No script. I had a lot of ideas, I'd done a lot of reading. But the structure of the film -- I had half of it in my head when we started editing. But at least half was done in collaboration [with his team] while we were editing the film.
EA: Do you view Inside Job as having the potential of being a call to action?
CF: I certainly made the film for the general population, not for specialists. I tried very hard to make the film nonpartisan and non-ideological, because the problem comes from both sides of the aisle.
EA: How will you get the unconverted into theaters? The American public has been dumbed down.
CF: Sometimes it takes the American people a while to get things. But in general, in the end, they have the right reaction. It took them two or three years to see there was something wrong with the way the War in Iraq was being handled. So in time they'll get this. I hope so, I think so.