Don’t watch this film if you have high blood-pressure!
Inside Job, which I watched in a packed lunchtime screening today, is a full-length documentary on the origins of the global financial meltdown in September 2008, written and directed by Charles Ferguson. Watching this film made me realise how far big-screen documentaries have come in the last few years: it’s as gripping as a thriller, as beautifully photographed as any widescreen epic and skilfully edited to emphasise Ferguson’s case.
And Ferguson’s argument (which focusses largely on America) is that there is a revolving door between the banks, the financial regulatory bodies, government and universities. It is this central fact that explains how, as the banks raked in billions from ever-more flakey financial products, politicians, regulators and economists turned a blind eye and cheered them on.
Ferguson does not make films in the Michael Moore style (which has been wearing decidedly thin of late). There are no gimmicks or stunts – just testimony from talking heads, news video clips and careful documentation. Narrated by Matt Damon, the documentary presents the case that, beginning with the Reagan administration and continuing under every subsequent US presidency (including Obama’s), the big American banks developed increasingly risky and criminal devices to swell their profits. Using charts and diagrams to reinforce the narrative, the film manages to explain such complex financial mechanisms as derivatives, collateralized debt obligations and credit-default swaps very clearly indeed. This film is rare in that it manages to combine lucid exposition with passion and rage.
In a pre-credit sequence, the crisis is exemplified in miniature by Iceland, a pleasant, well-ordered country that went mad, selling off beautiful and environmentally-fragile land to be exploited and despoiled by American corporations, privatising the three largest banks (which were tiny, but grew to be European giants) and allowing them to borrow money that amounted to three times the size of Iceland’s GNP.
The film shows how banks aggressively promoted mortgages to people who could not afford them. These bad mortgages were then sliced and diced into derivatives packages that disguised their risk. They were carried on the books as tangible assets – but they were worthless. The institutions assembling them hedged their loans by betting against them (in CDOs or collateralized debt obligations). When the mortgages failed, the banks still made profits – despite and because of their failure. Ferguson shows convincingly how financial reform measures that would prevent such practices have been shunned by politicians because of the aforesaid revolving door. The most dangerous part of the film as far as one’s blood pressure is concerned is that which shows how big bankers slid into the most senior positions in government and the financial regulators – and vice-versa.
Speaking of vice, an illuminating section of the film deals with the close links between Wall Street and criminal activities involved in procuring prostitutes and drugs – and then claiming it all on expenses. Also exposed are academic economists, and the universities they work for, as being beholden and corrupted by their ties to big business. These include Glenn Hubbard, the dean of Columbia University’s business school, who was the chief economic advisor to the Bush administration, and instrumental in the design of the 2003 tax cuts for the rich. He is on the board of several financial institutions, and remains a staunch advocate of the deregulation of financial services. Then there’s Frederic Mishkin, professor at the Columbia Business School and a former member of the Federal Reserve Board of Governors, who resigned a month before the crash. Why? Ferguson asks. So that I could revise a textbook, replies Mishkin. ‘I’m sorry, I’m sure that your textbook is important and widely read’, Ferguson snaps, ‘But didn’t you think that more important things were going on in the world?’.
This is also the guy who in 2006 was paid $124,000 by the Icelandic Chamber of Commerce to write a report in response to critical coverage of the Icelandic economy and certain Icelandic companies in the international business media. The report – Financial Stability in Iceland – praised Iceland’s financial sector. Iceland’s banks collapsed spectacularly within a year of Mishkin’s report. Inside Job reveals that on Mishkin’s CV the title of the report has been changed to Financial Instability in Iceland.
This is an intelligent, riveting and informative film, which I highly recommend. Every so often during the screening there was the audible sound of jaws dropping – much like that of Christine Lagarde, the French minister of finance, when she was told about the collapse of Lehman Brothers: ‘Holy cow!’
Most of those who created the crisis that brought impoverishment and unemployment to millions are still in power, and still helping themselves (or have been paid off handsomely for their failure). The Obama administration hasn’t launched a single criminal investigation related to the crash. Meanwhile, the severance package Merrill Lynch’s former CEO received could pay the average yearly salaries of more than 5,000 typical workers. The film offers no solutions (apart from that of one interviewee who hints that bankers could be brought low if threatened with legal actions that drew on evidence of their systemic addiction to drugs and prostitutes).
That’s as likely as a snowball in hell – but what is happening this week in Madison, Wisconsin, is that tens of thousands of trade unionists have been occupying the state capitol building day and night in the biggest demonstration in the US since the Vietnam war, united against a bill backed by the state’s Republican governor to end collective bargaining and other union rights for public sector workers in order to push through spending cuts and job losses in the fallout from the crash. It’s the culmination of twelve days of continuous protest by teachers, students, steelworkers, pensioners, nurses and others – and it’s not a Tea Party.