Inside Job (Sony Pictures Classics, 2010). Produced, written and directed by Charles Ferguson.
Reviewed by Marsha Feinland
Posted on January 24, 2011 by the Communications Committee
Inside Job provides a comprehensible lesson on the current economic crisis and an entertaining expose of the slimy players behind it. I went to see this movie twice. I wanted to both review the information and check on what was missing.
The movie starts in Iceland. A formerly prosperous population suddenly lost its wealth, income and job base when the economy collapsed. The government had privatized the banks and deregulated industry, allowing speculators to finance risky operations with questionable loans. The example is jarring, but we never find out how or why a seemingly rational people allowed the government and some nefarious entrepreneurs to destroy their lives.
The movie provides more historical background for the crisis in this country. The premise is that it all began in the 1980s with deregulation of the banks under Ronald Reagan's presidency. The disastrous result was the Savings and Loan debacle and subsequent bailout. The banks stepped up their debauchery under the Clinton administration. Clinton put Robert Rubin and Lawrence Summers in charge of the economy, letting the business school-investment banking cabal call the shots. And shoot they did.
By now most of us know that under Clinton, congress passed the Graham-Leach-Bliley Act which repealed Glass-Stegle. That legislation had maintained a firewall between banks and insurance companies. What is interesting is that it was repealed after Citigroup, a bank, had already acquired Travelers Insurance Company. The bankers had no doubt that the U.S. Government was already in their pockets.
During this time investments lost all connection with real material value. Investment banks and universities hired mathematicians to promote the pseudo-science of financial engineering. They created derivatives, investment instruments composed of pieces of reality lumped together and inflated beyond recognition. The Clinton Administration pushed through the Commodities Futures Modernization Act, which prevented the regulation of derivatives.
The film explains derivatives and credit-default-swaps with a chart that should be hung in every economics class. An investment bank, Goldman-Sachs for example, sells CDOs (collateralized debt obligations) to its investor customers (which include our pension funds). These CDOs are derivatives, inflated mish-mashes of mortgages of unknown quality. An insurance company, AIG for example, sells to Goldman Sachs credit default swaps, instruments which will compensate the investment bank when the CDOs lose their value. Goldman Sachs buys additional insurance to protect itself from any failure of the insurance company after it has overextended itself in redeeming the credit default swaps. Thus the investment bank can benefit from screwing its client investors and watching the insurance company sink.
When the house of cards came down, people lost their homes, investors lost their savings, and pension funds were ruined. AIG went bankrupt. The U. S. Government bailed the company out at the the request of a former CEO of Goldman Sachs,Secretary of the Treasury Henry Paulson. AIG honored Goldman Sachs' credit default swaps.
Paulson, who promoted deregulation, claimed there was no danger in derivatives, and made sure that his cronies benefited in any case, declined to be interviewed for this movie. Likewise, Harvard trustee, Citigroup director, and Obama adviser Robert Rubin, who became Treasury Secretary for Bill Clinton after 26 years at Goldman Sachs, refused the invitation, as did his deputy secretary, Harvard professor and Obama adviser Lawrence Summers. But the filmmaker found a number of members of the Wall Street-Government-Ivy League establishment who were blind to the notion that a Hollywood producer might challenge them.
The movie paints Glenn Hubbard, the Dean of Columbia University Business School and chief economic adviser to George W. Bush as scumbag of the decade. He engineered the Bush tax cuts and was paid by investment banks to testify that derivatives were perfectly safe and helped to stabilize the markets. We see numerous interviews with Hubbard haughtily defending high executive compensation and claiming that the economic collapse was unforeseeable. In his final sequence, Hubbard is finally caught up in the contradictions between his statements and reality. He bristles and hisses at the invisible interviewer, "You have three more minutes."
The film uses the tying of neckties as a nice symbolic touch. In the depiction of events before the 2008 collapse, we see numerous shots of invisible hands perfecting the knots for impeccably dressed slimy rich guys while they speak. Except for the pre-indictment Eliot Spitzer, the critics and truth-tellers don't seem to need any personal assistance. And Robert Gnaizda of the Greenlining Institute, advocate for unfortunate homeowners, appears in a creased shirt. Inside Job gives us a good understanding of recent economic developments and vividly exposes the worst of the Wall Street-Ivy League operators. It blames the policies of Republican and Democratic administrations alike. But it falls short of even suggesting that the roots of the crisis lay in the capitalist system as a whole. In fact it is nostalgic for the days when bankers earned only ten times the salary of the average worker instead of thousands of times.
The movie ends with a solemn pronouncement:
For decades the American financial system was stable and safe. But then something changed....The men and institutions that caused this crisis are still in power.
If we are to depose these men and institutions, we need to arm ourselves with a deeper understanding of how capitalism inevitably works to enrich the few and impoverish the rest of us. We need to find ways to popularize that understanding and build a movement for socialism.