Inside Job

Posted by Marc Hodak on November 21, 2010 under Movie reviews | Read the First Comment

I suppose I was expecting a reasonably complete, if not entirely coherent, exposition of the causes and consequences of the financial crisis of 2008.  What I got was the Mother Jones view of the financial world, and beyond.  A more appropriate title would have been “Hack Job.”

In this film, director/writer/producer Charles Ferguson spins a morality tale of capitalists rising up like a beast to devour the working class.  It’s not an original story, but it is imaginatively set in the modern day, like an avant-garde King Lear production.  As in any good morality tale, the villains are presented with ominous music and foreshadowing innuendo.  And the villains are many.  We start with Morgan Stanley, a small 1970s partnership of bond dealers reportedly earning $45,000 per year.  This seemingly harmless firm transforms into a behemoth paying its tens of thousands of employees an average of hundreds of thousands per year.

Then we have Goldman Sachs, doing what bankers do best, only better–unbelievably better, in a way possible only for one who has made a pact with the devil.  The list of villains expands to include everyone who has allowed the bankers to operate freely outside the confines of what we are soon led to believe should have been raptor cages, from presidents Reagan to Bush II, including that right-wing stooge Bill Clinton, and his Goldman-entranced advisers.  Ferguson even accuses President Obama of being insanely to the right of what should be obviously tighter regulatory policies.  The tale of regulatory capture is convincing, but as with everything else in this film, what is left out is more important than what is shown.

Of course, bankers and politicians have little to recommend for them in the recent crisis–and the film’s best parts include some eye-opening revelations–but the condemnations don’t stop there.  The movie also goes after derivatives–the whole class of financial instruments–repeating the famous Buffett FWMD line.  It focused on credit default swaps and CDOs, explaining each in pictures and tables.  The film also explains the easing of capital limits using an analogy of ship compartments.  These explanations flatter the audience, who come away thinking they get high finance, justifying their bewilderment (and their envy) that anyone making millions of dollars didn’t get it.  The audience is left without any suspicion of what is left out of these explanations.

In search of the monster’s sustenance, Ferguson goes one step further after the academy that spawned “free market thinking.”  Not content to impugn a few conflicted academics, Ferguson appears to suggest that the discipline of economics itself was a root cause of the financial crisis.  Moreover, this “free market thinking” continues to afflict the world with income inequality and insufficient taxation of the rich.  So, in a sense, this movie gives us so much more than a mere chronicle of the recent financial crisis; it depicts everything that is wrong with the unregulated world of the leftist imagination.

Unfortunately, the movie gives us so much less in every other respect.  The entire film is bathed in the quaint, unspoken faith that a benighted group of regulators untroubled by any connection to the industry they regulate would have gotten it right.  It glosses over the fact that the financial sector of 2001-2008 was, in fact, no less regulated than the financial sector of the idyllic ’60s and ’70s, notwithstanding the repeal of Glass-Steagall and loosening of capital limits on investment banks.  It omits the fact that most countries that largely escaped the banking crisis, like Canada or Germany, have no Glass-Steagall-type restrictions, or that integrated banks like JP Morgan Chase and Bank of America (absent the Merrill acquisition) weathered the financial crisis much better than the investment banks and commercial banks that remained stubbornly separate.  It ignores the fact (or at least the strong likelihood) that what regulations there were helped to create the oligopoly of TBTF institutions, notwithstanding the film’s uncritical conclusion that banks, with the new regulations, just seem to be getting bigger.  It glosses over the core contribution of Fannie Mae and Freddie Mac in the debacle, which are blithely mentioned as merely a couple more financial institutions that needed to be propped up, instead of as government-created and government-backed entities that were far more central to the crisis than Morgan or Goldman.  Barney Frank is interviewed with not one question about his policies that arguably contributed to the crisis, while Columbia Dean R. Glenn Hubbard is grilled mercilessly for serving on the boards of financial firms, as if that was a major contribution to what unfolded.  Given some real eye-opening segments regarding the items that the film chose to include, it would have been interesting to see a similar treatment of these items the film chose to ignore.

The editorial nature of this film is exposed in the occasional Ferguson outbursts when he yells from behind the camera at his subjects “Are you serious?” or “That’s not true!”  Accusing your subject of lying right on camera gets in the way of the film.  It reminds us that the interviewer is crunching things into his point of view.  But Ferguson wanders furthest off the reservation in wondering out loud why none of the bankers landed in jail, as if there weren’t a passel of prosecutors who wouldn’t have loved to have gotten that notch in their belt.  Indeed, the whole point of the film seemed to be to get the audience to ask that question.  The film showed Bear Stearns traders in handcuffs, but neglected to mention than they weren’t found guilty in an actual court, as opposed to the kangaroo court of the media.

The film did mention, more than once, that bankers indulged in drugs and prostitution, and also featured Eliot Spitzer as a prosecutor willing to bang heads to get convictions.  Ferguson then clumsily tries to make the point that ‘the system’ didn’t have any problem using Spitzer’s indiscretions against him in getting him tossed from office, so why was it squeamish about using similar indiscretions of Wall Street johns to get a few of them tossed into prison?  The point is subtle:  Spitzer used prostitutes, gets tossed from office = bankers used prostitutes, get tossed in jail.  Get it?  Well, this subtlety (or inconsistency, whatever) was clearly lost on the audience, which simply snickered at the thought of Spitzer as a character witness against the bankers.

On the whole, the only economic insight I got from this film was that I need to be more careful with how I spend ten bucks on an evening out.