Tuesday, May. 18, 2010

Inside Job: How Wall Street Robbed the World

Two recent, searing scandals — sexual abuse by Catholic priests and the scheming of Wall Street financiers that triggered the world economic collapse — have some instructive, appalling similarities. Both involved egregious betrayals by people of stature of the trust placed in them by their powerless victims: in one case, the boys and girls scarred by the sins of their fathers; in the other, the middle- and working-class Amiercans who lost their homes, jobs and security. Both ruined thousands of lives. And both sets of atrocities were covered up by the agencies that should have protected the weak. The Church hierarchy stonewalled police investigations and shuttled offending priests to other parishes; Congress and the whole system of financial regulation let the high rollers keep playing, ever more recklessly, until the trillion-dollar tab had to be paid — by the taxpayer.

The only difference in this pair of capital crimes: the pederast priests didn't make money from their malfeasance. The finagling financiers did, in the cumulative billions. After their crimes were exposed, and the U.S. government bailed out their companies, they became even wealthier. If a class designation were to be appended to these brigands, it would be "the filthy rich."

This year's Cannes Film Festival has showcased a handful of movies about the money meltdown, including Oliver Stone's fizzy, sardonic Wall Street: Money Never Sleeps and Jean-Stephane Bron's Cleveland vs. Wall Street, which imagines a lawsuit brought by the city against the banks that foreclosed on so many local home mortgages. Now comes Inside Job, a cogent synopsis of the decisions that led to the Wall Street bubble and collapse, from documentary filmmaker Charles Ferguson, whose Oscar-nominated No End in Sight laid out the Bush Administration's slipshod planning of the Iraq invasion and occupation. In each case, Ferguson has addressed complex issues, involving dozens of key players, and made it all lucid. In Inside Job, narrated by Matt Damon, the filmmaker's tone is calm and professorial; yet you detect his growing anger as he digs beneath the headlines; and the fury is infectious. If you're not enraged by the end of the movie, you weren't paying attention.

The movie opens in Iceland, ends in the Halls of Ivy. Iceland, for years among the sturdiest European economies, in 2005 privatized its three largest banks — which jumped into speculative investments and, as one local economist says tartly, "wrecked the place." By 2008, the Parliament had to take drastic action to avert national bankruptcy. But the masters of the Wall Street universe saw Iceland's crisis as a fluke, not a harbinger, and kept their own party in high gear.

The central part of Inside Job details the history of deregulation, from Reagan to Clinton to George W. Bush, and the rise of financial instruments like derivatives and credit default swaps. Much of this material is familiar, both from news reports and books on the crisis and from earlier docu-blasts, particularly Leslie and Andrew Cockburn's American Casino and Michael Moore's Capitalism: A Love Story. In a way, Ferguson is the un-Moore: he's off-camera, asking questions, not front and center; his tone is serious and precise, not comedic-bombastic. Nor is Ferguson, who earned his Ph.D. in political science from M.I.T., a knee-jerk anticapitalist. In the '90s he and a partner created a software company, Vermeer Technologies, which they sold to Microsoft for $133 million. Unlike Moore, he's more at ease talking to the powerful than to the tearfully dispossessed. Inside Job contains just one brief interview with a woman who lost her home; the other conversations are with the articulate elite of bankers and professors.

Some of these wizards — Charles Morris, author of the 2007 book The Trillion Dollar Meltdown, and Fortune columnist Allan Sloan — saw the collapse coming and warned against it. In 2005, at a conference honoring Fed Chairman Alan Greenspan, University of Chicago economics prof Raghuram Rajan delivered a paper entitled "Has Financial Development Made the World Riskier?" and was chastised for his pessimism by Harvard President Lawrence Summers, who is now Barack Obama's chief economic adviser. Neither Summers nor Greenspan — nor, for that matter, Ben Bernanke, Robert Rubin, Henry Paulson, Timothy Geithner or any other architects of the bubble-and-bust economy — agreed to be interviewed for the film.

The few corporate apologists who dared to go on screen probably wish they hadn't. One is Fredric Mishkin, a Fed member from 2006 to 2008 who now teaches at Columbia University's Business School. Like some malefactor caught by Mike Wallace in his 60 Minutes prime, Mishkin stammers and wilts under Ferguson's increasing skepticism. ("Excuse me," the filmmaker says at one point, "you can't be serious.") Another squirming solon is Glenn Hubbard, Bush's chief economic adviser and now the Dean of Columbia Business School. Like the majority of the best and brightest, he ignored omens of a financial tsunami — and still pretends he's not all wet. As Ferguson's line of questioning becomes more pointed, Hubbard snaps, "You have two more minutes. Give it your best shot." But Hubbard has already shot himself in the foot. It will be interesting to see how this film affects his Deanship when it opens in the U.S. this fall.

In truth, one uncomfortable day in front of Ferguson's camera — or the implied embarrassment in refusing to answer for a career of misdeeds — is a minor inconvenience for men who earn vast sums sitting on boards, consulting and giving speeches at $100,000 a pop. You might condemn the bright kids who renounced science and medicine to make millions in the Wall Street game, and who charged millions more on their expense accounts for cocaine and prostitutes. No question, they were as trigger-happy as gunslingers, and as boastful of their portfolio size as porn studs. But they took their cue from the prevailing culture of excess: from their billionaire bosses with their private jets, from the rating agencies like Standard & Poor's and Moody's that kept awarding AAA ratings to the unstablest of firms, and from a Congress that overturned any laws that might stanch the money gush and protect the consumer. In the end, they didn't pay; we did, and got little back. (A wall of graffiti in the film reads: "Where's my f___in' bailout?")

The larger message of Inside Job is that American optimism — the engine, for two centuries and change, of our national expansion — can also have tragic consequences. The conquest of Iraq? A slam dunk. Gambling billions on risky mortgages? Not to worry — the housing market always goes up. Ignoring darker, more prescient scenarios, the smart guys in charge constructed faith-based policies that simply couldn't go wrong. In their myopia, they stumbled toward a precipice, and the rest of us fell off. Somehow, though, they stayed at the top. Instead of convictions and jail time, they got bigger government jobs, fatter paychecks in business, cushier sinecures in academe.

Michael Moore's Capitalism, completed last summer, painted a rosy view of the new Administration's response to the meltdown. A year later, that charitable judgment is hard to sustain. In its non-doctrinaire, subtly devastating fashion, Inside Job details how, in the Obama White House, Summers and Geithner and the same old boys are calling the shots of a recovery that has benefitted their cronies without enriching the average Joe. It's as if the pederast priests and their high-ranking apologists had taken over the Vatican.