Monday, November 1, 2010

Inside Job

MPAA (PG-13) USCCB (not rated) Roger Ebert (4 stars) Fr. Dennis (3 stars)

IMDb Listing –
Roger Ebert review –

I believe Inside Job to be a fairly good documentary directed by Charles Ferguson on the run-up and aftermath of the current financial crisis. It explained for the “layman” what derivatives, cdo’s (collateralized debt obligations) and cds’s (credit default swaps) are, and how the concoction and marketing of these “complex financial instruments” to investors the world-over led to the 2008 crash.

As perhaps could be expected, the documentary’s thesis was that the crisis was not an accident, that its arrival could have been predicted beforehand, that its root cause was a deregulationist ideology that entered American mainstream under Ronald Reagan and has largely continued (with some ebb and flow) under every administration, Republican or Democrat, since (though the GW Bush administration was the most reckless since Reagan’s) and finally that this deregulationist ideology resulted in “freeing” the financial services industry to become increasingly irresponsible until it drove the U.S. economy over a cliff.

None of those arguments are particularly surprising, even if they are well catalogued in this documentary. Perhaps less known to the public was the corruption of the investment rating services like Moody's and Standard and Poor's, which were paid apparently only if they gave good ratings to the financial services companies and the products those companies sold. As such, all the investment and insurance firms that went bankrupt, were bought out at the 11th hour at firesale prices or were taken over by the federal government -- Bear Sterns, Lehman Brothers, Morgan Stanley and AIG -- had moderate (A2) to excellent (AAA) ratings just days before their collapse. Dragged before Congress in the aftermath of the Sept 2008 crash, the executives of these previously highly respected rating services defended their ratings services saying that their firms were merely "giving their opinions" of the soundness of the other firms and the riskiness their products, which investors could presumably "take or leave." Indeed...

Where the documentary really strikes new ground is in its condemnation of the nation’s business and economics schools (Harvard, Colombia, UC Berkeley, etc) which the documentary argued have also been corrupted by Wall Street money. A good portion of economics professors’ income comes from speaking engagements to, testifying on behalf of, and writing position papers for Wall Street firms. Since these are the professors who are teaching the next generations of economics and business majors in this country, one is left fearing that it make take as much as a couple of generations for the nation to get out of this financial mess as the same ideological mistakes that caused this current crisis will be repeated over and over again especially since there is good money to be made in lying on behalf of rich patrons.

The documentary ends by noting that many of Obama’s economics advisors -- notably Treasury Secretary Tim Geithner (who used to work for Goldman Sachs), Lawrence Summers (former Clinton advisor and Harvard University President who has been one of those who’s made millions of dollars a year in speaking fees to Wall Street firms while technically serving in academia), and recently re-appointed Chairman of the Federal Reserve Ben Bernanke -- come from basically the same group of people who brought about the 2008 collapse and that this does not bode well for real change in the way Wall Street operates.

Where there is power and money there is inevitably corruption. But I do think that this documentary does make one pause, because it shows that the trail of corruption goes all the way to the economics and business schools teaching our nation's next generations of economists.

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