Who Maimed the Economy, and How
“Inside Job,” a sleek, briskly paced film whose title suggests a heist movie, is the story of a crime without punishment, of an outrage that has so far largely escaped legal sanction and societal stigma. The betrayal of public trust and collective values that Mr. Ferguson chronicles was far more brazen and damaging than the adultery in Nathaniel Hawthorne’s novel, which treated Hester more as scapegoat than villain.
The gist of this movie, which begins in a mood of calm reflection and grows angrier and more incredulous as it goes on, is unmistakably punitive. The density of information and the complexity of the subject matter make “Inside Job” feel like a classroom lecture at times, but by the end Mr. Ferguson has summoned the scourging moral force of a pulpit-shaking sermon. That he delivers it with rigor, restraint and good humor makes his case all the more devastating.
He is hardly alone in making it. Numerous journalists have published books and articles retracing the paths that led the world economy to the precipice two years ago. The deregulation of the financial services industry in the 1980s and ’90s; the growing popularity of complex and risky derivatives; the real estate bubble and the explosion of subprime lending — none of these developments were exactly secret. On the contrary, they were celebrated as vindications of the power and wisdom of markets. Accordingly, Mr. Ferguson recycles choice moments of triumphalism, courtesy of Lawrence H. Summers, George W. Bush, Alan Greenspan and various cable television ranters and squawkers.
Even as stock indexes soared and profits swelled, there were always at least a few investors, economists and government officials who warned that the frenzied speculation was leading to the abyss. Some of these prophets without honor show up in front of Mr. Ferguson’s camera, less to gloat than to present, once again, the analyses that were dismissed and ignored by their peers for so long.
Dozens of interviews — along with news clips and arresting aerial shots of New York, Iceland and other disaster areas — are folded into a clear and absorbing history, narrated by Matt Damon. The music (an opening song, “Big Time,” by Peter Gabriel, and a score by Alex Heffes) and the clean wide-screen cinematography provide an aesthetic polish that is welcome for its own sake and also important to the movie’s themes. The handsomely lighted and appointed interiors convey a sense of the rarefied, privileged worlds in which the Wall Street operators and their political enablers flourished, and the elegance of the presentation also subliminally bolsters the film’s authority. This is not a piece of ragged muckraking or breathless advocacy. It rests its outrage on reason, research and careful argument.
The same was true of Mr. Ferguson’s previous documentary, “No End in Sight,” which focused on catastrophic policies carried out in Iraq by President George W. Bush’s administration just after the overthrow of Saddam Hussein. But whereas that film concentrated on a narrow view of a complex subject — the conduct of the war rather than the at least equally controversial rationale for fighting it — “Inside Job” offers a sweeping synthesis, going as far back as the Reagan administration and as far afield as Iceland in its anatomy of the financial crisis.
Perhaps unsurprisingly, many of the highest-profile players declined to be interviewed. Mr. Summers appears only in news footage, and none of his predecessors or successors as Treasury secretary — not Robert E. Rubin or Henry M. Paulson Jr. or Timothy F. Geithner — submit to Mr. Ferguson’s questions. Nor do any of the top executives at Goldman Sachs or the other big banks. Most of the interviewees are, at least from the perspective of the filmmaker, friendly witnesses, adding fuel to the director’s comprehensive critique of the way business has been done in the United States and the other advanced capitalist countries for the past two decades.
Both American political parties are indicted; “Inside Job” is not simply another belated settling of accounts with Mr. Bush and his advisers, though they are hardly ignored. The scaling back of government oversight and the weakening of checks on speculative activity by banks began under Reagan and continued during the Clinton administration. And with each administration the market in derivatives expanded, and alarms about the dangers of this type of investment were ignored. Raghuram Rajan, chief economist at the International Monetary Fund, presented a paper in 2005 warning of a “catastrophic meltdown” and was mocked as a “Luddite” by Mr. Summers.
Meanwhile, some investment bankers — at Goldman Sachs in particular — were betting against the positions they were pushing on their customers. An elaborate house of cards had been constructed in which bad consumer loans were bundled into securities, which, were certified as sound by rating agencies paid by the banks and then insured via credit-default swaps. One risky bet was stacked on top of another, and in retrospect the collapse of the whole edifice, along with the loss of jobs, homes, pensions and political confidence, seems inevitable.
How did this happen? Mr. Ferguson is no conspiracy theorist; nor is he inclined toward structural or systemic explanations. Markets are not like tectonic plates, shifting on their own. Visible hands write laws and make deals, and in this case a combination of warped values and groupthink seems to have driven very intelligent men (and they were mostly men) toward folly. In addition to business and government, Mr. Ferguson aims his critique at academia, suggesting that the discipline of economics and more than a few prominent economists were corrupted by consulting fees, seats on boards of directors and membership in the masters of the universe club.
When he challenges some of these professors, in particular those who held positions of responsibility in the White House or in the Federal Reserve, they are reduced to stammering obfuscation — Markets are complicated! Who could have predicted? I don’t see any conflict of interest — and occasionally provoked to testiness. Mr. Ferguson, for his part, cannot always contain his incredulity or rein in his sarcasm. Occasionally his voice pipes up from off camera, saying things like, “You can’t be serious!”
But it is hard to imagine a movie more serious, and more urgent, than “Inside Job.” There are a few avenues that might have been explored more thoroughly, in particular the effects of the crisis on ordinary, non-Wall-Street-connected workers and homeowners. The end of the film raises a disturbing question, as Mr. Damon exhorts viewers to demand changes in the status quo so that the trends associated with unchecked speculation of the kind that caused the last crisis — rising inequality, neglect of productive capacity, endless cycles of boom and bust — might be reversed.
This call to arms makes you wonder why anger of the kind so eloquently expressed in “Inside Job” has been so inchoate. And through no fault of its own, the film may leave you dispirited as well as enraged. Its fate is likely to be that of other documentaries: praised in some quarters, nitpicked in others and shrugged off by those who need its message most. Which is a shame.
“Inside Job” is rated PG-13. Some drug and sex references and pervasive obscenity, though not the verbal kind.
Opens on Friday in New York and Los Angeles.
Directed by Charles Ferguson; written by Mr. Ferguson, Chad Beck and Adam Bolt; narrated by Matt Damon; directors of photography, Svetlana Cvetko and Kalyanee Mam; edited by Mr. Beck and Mr. Bolt; music by Alex Heffes; produced by Mr. Ferguson and Audrey Marrs; released by Sony Pictures Classics. Running time: 1 hour 45 minutes.
The Filmmaker Who Does a ‘Job’ on Wall Street
DealBook caught up with the 55-year-old filmmaker, who in 2008 was nominated for an Oscar for his first documentary, on the Iraq War, called “No End in Sight.”
It’s very unrealistic and I’m sure that was a deliberate choice, they decided that they were going to made a fun, entertaining film and decided to deviate from portraying Wall Street as it is. I don’t know why they made that decision. Maybe that’s good for my film. You certainly don’t get an idea of what happened during the crisis by watching “Wall Street” II, that’s for sure.
– Peter Lattman
Go to 2007 Profile of Mr. Ferguson from The New York Times »
Go to Related Article from DealBook »
Still Stuck in Denial on Wall St.
By JOE NOCERA
He would like you to know that he did not grow up with a silver spoon in his mouth. That he went to public school and Tufts University. That when he was interviewed for a job at Goldman Sachs, he wore a polyester suit. (“I didn’t know any better.”) That he failed the bar exam after graduating from Harvard Law School. That he was eventually fired by Goldman Sachs (but was rehired by a different division). That despite these setbacks, he founded a firm — a fund of funds called SkyBridge Capital — that now employs 43 people, and has $7.4 billion under management. And that he’s not one of those retrograde Wall Street types who thinks all taxes are evil.
“I’m pro-gay marriage,” he said. “Pro-choice. Against the death penalty. I have no problem if the government raises my taxes.”
And one other thing. Anthony Scaramucci wants you to know that he really, really wishes he had phrased that question he asked President Obama a few weeks ago a little differently. “I wish I hadn’t used the word piñata,” he told me earlier this week. “I was trying to throw him a softball.”
Did you see that exchange between Mr. Scaramucci and Mr. Obama? Jon Stewart feasted on it. It took place a week ago Monday, during the president’s town hall meeting in Washington. After a little jocular back and forth — Mr. Scaramucci was at Harvard Law at the same time as Mr. Obama, and joked about having once fouled the president on the basketball court — he got to the point.
“I represent the Wall Street community,” he began, wearing a suit that was decidedly not polyester. “We have felt like a piñata. Maybe you don’t feel like you’re beating us with a stick but we certainly feel like we’ve been whacked with a stick.” After going on a bit about job growth and the “connection between Wall Street and Main Street,” he returned to his theme. “When are we going to stop whacking Wall Street like a piñata?”
In fact, Mr. Scaramucci had served up a softball question — just not the kind he had intended. The rap on Mr. Obama from most Wall Street executives these days is that he is antibusiness. Stephen Schwarzman, chief executive of the Blackstone Group, compared Mr. Obama’s approach to Wall Street as akin to Hitler invading Poland in 1939. (Mr. Schwarzman quickly apologized when the remark was made public.) The hedge fund manager Daniel Loeb turned his latest quarterly letter to his investors into an anti-Obama screed.
As Mr. Scaramucci later explained it, though, he wasn’t trying to pile on. He supports Mr. Obama and wants him to succeed, he said. Rather, he was trying to tee up a question that, he hoped, would give the president a chance to begin to heal Wall Street’s hurt. “I thought I was giving him an opportunity to say he is pro-business,” Mr. Scaramucci said.
Instead, Mr. Obama used Mr. Scaramucci’s question to whack him like, well, a piñata. In the span of just a few minutes, Mr. Obama mentioned billion-dollar hedge fund compensation, Mr. Schwarzman’s Hitler remark, the absurdity of a fund manager’s secretary paying a higher tax rate than his or her boss, and the fact that “most people on Main Street feel like they’ve been beat up on.” He was interrupted several times by applause. “He came at me with a baseball bat,” complained Mr. Scaramucci.
When I went to see Mr. Scaramucci a few days later, my purpose was to get him to explain to me why it is that Wall Street feels so beleaguered. I’d been having a difficult time understanding it. Yes, the “fat cat” rhetoric can’t be much fun to listen to, but is it really any worse than the political rhetoric used against health insurance executives, or the big oil companies or the teachers’ unions? Hardly. In 1936, Franklin D. Roosevelt said of the financial industry executives, “They are unanimous in their hate for me — and I welcome their hatred.” Mr. Obama hasn’t said anything approaching that level of venom.
Nor have his deeds been as punitive as Roosevelt’s were. The big banks aren’t being broken up, the way they were in the 1930s. Bankers aren’t being hauled off to jail. No serious effort has been made to rein in executive compensation — or even to claw back millions of dollars in bonuses that were based on what turned out to be illusory profits. Most of the financial practices and products that brought us to the brink remain legal under the new Dodd-Frank legislation — though they will, finally, be regulated. All things considered, Wall Street has gotten off pretty easy.
Not surprisingly, Mr. Scaramucci didn’t see it that way. To his way of thinking, all of Wall Street was being blamed for the actions of a few bad apples. “You have 500 to 1,000 rogues on Wall Street,” he said. “They were the ones who did counterproductive things to the society. There were 25 guys at A.I.G. who blew up the whole company. It was a very small number. They were the devil on Wall Street. My assistant works on Wall Street. She’s not the devil. I just met with 50 brokers. They’re not the devil. When the president says ‘all these fat cats,’ he is hurting all of Wall Street.”
What about his old firm, Goldman Sachs? I asked. Didn’t they do things they shouldn’t have? “They probably did,” he replied, but then quickly reverted to his previous theory. “There are probably some bad people at Goldman,” he said. “But it would be very bad if the government took out Goldman Sachs. Goldman is the American dream factory. They can move people from the lower middle class to the ultra rich in one generation.” Therefore, he believed, Goldman should be praised, not scorned.
And so it went. Greed, Mr. Scaramucci conceded, had infected Wall Street during the years leading up to the crisis — but he wouldn’t acknowledge what seems patently obvious to most people: that those who gravitate to Wall Street are far less motivated by a desire to, say, supply capital to struggling start-ups than to get really rich. (He’s even written a high-minded book about all the good one can do on Wall Street, titled “Goodbye Gordon Gekko.”)
Wall Street had become such an important part of the economy, he insisted, that when the president went after it, he was hurting the entire country. “The president could have said that there are a lot of good people on Wall Street,” he said.
What was most striking to me was Mr. Scaramucci’s utter refusal to accept the notion that something truly systemic had infected the financial industry during the bubble years. It was as if all the bad things that had happened — the predatory practices of the subprime lenders, the corruption of the ratings agencies, the laundering of risky mortgages into triple-A securities that were then foisted on unsuspecting investors and all the rest of it —were anomalies that had taken place in some little corner of Wall Street, while everyone else on the Street was busy financing companies and doing other good things. Although Mr. Scaramucci seemed to me to be an intelligent and well-meaning man — with a stream-of-consciousness speaking style that made for an engaging hour — he also seemed to me to be in denial. Just like the rest of Wall Street.
A few hours after I spoke to Mr. Scaramucci, I went to see a screening of a new documentary about the financial crisis, “Inside Job.” (It opens next week.) Written and directed by Charles Ferguson, beautifully shot and jazzily edited, it is a film whose premise could not be more different from Mr. Scaramucci’s. Bad apples? Mr. Ferguson is firmly convinced that all of Wall Street was rotten to its core. “An out-of-control industry,” he calls it in the film.
Mr. Ferguson’s rhetoric gets a little overheated for my taste; at several points in the film he bizarrely stops to dwell on the supposed penchant of Wall Street traders for consorting with prostitutes. But what he does brilliantly is paint a compelling picture of systemic abuse.
Here is Wall Street actively encouraging subprime lenders to lower their already low standards — and then buying those loans knowing they are likely to default, but not caring. Here are traders up and down Wall Street making millions in bonuses selling products that are, in Mr. Ferguson’s words, “ticking time bombs.” Here is Moody’s, one of the three big credit ratings agency, quadrupling its profits in seven years by handing out triple-A ratings like candy. Here are the regulators, ignoring impassioned entreaties to investigate fraudulent lending practices and excessive leverage. These were not anomalies. This was standard operating procedure in the years before the crisis. “It was a great big global Ponzi scheme,” Martin Wolf, The Financial Times columnist, tells Mr. Ferguson.
Mr. Ferguson is merciless in evaluating the Obama administration’s response to Wall Street’s abuses. He thinks the government has done far too little to punish Wall Street and rein in its excesses. And though I think this is another place where his rhetorical excesses get the best of him, there is little doubt that his view is going to make his film very popular this fall. He is preaching to the converted.
The main thing I thought as I left the theater, though, was that I hoped Mr. Scaramucci would take the time to see it. He won’t like it, of course, but maybe it’s the thing he needs to rouse him from his state of denial. Maybe it can help all of Wall Street understand why the American people have no sympathy for its supposed plight.
At a minimum, Mr. Scaramucci will finally understand why Wall Street is going to remain a piñata for a very long time.