'Inside Job': Fix Is in, and Taxpayers Are Dupes

"Inside Job" relies on a series of experts, including Rep. Barney Frank, D-Mass., above, and former New York governor and attorney general Eliot Spitzer, below, to tell the story of how the U.S. economy came to be in such a sorry state. Photos from Representational Pictures, Courtesy of Sony Pictures Classics.

“INSIDE Job” is not a comedy but it was responsible for lots of laughs from the audience that screened it last week at the 48th New York Film Festival.

Oscar nominee Charles Ferguson’s (“No End In Sight”) documentary is about the forces responsible for the economic crisis in 2008 that caused millions to lose their jobs and homes at a cost of more than $20 trillion and counting. It opens today nationwide.

One had to laugh to keep from crying or screaming as the film recounts in blunt, plain English how the regulations put into place after The Great Depression have been systematically weakened since the rise of Ronald Reagan. Deregulation continued into the administrations of George Bush, Bill Clinton and George W. Bush. The jury is still out on President Barack Obama, but at the moment things do not look promising. Alas, virtually his whole economic team is pro-deregulation.

Easing of regulations, for instance, allowed community banks to pursue risky investments with depositors’ money. Investment banks could merge with insurance companies, creating a conflict of interest, and so forth. Out of this deregulation also came financial “innovations” such as derivatives, credit default swaps and portfolio insurance. They are highly speculative, intentionally complex and have little or no basis in financial reality.

These innovations are prized because a ton of money can be made from them. Indeed, a trader can both recommend and bet against the same risky “product,” essentially talking out of both sides of his mouth. Or under the cover of a favorable grade from industry-beholden credit rating agencies, recommend a product to a client that s/he knows full well is junk. In this environment competition became intense. Many traders lost all sense of ethics and responsibility in their quest for huge bonuses for themselves, obscene profits for their firms and heavy losses for taxpayers if the bubble burst.

Greed was good and greed was rampant. Even with all of the crashes – i.e., S&L scandal, dot-com debacle, and of course, The Great Recession – virtually nothing has changed. Goldman Sachs, a major offender, for instance, continues to make money hand over fist. And as Charles Ferguson points out about the 2008 crash in his director’s notes, “nobody has gone to jail, despite fraud that caused trillions of dollars in losses.”

“Inside Job” opens to the beat of Robert Gabriel’s “Big Time” and slick, aerial views of Manhattan, as well as scenes of swank homes in exotic and exclusive locales – the spoils of war. Explaining or avoiding explaining just how the country and world got into this fix throughout the film are narrator Matt Damon, an impressive roster of economists, politicians, hedgefund managers, academics, policymakers, one Madame, as well as charts, graphs, Congressional hearings and a propulsive soundtrack.

It’s depressing, illuminating and riveting. This should be required viewing, especially for those studying business and finance. There are a lot of talking-heads, but many of them are utterly fascinating in their candor or coyness. Those who are reduced to hems and haws, studdering and muteness under CF’s insistent queries are thoroughly entertaining. In sheer exasperation, Glenn Hubbard snaps, “I don’t believe I have to discuss that with you” when CF persists in harping on the former's clear conflicts of interest. GH is the dean of the Columbia University business school and a former Bush II chief economic advisor who played a key role in designing the infamous 2003 tax cuts. French minister of economic affairs, industry and employment Christine Legarde’s revelation that she learned about the collapse of Lehman Brothers from the news instead of the New York office is depressing.

One could fault CF for not offering any prescriptions in “Inside Job,” but it is massively apparent that the illness here is the cancer known as the campaign finance system and the cure is sincere reform. For it is this blight that spawned deregulation and an enforcement structure that permits the wolves to stand guard at the hen house.

If the financial services industry can be re-regulated and those regulations are enforced, that would address a lot of systematic dysfunction. Unfortunately, as “Inside Job” points out and any thinking person can see for himself, Washington is in the deep pocket of Wall Street. According to the documentary, the financial services sector has five lobbyists for each member of Congress. Many of the regulators are from The Street and are pro-deregulation. The U.S. taxpayer doesn’t stand a chance.

“It will be very, very difficult to reform the system, said Nouriel Roubini, Professor of Economics at Stern School of Business at NYU, speaking to Yours Truly after the film in which he appears prominently. He was addressing whether campaign finance reform could play a major role in curbing Wall Street excesses. “They tried that already and it didn’t work.”

NR aka Dr. Doom because of his bleak economic forecasts, called the 2008 meltdown as far back as 2006, but he and subsequent others were ignored by both Washington and Wall Street. “I think it will take several years – maybe by 2013 or 2014 – for the economy to recover,” he predicted.

Visit www.filmlinc.com to learn more about the 48th New York Film Festival.