The Sony Pictures documentary Inside Job says the 2008 meltdown of world financial markets was avoidable. The global financial crisis of 2008 was an “Inside Job” that led to a global economic recession, millions of people losing their jobs, savings and homes and huge increases in government debt in order to pay for corporate bailouts.
The main perpetrators in the property, banking, financial industries not only got off without being charged but many got bailed out of losses with taxpayers money.
Now towards the end of 2011 the world stands on the brink of GFC2 as European nations struggle to cope with their debt burdens and the USA has what is known as a “U6” under/unemployment rate of 16.5%.
Over 104 minutes Matt Damon narrates the sorry story, tracing the causes to:
Aggressive Financial Deregulation – It’s worth reading an essay by former Australian Prime Minister Kevin Rudd which argues that the “crisis is the culmination of a 30-year domination of economic policy by a free-market ideology that has been variously called neo-liberalism, economic liberalism, economic fundamentalism, Thatcherism or the Washington Consensus. The central thrust of this ideology has been that government activity should be constrained, and ultimately replaced, by market forces”
Excessive salaries, cash bonuses and stock options given to financial services industry staff and CEO’s – Failed CEO’s are often given millions in bonuses and compensation rather than being sacked. The New York Times has a good infographic about executives of seven major American financial firms that have either collapsed, were sold at low prices or have received taxpayer-funded bailouts.
Banks advising customers 1 way and then betting against them – This New York Times article: Banks Bundled Bad Debt, Bet Against It and Won explains the issue well: “The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”
Greedy Credit Rating Agencies – AFP reported that “the powerful “big three” raters – Moody’s, Standard & Poor’s and Fitch – have been accused of blithely awarding mortgage-backed securities their lucrative “AAA” investment ratings simply to net more business.”
Prominent Economists Had Huge Conflicts of Interest – they were key players in financial services deregulation but also earnt a substantial portion of their personal income from directorships, advisory posts and consultancy work for banks, insurers etc. Read the comments at this Financial Times article to see what I mean.
Loans Were Given To People Who Couldn’t Pay Them – NINJA loans are one example (No Income No Job or Asset). NPR produced a special show called Giant Pool of Money that explained what the American housing crisis has to do with the turmoil on Wall Street and why banks made half-million dollar loans to people without jobs or income.
Finance Industry “Owns” Government – There is an old saying that “He who pays the piper calls the tune”. In the USA the financial industry is one of the key financiers of political campaigns and “owns” politicians on both sides, Democrats and Republicans.
In Australia it is commonplace for former politicians to work for the financial industry as staff or consultants such as the ex-NSW premier Bob Carr.
The following excerpt from a Sydney Morning Herald report “Macquarie: government by private enterprise” gives several more examples:
“‘Ten years ago Macquarie dealt with the pollies through David Clarke and his connections,’ says one executive director. “When they got serious about lobbying, they hired [former federal minister] Warwick Smith to try and understand how the government thought.”
Since then Macquarie has made an art of poaching politicians – former Victorian treasurer Alan Stockdale, to the colourful ex-member for Parramatta, Ross Cameron, to the controversial appointment of former premier Bob Carr earlier this year.
The string of political appointments has sparked a local debate on the appropriateness of politicians leaving office only to walk into the arms of the country’s most successful bank.”
The current level of belief that politicians and governments work in the public interest is abysmally low as more and people have realised that politicians are beholden to the corporations like banks and mining companies that help finance the cost of their election campaigns.
Along with other factors this has led to the We Are the 99% website and Occupy Wall Street movements. We will see in time whether the protests fizzle out or have an actual impact on elections, politicians and corporate decision making. Getting fair media coverage will be tough
Other Peoples Reviews
“an angry, well-argued documentary about how the American financial industry set out deliberately to defraud the ordinary American investor.”
– Roger Ebert, Chicago Sun Times
“Ferguson’s really well made documentary makes at least some of the puzzle clearer. There are graphs and charts and graphics and numbers galore, but the bottom line is that the poor old punter has been taken for a ride by greedy corporate business tycoons who have been hand in glove with government departments. It’s a horror movie, in a way, one designed to make you angry and want to do something about it.”
– David Stratton, ABC At The Movies
“Inside Job is a powerful experience and functions as one of the better guides for understanding The Global Financial Crisis in the documentary format.”
– Andrew Moraitis, Filmink Magazine
“You don’t have to be a financial whiz kid to find this superbly made documentary fascinating. As gripping as any thriller, Inside Job tells us everything we wanted to know about the global financial crisis but didn’t know the right questions to ask. Informative, intriguing, funny in an ironic way with blatantly terrifying implications, filmmaker Charles Ferguson has constructed a five-part film which describes, explains and analyses what, why and how it happened. We can digest as little or as much as we want; to absorb it all, more than one viewing is required.”
– Louise Keller, Urban Cinefile