On Thursday, February 23 you are invited to learn about an Inside Job, as director Charles Ferguson breaks down in a clear and comprehensible way how the housing and economic collapse happened—and names the politicians and Wall Street bankers who are responsible.
A 2010 documentary film by Academy Award®-nominated filmmaker, Charles Ferguson entitled, “Inside Job” is getting a lot of fresh attention lately. Earlier this month, MoveOn sponsored a nationwide home screening festival and is hosting a petition drive to… “make sure the federal investigation co-chaired by New York Attorney General Eric Schneiderman truly holds big banks accountable for the crimes that crashed the economy for the 99%—and keep working to make sure banks treat homeowners fairly.”
The film was selected for a special screening at the 2010 Cannes Film Festival where it won the 2010 Academy Award for Best Documentary Feature. One festival reviewer characterized it as “a complex story told exceedingly well and with a great deal of unalloyed anger.” Logan Hill of New York magazine’s Vulture, characterized the film as a “rip-snorting, indignant documentary,” noting the “effective presence” of narrator Matt Damon.
The film is surprisingly non-partisan. If Ferguson takes Reagan and Bush to task for tax cuts that benefit the wealthy, he also criticizes Clinton for encouraging derivatives and Obama for failing to deliver on the promise of reform. He describes his film as covering “the systemic corruption of the United States by the financial services industry and the consequences of that systemic corruption.”
The film continues to receive positive reviews, earning a 98% rating on the Rotten Tomatoes Website. Roger Ebert describes it as “an angry, well-argued documentary about how the American financial industry set out deliberately to defraud the ordinary American investor.” A.O. Scott of the New York Times wrote that “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.”
“Inside Job” begins and ends in Iceland, a flourishing country that gave American-style banking a try – and paid the price. In 2000, Iceland was highly deregulated and its banks were privatized. When Lehman Brothers went bankrupt and AIG collapsed on September 15, 2008, Iceland and the rest of the world went into a global recession. In five parts, the film explores how changes in the policy environment and banking practices helped create this financial crisis.
“I finally managed to see the movie. Do see it if you can; it will make your blood boil, and in a good way,” says New York Times columnist Paul Krugman. “I think this film will stay with us; when you ask how the even worse crisis of, say, 2015 happened, the fact that these people got away with it will loom large.”
Greens N Grains Deli hosts a natural and organic dinner special each evening before the Film Society screening. Enjoy a delicious soup specialty, salad, a fresh baked roll and a cup of tea for $7.50, available from 6 pm on. The Film Society screenings take place at 7 pm and there is no charge for membership but seating at screenings is limited to 28 people. Dinner and film reservations are requested. RSVP: 920.868.9999.
Greens N Grains Natural Foods and Deli is open daily from 10 am – 5 pm – except on movie nights when we will remain open until 9 pm – in downtown Egg Harbor at 7821 Hwy 42, and can also be reached by email at firstname.lastname@example.org.
Part I: How We Got Here
The American financial industry was regulated from 1940 to 1980, followed by a long period of deregulation. At the end of the 1980s, a savings and loan crisis cost taxpayers about $124 billion. In the late 1990s, the financial sector had consolidated into a few giant firms. In 2001, the Internet Stock Bubble burst because investment banks promoted Internet companies that they knew would fail, resulting in $5 trillion in investor losses. In the 1990s, derivatives became popular in the industry and added instability. Efforts to regulate derivatives were thwarted by the Commodity Futures Modernization Act of 2000, backed by several key officials. In the 2000s, the industry was dominated by five investment banks (Goldman Sachs, Morgan Stanley, Lehman Brothers, Merrill Lynch, and Bear Stearns), two financial conglomerates (Citigroup, JPMorgan Chase), three securitized insurance companies (AIG, MBIA, AMBAC) and three rating agencies (Moody’s, Standard & Poors, Fitch). Investment banks bundled mortgages with other loans and debts into collateralized debt obligations (CDOs), which they sold to investors. Rating agencies gave many CDOs AAA ratings. Subprime loans led to predatory lending. Many home owners were given loans they could never repay.
Part II: The Bubble (2001-2007)
During the housing boom, the ratio of money borrowed by an investment bank versus the bank’s own assets reached unprecedented levels. The credit default swap (CDS), was akin to an insurance policy. Speculators could buy CDSs to bet against CDOs they did not own. Numerous CDOs were backed by subprime mortgages. Goldman-Sachs sold more than $3 billion worth of CDOs in the first half of 2006. Goldman also bet against the low-value CDOs, telling investors they were high-quality. The three biggest ratings agencies contributed to the problem. AAA-rated instruments rocketed from a mere handful in 2000 to over 4,000 in 2006.
Part III: The Crisis
The market for CDOs collapsed and investment banks were left with hundreds of billions of dollars in loans, CDOs and real estate they could not unload. The Great Recession began in November 2007, and in March 2008, Bear Stearns ran out of cash. In September, the federal government took over Fannie Mae and Freddie Mac, which had been on the brink of collapse. Two days later, Lehman Brothers collapsed. These entities all had AA or AAA ratings within days of being bailed out. Merrill Lynch, on the edge of collapse, was acquired by Bank of America. Henry Paulson and Timothy Geithner decided that Lehman must go into bankruptcy, which resulted in a collapse of the commercial paper market. On September 17, the insolvent AIG was taken over by the government. The next day, Paulson and Fed chairman Ben Bernanke asked Congress for $700 billion to bail out the banks. The global financial system became paralyzed. On October 3, 2008, President Bush signed the Troubled Asset Relief Program, but global stock markets continued to fall. Layoffs and foreclosures continued with unemployment rising to 10% in the U.S. and the European Union. By December 2008, GM and Chrysler also faced bankruptcy. Foreclosures in the U.S. reached unprecedented levels.
Part IV: Accountability
Top executives of the insolvent companies walked away with their personal fortunes intact. The executives had hand-picked their boards of directors, which handed out billions in bonuses after the government bailout. The major banks grew in power and doubled anti-reform efforts. Academic economists had for decades advocated for deregulation and helped shape U.S. policy. They still opposed reform after the 2008 crisis. Some of the consulting firms involved were the Analysis Group, Charles River Associates, Compass Lexecon, and the Law and Economics Consulting Group (LECG). Many of these economists had conflicts of interest, collecting sums as consultants to companies and other groups involved in the financial crisis.
Part V: Where We Are Now
Tens of thousands of U.S. factory workers were laid off. The new Obama administration’s financial reforms have been weak, and there was no significant proposed regulation of the practices of ratings agencies, lobbyists, and executive compensation. Geithner became Treasury Secretary. Feldstein, Tyson and Summers were all top economic advisers to Obama. Bernanke was reappointed Fed Chair. European nations have imposed strict regulations on bank compensation, but the U.S. has resisted them.