Monday, August 22, 2011

Inside Job: what's the deal with the credit crisis?


Yesterday we finally got around to watching Inside Job (despite having recommended it all the way back here). If you, like me, often feel out of your depth in discussions of banking, finance, stock markets and the global economic instability of the last few years, then this is the film for you. Bringing dry and complex details into vivid comprehensibility, this film cuts through the bafflement factor and, via a series of fascinating and jaw-dropping interviews with key players, lays out many of the key threads that that led to the headline-grabbing events of 2008 and its aftermath (which continues to play out today).

The film won best documentary at the 2010 Academy Awards and currently sits at 97% on Rotten Tomatoes. It is easy to see why. Tackling an important subject with insight, emotion and sensitivity, this film is pure outrage mixed with damning evidence of systemic problems in the US financial industry from traders to CEOs, from regulators to investors, from president to ratings agencies, from academic economists to congress. There is plenty of blame to go around. And yet, somehow, no one is in gaol for the greatest inside job in history.

And very little has changed.

28 comments:

ben said...

It's a cracker, isn't it?

And yes, no jail time, but at least some acute embarrassment and changes to business school practice!

byron smith said...

MarketWatch: 2010 was the year that America finally took on the power and greed of the Wall Street banks. And the banks won.

byron smith said...

Ben - Very interesting. I hadn't heard about that. Well, that's one small victory then.

byron smith said...

CASSE: Defusing the debt bomb. Another quick overview of the credit crisis and why it hasn't gone away.

byron smith said...

CD: One third of Obama's recent financial support has come from Wall St.

byron smith said...

Common Dreams: "This is as bad as white collar crime gets".

Julian said...

There is a couple of perspectives on this issue:

http://news.ycombinator.com/item?id=2952683

byron smith said...

Julian, I assume you intended to link to this NYT article, suggesting that the US government is preparing to sue more than a dozen big banks, "accusing them of misrepresenting the quality of mortgage securities they assembled and sold at the height of the housing bubble, and seeking billions of dollars in compensation."

Very interesting, thanks for pointing it out.

Julian said...

The article is the source document - but the commentary in the first link is what I intended to draw your attention to. The different arguments about who was involved.

From what I've heard of that documentary - sitting around saying "Isn't it terrible that these guys aren't in jail?" is only half the argument.

Clinton's government created the Freddy Mac's and Fannie May's. They created government backed home loans. They allowed the loans to be securitised and traded on the financial markets. They sat there and did nothing when the trading of them got frenzied and had the potential to cause a meltdown.

Yes the financial markets did this with the full knowledge that the securities weren't all they were cracked up to be. They knew and were complicit in the ratings being misrepresented. But they also knew that the government had to back them.

The question posted by the documentary, "Why haven't people been sent to jail over this?" only asks half the question. If half the fault belongs to the government, then Congressmen and Senators are unlikely to create laws to put themselves in jail.

byron smith said...

I see. My post (and the film) include government regulators and politicians in the list of those at (in many cases criminal) fault. There is no sense in which the banks were/are the only "bad guys" in this situation.

byron smith said...

PS Thanks for clarifying your link. Some of the discussion there is quite interesting, as you point out.

byron smith said...

CD: Obama goes all out for dirty banker deal. Another perspective on the federal litigation - that it actually represents a relatively small slap on the wrist in order to make the legal problems go away. But the NY attorney general threatens to throw a spanner in the works through an independent investigation.

byron smith said...

CD: The $2 Billion UBS Incident: 'Rogue Trader' My Ass.

Julian said...

Re Rogue Trader - heartily agree - but think the US is a long way from doing anything about it at the moment.

byron smith said...

True, but it will only get closer to doing something when more people start naming things in the industry as they are.

byron smith said...

CD: What is wrong with Goldman Sachs? An impressive list of misdeeds.

byron smith said...

Larry Elliott: Who caused the financial crisis and great recession? The list of culprits is long.

byron smith said...

Guardian: Why we need more banker bashing. The problems have not gone away.

byron smith said...

Observer: The equation that caused the crash, or the more readable version from Charlie Brooker: Why you can't fart a crashing plane back into the sky.

byron smith said...

In case the bankers get all the blame, Philip Soos reminds us that economists have to take their share too!

byron smith said...

Guardian: Barclays Bank, too big to obey the rules.

byron smith said...

Guardian: The culture of banking.

"why does finance, in spite of considerable investments in internal policing, fail to self-correct? The short answer is greed, but there is more.

"Going over the interviews, all of which can be read online, it is clear that at least some people in finance are not primarily driven by money. But they are afraid, powerless, or both. Indeed, if you had to design a working environment that encouraged short-termist conformism and discouraged whistle blowing, then the finance sector would be your blueprint."

byron smith said...

Jonathan Freedland: The Barclays scandal is not 'wholly inappropriate'. It's a crime.

"Inappropriate? Inappropriate is wearing a tie to a barbecue. Wholly inappropriate is burping during the wedding vows. Distorting for personal gain a rate that underpins contracts worth $350 trillion worldwide is rather more than "inappropriate". [...] Imagine a footballer implicated in a match-fixing plot suggesting his punishment should be to forgo that season's pot of extra prize money – while remaining on his telephone-number salary. It would seem – what's the word? – inappropriate."

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Now let's see: if a rioter was given a six month sentence for stealing bottles of water worth £3.50, and these traders were rigging deals in ways that expanded their banks' bottom line by a few billion in a multi-multi-trillion pound market, then...

byron smith said...

MWH: How Barclays betrayed its own heritage. Some very interesting history to this massive company.

byron smith said...

PP: Scorecard for bank misbehaviours. US-based and just for the last couple of months...

byron smith said...

The Conversation: Debunking the myth of our well regulated banks.

"Our" = Australian.

byron smith said...

Guardian: Wall Street winning the long war against post-crash regulation.

byron smith said...

Bill Moyes: Six films on the financial crisis.