Movie Review: Inside Job

Inside Job ****
Directed By: Charles Ferguson.

It is unlikely that a more important film than Charles Ferguson’s Inside Job will be released this year. Like he did with his debut film, No End in Sight about the War on Terror, Ferguson does an excellent job of showing just what exactly happened to make the economy collapse in 2008 – and why it is likely to happen again. There is not much “new” information in this documentary – but Ferguson distills what is out there into the most important factors, and does an excellent job of making it easy to understand. Wall Street depends on the making everything so complicated that regular people will find it nearly impossible to know what is happening – but Ferguson breaks it down into terms you can understand. He then interviews people – both those who had warned of a problem, and those who contributed to it – and has them explain themselves.

Ferguson however is not Michael Moore – who delights in his stunts and in making fools of his interview subjects. Ferguson stays off camera – although we do hear him questioning his subjects – especially when they say something that he finds appallingly inaccurate and wants to either correct them, or express dismay over what he has just heard. But mainly, he just lays the facts out there for you to see.

You want to know why the subprime mortgage crisis caused such catastrophic things to happen to the economy for example. Here’s why: In the old days, the person who gave you your mortgage had a vested interest in you being able to afford it – because if you didn’t, they lost money. Now what happens is that the people, who give you a mortgage, turn around and sell that mortgage to an investment bank, so they get their money. The Investment bank than packages all these mortgages together, and sells them to investors, who because rating firms, who are paid by the investment banks, have highly rated these investments, making them seem safe. Not only that, but then the Investment Banks turn around an “insure” these mortgages with someone like AIG – meaning that if the mortgage owner defaults, they still get all their money back, and it’s just the individual investors who get screwed. On top of that, there is something called “derivatives”, which essentially means that ANYONE can take out insurance on the mortgage – so every time one mortgage is defaulted on, a firm like AIG has to pay many multiples the actual value of the house back to all those people who took out insurance on it – essentially betting that it would fail in the first place. When you hundreds of millions of dollars in bad mortgages, this adds up pretty quickly, and pretty soon, AIG has no money left, the Investment Banks have no money left, and investors have no money left – and everyone is broke.

The question becomes why this was all allowed to happen – and the answer is simple – deregulation. America used to have pretty tight control on what Investment banks were allowed to do – and no one had even heard of derivatives. Starting in the Reagan years, America started a decade’s long string of deregulations – allowing Investment Banks to engage in riskier and riskier behavior. The Banks didn’t care – they were being run by men who get paid based on current performance, not future performance, so they got away with hundreds of millions of dollars in bonuses when times were good – and when they collapsed, they could simply walk away.

Lest you think the film is an Anti-Republican screed, it should be pointed out that Ferguson is just as hard on Clinton as he is on Regan and George W. Bush. And he ends his film with a lengthily explanation attacking Barack Obama, who promised major reforms, and has yet to do anything. Not only that, but he has essentially appointed the same people who oversaw the last collapse to oversee the rebuilding plan – meaning that the whole cycle is beginning all over again. This is not a partisan issue – but one that affects every politician on both sides of the aisle.

Inside Job is fascinating, insightful, entertaining and infuriating in equal doses. It’s infuriating because the people responsible for the collapse – the ones who will talk to Ferguson anyway, and many won’t, don’t seem to realize the impact that they have had – and will continue to have. They don’t even see that there is a problem with the system. They continue to want no regulation, because that would inhibit the flow of capital, and in their view, that would hurt the economy. But the economy is already hurt – as Ferguson makes painfully clear. But nothing will ever change, unless the people, who have the power to change it, decide to. And since they have a vested interest in the system remaining the same, it’s likely it never will.