Inside Job (5/5 Stars)

Witches, witches, all of them witches!

The above quote is from Roman Polanski’s Rosemary’s Baby, a movie about a woman whose fiancé sold her womb to a coven of witches next door and had her impregnated by Satan himself. She says the line once she finally figures out that everyone, not just the neighbors, are in on it. Another couple of lines that ran through my head while watching through this documentary are from another Polanski movie, “Chinatown.” The main character, a private detective, finally figures out who is behind a murder and an even bigger crime, a complex water-working scheme that will rip-off the entire city of Los Angeles (based on a real crime). He asks the main bad guy who is already a very wealthy man:

“Let me ask you something, how much are you worth? Over ten million?”

“Oh Yes.”

“Why are you doing it? What can you buy that you can’t already afford? How much better can you eat?”

“Oh the Future Mr. Gittes, the Future!”

It is appropriate that I would think of Roman Polanski movies when I watched, “Inside Job.” Nobody has been a clearer witness to evil than Polanski (Holcaust, Helter Skelter) and this movie is one of the clearest portraits of evil I have ever seen (Right in the running with the documentary ‘Deliver Us From Evil’). It should be nearly impossible for this movie to not win the Oscar for best documentary of the year.

The Writer/Director is Charles Ferguson (No End in Sight) who could rightly be described as the Anti-Michael Moore. This documentary is not set up as a story about Charles Ferguson. He spends the entire movie off-screen and can only be heard asking questions in order to provide context for the answers of the interviewees. There are no grandstanding confrontations or “Look At Me” stunts. Instead there is an astounding amount research and knowledge, which is presented in a clear and comprehensive manner by a narrator (not Ferguson but Matt Damon). There are also no attempts at comedy although the audience which I sat with laughed in complete disbelief and astonishment at some points as brazen callousness and corruption oozed from the lips of people who should have known better than to take an interview with somebody who had done their homework. 

As with all reviews about documentaries it is impossible to try to summarize the plot in a review. The entirety of the movie consists of the explaining of the apocalyptic financial catastrophe of 2008. Ferguson has done a masterful job of limiting his explanation to two hours. It would be folly for me to list everything in two pages. But here’s a taste of what the movie has to offer:

Criminal activity is rampant in the financial sector and big banks have been convicted and fined for millions of dollars for, among other things, financing Iran’s nuclear program and laundering Mexican drug money. It is so common that bankers are allowed write off lawyer’s fees as ordinary business expenses. (That last sentence is not in the movie. I learned it in my Federal Income Tax for the Individual class)

Leverage is the ratio of the amount of debt compared to assets (Your Money!) in a bank. When a bank takes on more and more debt, it is more and more at risk of not being able to pay back creditors. The result is bankruptcy (Losing all your Money!). When deregulation allowed leverage caps to be raised, the banks did exactly that: They incurred a lot more debt without adding any more assets. Technically you do this because you would be investing the money in other companies. But no, instead the banks did this so they could pay their employees huge bonuses, all the while endangering the company and Your Money! When the banks inevitably collapsed all Your Money was lost. The officers had already been paid and didn’t lose any money at all. For lack of a better word, this is called stealing.

The securitized mortgage market is an incredible thing to behold. Joe Bob goes to a mortgage broker, a guy in a suit behind a desk. Joe Bob wants a house and asks the suit which loan is the best type for him. The suit gives him the worst mortgage possible, something with high interest rates and completely unsuitable for his income range. He does this for two reasons: One he makes more money with a high interest rate and Two: he has no risk if the loan fails. The mortgage broker gives the promissory rate to a bank. The bank has no risk because it passes the mortgage off to an investment bank. The investment bank takes the loan, couples it with several other thousand bad loans into a CDO. It gets its friends in the credit rating companies (which it pays big bucks) to give it an investment rating and sells it to a shell company, usually a LLC, which investors can invest in. A credit rating company gives it a grade from AAA (highest rating) to C. If it gets at least an AA rating, then IRA and 401ks, perhaps even Joe Bob’s retirement fund can invest in the CDO. The investment bank and the credit rating companies have no risk if the CDO fails. All the risk is with the LLC and its investors, aka Joe Bob and his retirement savings. Everyone along the chain gets paid while fobbing off all the risks. The economy goes into recession; Joe Bob loses his job, his house, and his retirement fund. The Banks get bailed out (with taxpayer money, so some of it is Joe Bob’s) so they can keep giving more loans and keep the economy from slipping into a full-blown depression. The bankers are not fired or convicted and continue to pay themselves exorbitant salaries.

But it doesn’t stop there. Do you know what a credit default swap is? A CDO and their investors can get insurance just in case that Joe Bob won’t be able to pay his mortgage (Usually from somebody like AIG). But did you know that credit default swaps allow other people to also take out an insurance policy on the same CDO. So it is very possible that Joe Bob’s mortgage has been insured not once by his CDO but 50 times by 50 different people. If you were the investment bank that handled his loan, you may have inside knowledge that Joe Bob probably won’t be able to pay back the loan. So instead of informing people of the danger and risk, you take out several insurance policies on the CDO. Once Joe Bob fails to pay the high interest rates and subsequently defaults, loses his house and his retirement fund, you get paid even more. This is exactly what Goldman Sachs did. The financial system had been so deregulated that it was legal. All it took was a complete lack of conscience and a pit of evil where a heart should be.

But what on earth could one person do with millions upon millions of bonuses and executive pay? How about hookers and cocaine? Some of the more amazing interviews involve a Wall Street Madame who tells of $1,000 a night escorts and a Wall Street therapist that tells of excessive use of cocaine by the traders. They say it was rampant and went straight to the top. It sure would make sense to me considering the other types things they were doing. If you’re going to hell, you might as well go whole hog.

And then Ferguson targets other people you wouldn’t think of targeting: Academia. He points out that some of the people in charge of deregulation now head the business schools of Columbia and Harvard. These are some of the best interviews of the movie. Apparently the professors weren’t expecting Ferguson to talk about financial conflicts of interest. One, Glenn Hubbard, gets really mad when Ferguson brings up the fact that Hubbard was paid $130,000 to write favorably about Iceland’s deregulation policies (which quickly collapsed that economy within 8 years) and declined to disclose his paycheck in the article. Here’s another somewhat paraphrased quote with the guy from Harvard.

Ferguson: If a doctor received 80% of his income from a drug he was promoting, wouldn’t that be a conflict of interest.

Harvard: Yes

Ferguson: How is this any different?

Harvard: It’s different in that…um….um….umm…um

(And then the audience and I let out an exasperated nervous disbelieving incredulous bale of laughter.)

This movie is extraordinary. Don’t let anyone tell you that the catastrophe was unpredictable or that the financial schemes are too complicated to understand. You can understand it and so did the bankers. That’s how they made so much money. And if there is one moral I can impart on you, it is that nothing has changed so you might as well become informed real quick. Don’t take my word for it. Take the word of the credit ratings agencies that testified before Congress and testified that their ratings were simply “opinions” for which they shouldn’t be held responsible. Allow me to interpret: That’s a polite way of saying, “It’s your own damn fault for trusting scumbags like us.” So take heed reader. There are evil people in the world and they are out for all they can steal. Act accordingly.