(2010) "Not a single executive has gone to jail," announced director Charles Ferguson as he accepted the Academy Award for Best Documentary. By now most Americans are aware of the calumny associated with Wall Street and the federal government for the economic crisis of 2008; but most citizens along with this documentary are unwilling to admit that ordinary people were also responsible by their believing in free lunches, some behaving as if they'd won a new house in a lottery without having to make any downpayment. Matt Damon narrates a script from Chad Beck and Adam Bolt of the hows and whys the global economic crisis came about.

Opening with the disastrous consequences of late 2008 following Iceland's financial deregulation, allowing three tiny banks to borrow $120 billion (ten times the size of the small country's economy) and millionaires to take out billion-dollar loans while government regulators noticed nothing wrong until too late, the filmmakers segue into the US's starring role in the global financial crisis.

Massive private gains, including excessive executive pay and employee bonuses, were obtained from enormous public loss - a great recession with double-digit unemployment, retirement plans wiped out, and millions of housing foreclosures. Taking inordinate risk with investors' money, investment bankers thought they were godlike in "creating something out of nothing" with innovative, unregulated financial instruments, such as credit default swaps (CDSs) and collateralized debt obligations (CDOs), which ultimately made the financial markets unstable.

Bankrupted Bear Stearns was bailed out, Lehman Brothers collapsed, AIG on the brink of failure, deemed "too-big-to-fail," received $180 billion in taxpayer/government aid. After 40 years of careful oversight following the Great Depression, the Reagan administration initiated a 30-year period of financial deregulation that led to an "out-of-control industry" without scrutiny by regulators.

As one of the few who attempted to halt the runaway train, Eliot Spitzer, former New York attorney general and governor, says of the regulators: "They didn't do their job." While Spitzer was taken down from his political prominence for involvement with a prostitute (see Client 9: The Rise and Fall of Eliot Spitzer), no one from the investment industry - though numerous witnesses comment on how risk-taking CEOs, other executives, and high-flying traders were indulging in cocaine and clients of high-class call girls, using fraudulent billing to cover their expenses - was similarly investigated, exposed, or charged with crimes.

They were protected from investigations into their fraud, money laundering, cooking books, overstating earnings, misleading customers, because they had captured the political system. In 1999 the prohibition by Glass-Steagall Act of 1933 on any individual financial institution's becoming any combination of a commercial bank, an investment bank, or an insurance company was repealed with the Gramm-Leach-Bliley Act (aka Financial Services Modernization Act), opening the door to combinatory practices that permitted these institutions to rapidly become bigger, more concentrated and powerful than ever before.

They could effectively fight reform with their lobbying prowess and campaign contributions. A global Ponzi scheme became possible through securitization of the food chain for these huge banks, bringing in billions of dollars of short-term revenue and profits, from fees for predatory subprime loans and relaxation (largely thanks to the efforts of Goldman Sachs CEO Henry Paulson, who then became President George W. Bush's secretary of the treasury) of limits on leverage.

This was abetted by the credit-rating agencies (who at any time "could have stopped the party"), seduced into weakening their underwriting standards, providing triple- and double-A "opinions" on the subprime crap (as Sen Carl Levin referred to their products) being offered to the public. While accountability is expected of educators teaching children, it's not part of the vocabulary being applied to our banks any longer, for though many of these companies were fined - a cost of doing business without having to admit to any wrong doing - most of the CEOs got away with their fortunes intact.

A few courageous economists and government officials spoke up early, warning of the threat to the economy, such as Nouriel Roubini ("cardiacal arrest of financial system"), Allan Sloan, Brooksley Born, Raghuran Rajan; but others who were key participants in the fiasco either refused to be interviewed - such as Larry Summers, Henry Paulson, Alan Greenspan, Timothy Geithner, Ben Bernanke - or turned flustered or angry on camera, especially Glenn Hubbard (formerly the chief economic adviser to President George W. Bush and currently dean of the Columbia Business School): "This isn't a deposition, sir. I was polite enough to give you time, foolishly I now see. But you have three more minutes. Give it your best shot."

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Copyright © 2011 Patrick Ivers. All rights reserved.
Reproduced with the permission of the copyright holder.

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