EC: The economic crisis was an 'inside job'

Kathleen Parker
Wednesday, October 13, 2010

If you haven't been humming tunes from "Les Misérables," you haven't seen "Inside Job," the new documentary about how our economic crisis evolved.

The most forgiving American will want to seize a pitchfork and march on Wall Street. Or Harvard Square. Or in front of the White House. There are so many despicable parties, it's hard to pick a favorite. Is it time to reconsider the Axis of Evil?

The film, written and directed by Charles Ferguson (and narrated by Matt Damon), will be opening in select cities this week. Although much of the story is familiar, Ferguson manages to weave together decades of bits and pieces into a dramatic narrative that plays like a whodunit. Names have faces, and storytelling combined with graphic illustrations helps explain the complex series of events that led to the global meltdown. Here are a few takeaways: One, trying to assign blame to either Democrats or Republicans is pointless. Everyone is culpable. From the early 1980s, when Ronald Reagan deregulated banks, through the two Bushes, Bill Clinton and now Barack Obama, each administration has endorsed -- and each Congress has helped tweak -- laws and rules that made systemic abuses and the meltdown not only possible but, looking back, inevitable.

Two, many investment bankers knew the mortgage loans they were packaging and selling were junk. They knew because their own analysts told them so. Tens of thousands of loans failed to meet basic underwriting standards, according to recent testimony before the Financial Crisis Inquiry Commission, a bipartisan group created to examine the causes of the meltdown. Not only that, Wall Street insiders were betting against their own customers and institutions.

Throughout the system, from the lending institutions to federal regulators to congressional overseers, those charged with protecting consumers averted their eyes.

Three, the cozy relationship between Wall Street and Ivy League academia, wherein economists push policies that benefit them financially, is eye-opening. In some cases, business professors and economists at America's top schools were shown to have conflicts of interest as they advanced policies for which they had been paid directly or that otherwise benefited them.

In other instances, we see that the same people who created policies that ultimately led to these abuses are still -- or were until recently -- running the show. Notably missing from the film, declining to be interviewed, are Larry Summers, Tim Geithner, Hank Paulson, Alan Greenspan and Robert Rubin.

This is not to say that what benefits Wall Street necessarily hurts average Americans or that all bankers are corrupt, but the system clearly enabled the abuses that have led to current circumstances. The attitude seemed to be that everyone was doing it.

When the big banks failed, of course, taxpayers were left holding the bag. Even though there was wide consensus that the bailouts were necessary to get credit moving again, there is simply no justification for the bonuses and golden parachutes that went to the very people who drove their institutions -- and us -- off a cliff. Reward for failure was the best gig in town.

Although most of what the movie highlights is familiar, there's something jarring about seeing the culprits up close in all their taxpayer-subsidized, suntanned splendor -- their multiple estates and private jets juxtaposed against shuttered homes and unemployed Americans living in tents. Obscene is the word that comes to mind.

I'm not one to advance class warfare, and most Americans still want to preserve a market system that leaves open the possibility that they, too, can work hard and achieve wealth. But it's clear from "Inside Job" that the game has been rigged so that only a few were in positions to get rich at the expense of the middle class, not just here but globally.

The movie isn't perfect. One wonders what was left on the editing floor. Some of those interviewed, who dodged questions or gave unacceptable answers, also looked stupid. None of these guys is stupid.

And, at the end, Ferguson couldn't resist making an editorial comment as the camera panned the Statue of Liberty. "Some things are worth fighting for."

We get it. The film is so well done and presented so factually that no Hollywood prodding was needed. Anyone who sees this movie will be furious. Thus, the only remaining question is why some of these people aren't being prosecuted for fraud or at least shirking fiduciary duty.

It would seem as never before that the White House should hire a special prosecutor. Ferguson's movie, which the president and his economic team had best watch -- and soon -- could use a sequel: "The Perp Walk."

kathleenparker@washpost.com