Inside Job is a fascinating and enjoyable film. I have lived through various financial crises dating back to Long Term Capital Management's collapse in the mid-1990s. With each succeeding market meltdown the culprits seem to get progressively greedier and the regulators look increasingly stupid. What is worrying is that business ethics seem to be a thing of the past.
Dating back to the 1920s it seems that given complete freedom to speculate, investors will act irresponsibly. Roosevelt concluded that tighter regulation was necessary to stop a repeat of the 1929 crash and he was probably right. Greenspan and his followers seem to have believed that people are smarter today and government intervention was no longer necessary. The film shows that markets can't be trusted to regulate themselves.
In a recent PBS documentary there was a report Brooksley Born's attempt to regulate derivatives in the 1990s. Born was the chairperson of the Commodity Futures Trading Commission and was stopped by a cabal consisting of Greenspan, Summers and Rubin. Born received no support from Bill Clinton who appointed her. Her resignation is also mentioned in Inside Job. Before the crash Greenspan was considered by the press to be almost a wise Yoda-like genius. His views carried the day but eventually his luck ran out. Things may have turned out differently had Born been listened to.
Many of the academics interviewed in the film now look ridiculous for their support of big finance. In my experience academics don't really understand how markets work. They have very simplistic theories based around the idea that markets are rational and efficient. I just interviewed two recent MBA graduates from good schools and its amazing they are still being taught stuff I learned 30 years ago, which I now know is seriously flawed. Various crashes have taught me that most academic theories in finance don't really survive in the real world. It's a case of the blind leading the blind.
Greenspan admitted to Congress that his understanding of the way markets work may have been wrong. However,as the film reveals, academics have often provided intellectual cover for the bankers and speculators. They are supposedly independent but they have become articulate and convincing cheerleaders for free markets. Unfortunately they have also become useful idiots. People tend to blame the Republican's for being too easy on big business, but George Bush's initiated the Enron trials and Jeff Skilling their former CEO was sent to prison for 24 years. Bush also introduced the Sarbannes-Oxley legislation. The shocking thing about Inside Job is that under Obama nobody on Wall Street was punished and the legislation he introduced has really changed nothing. He is clearly no Roosevelt. You got the impression from the film that both Obama and Clinton employed advisers that were too close to Wall Street.
Hopefully after the next meltdown, serious change will happen, however don't bet on it.
Dating back to the 1920s it seems that given complete freedom to speculate, investors will act irresponsibly. Roosevelt concluded that tighter regulation was necessary to stop a repeat of the 1929 crash and he was probably right. Greenspan and his followers seem to have believed that people are smarter today and government intervention was no longer necessary. The film shows that markets can't be trusted to regulate themselves.
In a recent PBS documentary there was a report Brooksley Born's attempt to regulate derivatives in the 1990s. Born was the chairperson of the Commodity Futures Trading Commission and was stopped by a cabal consisting of Greenspan, Summers and Rubin. Born received no support from Bill Clinton who appointed her. Her resignation is also mentioned in Inside Job. Before the crash Greenspan was considered by the press to be almost a wise Yoda-like genius. His views carried the day but eventually his luck ran out. Things may have turned out differently had Born been listened to.
Many of the academics interviewed in the film now look ridiculous for their support of big finance. In my experience academics don't really understand how markets work. They have very simplistic theories based around the idea that markets are rational and efficient. I just interviewed two recent MBA graduates from good schools and its amazing they are still being taught stuff I learned 30 years ago, which I now know is seriously flawed. Various crashes have taught me that most academic theories in finance don't really survive in the real world. It's a case of the blind leading the blind.
Greenspan admitted to Congress that his understanding of the way markets work may have been wrong. However,as the film reveals, academics have often provided intellectual cover for the bankers and speculators. They are supposedly independent but they have become articulate and convincing cheerleaders for free markets. Unfortunately they have also become useful idiots. People tend to blame the Republican's for being too easy on big business, but George Bush's initiated the Enron trials and Jeff Skilling their former CEO was sent to prison for 24 years. Bush also introduced the Sarbannes-Oxley legislation. The shocking thing about Inside Job is that under Obama nobody on Wall Street was punished and the legislation he introduced has really changed nothing. He is clearly no Roosevelt. You got the impression from the film that both Obama and Clinton employed advisers that were too close to Wall Street.
Hopefully after the next meltdown, serious change will happen, however don't bet on it.