Sunday, September 26, 2010

An Incisive Examination of the 2008 Financial Crisis

A Film Review of 'Inside Job' and Interview with the Director Charles Ferguson

by Chuleenan Svetvilas

Inside Job tackles the financial crisis of 2008, delving into the economic policies, conflicts of interest, hubris, and greed that created this decades-long disaster in the making. Yeah, a documentary about the financial catastrophe seems like a super-boring film to sit through but this film is anything but dull. Through riveting personal interviews and plenty of facts and figures, director Charles Ferguson chronicles the intricate web of connections among the investment banks, credit rating agencies, economists, the Securities and Exchange Commission, and the Treasury Department under the Reagan, Bush I and II, and Clinton administrations.

Though the film is loaded with talking heads — everyone from New York University economics professor Nouriel Roubini (aka Dr. Doom) and former New York governor Eliot Spitzer to French Finance Minister Christine Lagarde and former Federal Reserve Board member Frederic Mishkin — it is tightly edited to keep the viewer's interest.

Ferguson asks pointed questions and it is painfully funny as well as infuriating to watch Mishkin squirm as he tries to explain whether the credit ratings were accurate and why he left his position in the midst of the economic collapse. Economist Glen Hubbard, former chair of the U.S. council of Economic Advisors under George W. Bush and now dean of Columbia’s business school, becomes very hostile and angry when asked about his financial conflicts of interest, for example not revealing that he was paid $100,000 to testify in defense of a financial company. He sneers at Ferguson, "You have three more minutes. Give it your best shot."

Narrated by Matt Damon, the film is divided into five parts: 1. How We Got Here, 2. The Bubble, 3. The Crisis, 4. Accountability, and 5. Where We Are Now. The first four sections craft a cogent argument that deregulation was at the root of the financial crisis and that there were many opportunities to lessen its impact or even prevent it from happening in the first place. The last part seems to falter, not only because it shows how the Obama administration is simply continuing the same policies as previous administrations but because the fury Ferguson raises in the previous parts is gone. It ends with platitudes. The last scene, one of city streets, ends with Damon’s voice intoning: "It won't be easy, but some things are worth fighting for."

Chuleenan Svetvilas interviewed director Charles Ferguson in San Francisco on September 21. Inside Job, his second film, will open in New York on October 8 and Los Angeles on October 15, and in the Bay Area on October 22. Ferguson's first documentary, No End in Sight, a remarkable exposé and indictment of the occupation of Iraq, was nominated for an Academy Award in 2007.

When and why did you decide to make this film about the 2008 financial crisis?

Well I made the final decision when in a 48-hour period, Lehman Brothers, Merrill Lynch, and AIG fell apart in September of 2008. And when also, as a result of that and everything else that was going on, we all found ourselves staring into nothingness. Then it was crystal clear that this was a gigantic thing and would be with us for a very long time and would have a lot of effects on a lot of people; it was something worth looking into. I had actually started thinking about it earlier, long before. I have two friends, both of whom are in the film, Nouriel Roubini and Charles Morris. They’re both old friends of mine.

In 2007 both Nouriel and Charlie began telling me that there was this huge problem coming and in late 2007 I read Charlie’s book and manuscript. It was published in February 2008, one month before Bear Stearns had collapsed and it was called The Trillion Dollar Meltdown. And at the time I thought he was exaggerating and he told me, “Just you wait, Charles.” And then you know, when major financial institutions began collapsing, I began to take my friends more seriously. Then in September of 2008 I decided, I gotta do this.

At that point did you start contacting people to interview? Once you decided to make the film, what was the first thing you did?

The first thing actually was I approached the two guys who run Sony Pictures Classics, Michael Barker and Tom Bernard and asked them if they would be interested in the film and they said yes. And in fact they financed a little over half the film and agreed to distribute it. So it was at that point that I started doing serious work. The first thing that we did is a lot of research. I talked to a million people. I read everything I could get my hands on.

We did mainly research for six months, a lot of research, including who we might want to film. Then we started filming in March/April 2009. We filmed basically through the end of the summer. I think our last interview was in September 2009 by which point we had already started the editing. We started editing around the time of the last interview.

So did you come up with the other half of the budget yourself?

We had another equity investor and then a small fraction of it is me, myself as an equity investor.

Did you feel that you were well prepared to tackle this subject because you already had one critically acclaimed documentary under your belt [No End in Sight] and then you have this PhD in political science from M.I.T. where you studied economics, political economy, and economic history?

It did and it helped a lot. My prior background in academia was very useful. In the first place I knew a lot of these guys. I also had some understanding of the issues. I wouldn’t say I had a lot. I had become rather disconnected from the financial world over the previous decade and it had changed a lot. It’s very clear that it had changed a lot and mostly for the worse. But I had some familiarity with finance and I also knew from my prior academic background, about the conflicts of interest in academic economics. I had seen the beginnings of that problem when I was a graduate student and a post-doc. So when the crisis occurred and I started making the film, I thought, there’s probably something here so I should look at this. And I looked and I found.

So when you were a graduate student, what did you think about the Chicago School of thinking regarding economics? Did you think that it was a viable thing – unfettered capitalism?

No, and it always seemed obviously dubious to me. I spent a lot of time studying it actually. I took a lot of economics. I read a lot of the kind of advocacy things that the Chicago School and other people wrote. I read Capitalism and Freedom, Milton Friedman’s book, and it always struck me as just very clearly deficient in reality for one thing. It seems as if Friedman was completely sincere in his beliefs. There’s no evidence that he was doing this for financial gain but it was clear that many other people were.

And he had his faithful disciples, Alan Greenspan being one of them.


I saw an interview you did in Cannes and you said that you were surprised by the Bush administration’s incompetent handling of the financial crisis. I’m wondering why you were surprised given that you had done No End in Sight, which showed the incredibly inept handing of the occupation of Iraq.

The reason I was surprised was that some of the people who were doing the handling in this case were people who seemed to be more practical and less ideological than the people who had been in charge of the Iraq war. Hank Paulson, whatever you think of him, he had real experience with the real world, not experience handling a financial crisis but a lot of experience with handling what investment banks do and how they behave. And so I was very surprised when it turned out that neither he nor Bernanke had understood that when they shut down Lehman Brothers that British and Japanese bankruptcy law would force the immediate closing of those offices, the immediate freezing of all transactions and accounts that would have this cascading effect throughout the financial system. He didn’t know that. I found that rather surprising, that he wouldn’t know that, that he wouldn’t take the trouble to find out.

I also thought that there would be more and more intelligent consultation with other people. When I asked Christine Lagarde, the finance minister of France, how did you find out Lehman was going to go bankrupt, I assumed that she was going to tell me a day or two earlier or someone had given her a call, and when she told me she found out about it after the fact by opening up the morning paper, I was dumbfounded.

Why wouldn’t you talk to other people who have a stake in this? We’re talking about a worldwide financial market, not just a U.S. financial market.

That seems to have escaped their notice.

Did you decide to structure the film in these five parts because that was the best way to explain the different steps of what had happened? I see similarities to your previous film: dividing the film into different parts and going through things chronologically and having people reflect back on what happened.

I think that I just naturally think like that. I guess it’s my academic background, I don’t know. I have a somewhat systematic, rigorous mind. I tend to do that to things. So partially that and partially I thought that the subject required it. This is something that could be very easily complicated where it would be easy for people to get lost. So giving some structural guidance in the film was something that would help relax the viewer and guild the viewer through a fairly complicated film. There’s a lot of facts in that movie. There’s over 100 documents in that film and a lot of people say a lot of things so it just seemed like a good idea but it’s always naturally how I tend to approach things.

There is a heavy use of voiceover in the film. You have Matt Damon reciting a lot of facts that way. Was that one way you tried to get around putting a lot of numbers and figures on screen to avoid overwhelming the viewer?

Yes, and also we tried to use a mixture of different ways to present information just to keep people stimulated so they wouldn’t get bored. So sometimes you would look at a graph and sometimes you would hear it from somebody’s voice. Sometimes you would see somebody saying it to you. We tried to keep the film visually and otherwise stimulating.

Did you try to interview Brooksley Born, [former head of the Commodity Futures Trading Commission]?

Yes, I actually had a very long private conversation with her off the record. She didn’t want to be interviewed on the record because she knew that she was soon going to be appointed to be a member of the Financial Crisis Inquiry Commission, which she is now a member of. My inference, she didn’t say this, but my inference is that she was afraid that if she spoke on the record that she wouldn’t get appointed and she wanted to be part of that effort. So she didn’t feel comfortable being interviewed on the record. It was too bad. She’s amazing to talk to, really an amazing person.

Does the same thing go for Elizabeth Warren?

Yes, I also had a long private conversation with her. She also declined to be interviewed on the record for similar reasons.

You make it really clear in your film that the regulators, the ratings agencies, economists, etc. didn’t do their job. And even after the crisis they still wouldn’t say that they didn’t do their job or would imply that somebody was looking at things but clearly that’s not true. So what do you hope to accomplish with this film?

I hope to make people aware that this is still an important issue that hasn’t been dealt with and they should become more active in dealing with it — both with regard to their personal financial lives and also in the larger political landscape. Just as war is too important to be left to the generals, so too finance is too important to be left to the financiers. So first of all that. I also just wanted to inform people about why it is that America is still in this state, why so many people are losing, have lost their jobs, their savings. I think that, I hope that people want to understand that.

You had mentioned earlier how you were aware of the conflicts of interest regarding people in academia, the economists. At what point during the interviews with people like Glen Hubbard [dean of Columbia Business School and economics professor] did you start asking more probing questions about conflicts of interest?

It depended but it was pretty early. I usually asked them a few relatively general questions first. I wanted to hear what they thought about the crisis in general and so I usually asked them those kind of questions first but pretty quickly I started asking them about these other things and they got uncomfortable pretty quickly.

Yeah, Hubbard was incredibly uncomfortable and said, “You’ve got three minutes.” So how long had you been talking to him before he started shutting down and getting really angry?

Maybe 15, 20 minutes into the interview. There was tension almost immediately but then it kind of got progressively more tense.

Were you surprised that it got so tense so quickly?

I didn’t know what to expect. The personal chemistry issue, how people are going to respond at the emotional level was hard to predict and people responded differently but I was a little bit surprised at how hostile Glen Hubbard got.

After all he agreed to be interviewed.

Yes, but I think what happened with all those people is that they’re not used to being challenged. They’re used to being deferred to, they’re used to people being very respectful and favorable and not antagonistic and not challenging. So I think that they were surprised that they were being challenged. And I think that they were also surprised at how much I knew. They weren’t used to people having read through their papers and gone through their C.V., looked at their financial disclosure forms. I think that came as a bit of a shock to them.

What’s your next project?

I don’t know, I have a number of ideas, some of them documentaries, some of them feature films. Right now I’m spending all of my energy trying to make sure people watch this film. That’s going to totally consume me for at least the next month, maybe for even longer but certainly for the next month.

What are your plans for the film’s website?

The website will have many things on it. It has a lot of information about the people in the film. It has information about some of the issues discussed in the film. It has links to an enormous number of the documents that we read and reference materials that we read: articles, books, all kinds of things. Also, links to organizations that work on these issues. So there’s going to be a lot on the website.

Do you plan on doing a book like you did with your other film?

I tend to doubt it. For one thing the website is going to have so much material on it that it’s not clear to me that there would be much additional benefit to doing the book. Also, I hope that the film speaks for itself. I hope that from watching the film that people will get a good enough idea what the issues are.

What question would you like to be asked or is there anything else you would like to add?

Well, I will take your opportunity to say that I think that the most disappointing thing I encountered was the reaction of the Obama administration and of President Obama personally. Many of us had high hopes for him and he’s been a great disappointment and that’s really too bad. A big opportunity lost but hopefully, hopefully the American people will start pushing him to change.

Chuleenan Svetvilas is a writer and editor in Berkeley, California. Her articles on film have appeared in print and/or online in Alternet, California Lawyer, Documentary, DOX, Hyphen, The Panopticon Review, and Mother Jones. Her 2007 review of Offside will be reprinted in Soccer vs. The State: Tackling Football and Radical Politics in 2011.