In the film Inside
Job, the only man not visibly wearing a
suit and tie is a psychotherapist specialising in the sexual
disorders of bankers and hedge-fund operators.
So says Philip French in a
review
for the
Observer.
The film, which explains how the financial crash of 2008
happened, opened in the UK last Friday. On Wednesday, I heard an
interview with its director Charles Ferguson
on Radio 4’s programme Front Row. And
although I joke about the absurd degree
of specialisation involved in maintaining
the psycho-sexual health of a
hedge-fund operator, that’s the
only bit that’s funny. Because some people
will die of heart attacks caused by the stress
of losing their jobs in this wrecked economy. Others,
in the UK, will die because of cuts to the National
Health Service. And others will merely become unhappy.
I’m unhappy because Oxfordshire county council
wants to close twenty libraries — it says
cuts mean it no longer can run them,
and so much for education and teaching children to read.
So I want to ask a question.

The Radio 4 interview is linked from Front Row’s
page for
Wednesday 16th February. It starts just over 13 minutes
into the programme, following a snatch of
The Archers and an interview with Bob Geldof.
In case you’d rather read than listen, I’ve
transcribed it below. The initials JW, CF, and SF
stand for the presenter John Wilson; for Charles Ferguson;
and for the BBC’s economics editor
Stephanie Flanders. And there’s an excerpt from the film
in which a banker speaks. I’ve identified him as
“Banker”, though I was tempted to write a ruder word. Here’s
my transcript:

In economics news today, sterling fell
sharply
in the wake of warnings from the
Governor of the Bank of England of rising inflation.
Mervyn King said, we are only now seeing
the impact of the 2008 events.
The events he referred to, of course,
were the ones that saw banks collapsing under the
weight of their own dealings
and
having to be bailed out with
billions from us, the taxpayers.

As the bankers count their bonuses,
we have a chance to see exactly how they all
got us into this mess.
The film Inside Job
has already
bagged an Oscar nomination
in the Best Documentary category.
It weaves together interviews with bankers,
economists,
and financial regulators, to present
a case of corporate collusion
and theft on a grand scale:

Banker: It turns out that, er, that the prudential regulation
and supervision
was not strong in Iceland, and particularly —

CF: So what made you think that it was?

Banker: I think that, er, you go with
the information you have, and, and
generally, er, the view was that, that Iceland had
very good institutions, it was
a very advanced country.

CF: Who told you that?
What kind of research did you do?

Banker: You talk to people, you have
faith in, er in the central bank
which actually did fall down on the job.

CF: Why do you have faith in a central bank?

Banker: Well, that faith — you, er — because
you go with the information you have.

CF: How much were you paid to write it?

Banker: I was paid, er —
I think the number was —
it’s
public information.

JW: A scene from Inside Job.
In a moment we’ll hear from the BBC’s economics editor
Stephanie Flanders what she made of it.
But first
I spoke to the director
Charles Ferguson. I suggested that his film
will make a lot of viewers very angry.
Was he?

CF: Well, I wouldn’t say that I became an
angrier person. But certainly I
was shocked at what I found. By the time I
started making the film, it was already
clear and I already knew, that there had
been
a fair amount of rather
bad behaviour.
But I must say that I was truly stunned
by what I found when we
engaged in the research for the film.
I was really really stunned. Both
by the incompetence of the American governmental
response to the crisis,
and also by the just
incredibly unethical behaviour in which —
and frequently I think
illegal, frequently criminal,
behaviour —
in which American
investment bankers
engaged.

JW: The interviewing style, combative;
and you needed to know your facts inside out.
And the stock in trade of your
interviewees,
the ones at the centre of the crisis,
is very often to bamboozle and to obfuscate and to say this is all
very complicated. So you must have known the story:
you had to rake through the facts
and the figures
before you set out with your camera.

CF: We did — I conducted about six months of
research before we conducted our first interviews,
before we filmed our first interviews.
It also certainly helped that I had a background
that was relevant:
I have a PhD in political science long ago, far
away, and my PhD adviser was actually an economist by training.

JW: And
very often during the interviews, you let them hang themselves.
Several of your interviewees
begin to squirm
and refuse to answer the questions quite a way into the film.
What was the process by which you gave them
enough rope to do that job?
What was the pitch to these CEOs?

CF: Well, it wasn’t primarily CEOs, by the way.
The most difficult, confrontational,
interviews were with
former government officials
and/or
senior academics. Most of the CEOs,
in fact every single one of the CEOs,
refused to be interviewed
on camera, and most of them refused to speak
with me even off the record. But, we did
approach a large number of people, and some
of them said yes.
We told them that we were making a
documentary about the financial crisis;
we didn’t
conceal what our intent was. Now of course, nor did I say,
I’ve uncovered highly compromising information about
you and I’m going to ask you about
it. I didn’t tell people that.
But nor did I say — .
You know, it’s not
like I promised to discuss
one subject and then discussed another:
we were honest with people.
Sometimes they asked additional
questions and we answered them.

JW: And one of the more shocking aspects of the documentary
is the way that you reveal how so many of the
academics specialising in the field
of economics
appear to have been bought off,
all supplementing their teaching income
with consulting jobs
for the very companies about which they are writing
reports on behalf of the government.

CF: Yes, and I wouldn’t quite call it
supplementing their income,
I would call it multiplying.
These people’s private consulting incomes
are typically five to ten times their
academic incomes.
They make really serious money,
millions of dollars, sometimes tens
of millions of dollars,
doing this.

JW: One of your financial analysts,
looking at the way in which the banks seem to have
the whole system
tied up with the Federal Reserve and the
people who are supposed to be regulating
the system,
describes it as a
pissing contest. He says, mine’s bigger
than yours. It was all men
at the centre of this situation,
and that is the culture that you turned your camera on.

CF: It was a very macho culture. That
was part of the problem.
Many people said that to me.
It was a very common
refrain, that there was
so much money
and so much
ego, that people’s behaviour became really
quite disconnected from reality.

JW: And you reveal that
cocaine use and the use of prostitutes as
part of these business deals was widespread.

CF: Yes, and
I put that in the film for two reasons
The first reason I put it in the film
is that it formed part of this culture of
disconnection from reality.
These people had so much money,
and the way that they used it
was to
insulate themselves from all of the personal
and emotional forces that might otherwise
have called their behaviour into question.
You know,
if all the people aound you are financially dependent on you,
then they’re probably not going to tell you
you’re doing something
unsustainable and unethical
and insane and you should stop.
That was the first reason I put that in the film.

The second reason
I put that in the film is
because it’s
pertinent to the quite scandalous fact that there have
literally been zero criminal prosecutions related to
the crisis in the Obama administration. One
excuse that sometimes government officials
and prosecutors give
is that these are very complicated cases
and it’s very difficult to get people to talk.

Well, if in fact you’re dealing with an industry
in which the use of prostitution
and cocaine are endemic, which is the case here,
then
if you really wanted to get people to talk, you could.
If you have an industry all of whose incentives,
or most of whose incentives, reward
unethical personal behaviour,
then
not surprisingly you’re going to attract very
unethical people to that industry.
And
that’s a great deal of what happened in American investment
banking.

JW: Charles Ferguson who made the Oscar-nominated film
Inside Job.
I’m joined by Stephanie Flanders, the
BBC’s economics editor, who’s seen the film.
Stephanie,
forensic analysis of the deals that led to the crash
three years ago. But does it tell us anything that
we didn’t already know, or rather I should
say that you didn’t already know?

SF: Well, what I didn’t know and what
other people didn’t know
I hope is slightly different, at least on average.
I do think that what was striking about
it is that it’s the first — .
There’ve been a lot of documentaries and some
very good ones. I think this
is one of the better ones, if only that
it brings a lot of
very high production values to it,
this very difficult area.
It starts with this
cautionary tale about Iceland,
which is just beautiful pictures of Iceland
and it kind of pulls you in.
You’ve got
Matt Damon narrating —
I think for Brits it will be probably
the
one and only film
they see which includes Matt Damon and
the Financial Times chief economic commentator
Martin Wolf in the same film.

But I did think
he got to some things;
and actually, at the end of the interview that you’ve
just done, I think that
this idea that the outrage at the lack of accountability
at some of the things that had gone on
in Wall Street is not so much that he revealed things
that hadn’t been revealed at least about the bankers,
but pointing up — .
I certainly hadn’t seen anyone point out the
fact that
they were all going to prostitutes and
they were all taking drugs
and wouldn’t this have been a bit of
leverage for a savvy attorney to get in there and
start making some indictments.
So I think that was something he added to it.

I think also as you suggested in your
interview, it’s this excruciating interview
footage which
I was surprised that people who really ought to know better,
and as you said were quite
savvy players on this scene,
were completely floored
at various points and come off
looking evasive or stupid or both.

JW:
Incredibly skilfully conducted
those interviews,
and very subtle
as well. As you say,
he leads them on, but he leads them into corners from which
they can’t run.

SF: I think so, and that’s possibly because
they didn’t see him
coming. I think well maybe they hadn’t seen —
I mean,
Charles Ferguson also did a very forensic film about Iraq and
I suspect if they’d seen that film before
they did the interview, they
might not have done the interview.

JW: The title of course is a crime reference, Ferguson arguing that
this is a multibillion-dollar
heist: the Inside Job.
So although it starts as an investigation and ends
as a polemic in a way,
asking why the bankers are not in jail.
Is he overstating the case do you think?

SF: Well there is a slight —
the problem I had with the film
and I should say I did think it was a
good watch —
it was probably a bit long
and towards the end you do get this sense that
it’s bringing in absolutely everything bad that’s
happened in global capitalism
in the last twenty years
and somehow tying it together
as a conspiracy between the banks and government.
You know, the rising inequality —
just everything is thrown together
and I think at that point
you might well start to lose most audiences.

But I also thought there was an interesting thing.
I mean this is the first film I’ve seen
pick on not just the bankers but also the
academic economists for being in the
pockets of the banks and taking all these
very lucrative contracts from the banks. I think he’s
right, and it’s
an interesting point which is actually a big debate
now within the economic profession —
you know,
should we be revealing who’s funding our
research, just like medical researchers do.
But he takes it a bit far because frankly
there are plenty of economists who
got this wildly wrong
for free. They weren’t being paid by the banks,
they just were completely wrong in what they thought
would happen with these financial contracts.
So in a sense he’s almost giving too much
benefit of the doubt to the
economists
because they were
incompetent not corrupt.

JW: Fascinating stuff. Thanks very much to Stephanie Flanders.
Inside Job opens in selected cinemas across the country
on Friday: the certificate is 12A.

So that’s the film. And I want to ask a question.
Because if you’re reading this, you’re
a programmer. And while some programmers write programs that
design oil rigs or allocate mobile-phone cells,
others work for banks. In Britain, because we don’t
manufacture stuff any more, I expect most work
for banks. Some, I suppose,
code innocent non-investment-banking things like those irritating
interaction sequences for cash machines. You know;
the ones that never tell you the machine is empty until
after you’ve typed your PIN, asked for cash, selected
the amount, and decided not to have a receipt.
Or like the event handler that
deletes £20 from your account
on the first microsecond after you’ve gone a penny
overdrawn. Which is fair enough, because there’s a lot of
interest on a penny, and your bank can’t afford
to lose money.

But there must be other programmers who are
coding trading algorithms for hedge funds, or
functions that distinguish good
credit default swaps from bad credit default swaps,
or other functions that distinguish
safe mortgage holders from really really risky mortgage holders.
And clearly, a lot of these programmers
got it very badly wrong. Dear Reader, did you
help crash the economy?

Written
for Dr. Dobbs