Tag Archives: Inside Job

‘Inside Job’ – Update

Crony Capitalism: After Lobbying Against New Financial Regulations, JPMorgan Loses $2B in Risky Bet (Democracy Now, 5/15)

As you’ll recall, the film Inside Job (2010) ended with a call for accountability, after highlighting how no senior-level financial executives had been prosecuted for wrongdoing that fueled the housing boom/bust and financial crisis.  When we watched the film a couple months ago, that was still the case.  But things may be changing as the FBI launches a criminal investigation of JPMorgan Chase, the nation’s largest bank, which lost at least $2 billion in risky derivatives trading.

The link above features an interview by former financial regulator, white-collar criminologist, and University of Missouri-Kansas City Professor William Black, author of The Best Way to Rob a Bank is to Own One. Black traces JPMorgan’s woes to the logic of ‘too big too fail’ — when banks are so big and systemically important, there’s nothing to stop them from taking excessive risks because they expect to be bailed out by taxpayers.

JPMorgan Chase CEO, Jamie Dimon, had long been considered the ‘Golden Boy’ of Wall Street, widely praised for his ‘risk management’ skills.  And he’s been a vocal opponent of financial regulation.  Despite the revelations, President Obama, speaking recently on ‘The View,’ still had praise for Dimon and his bank: ‘JPMorgan is one of the best-managed banks there is…Jamie Dimon, the head of it, is one of the smartest bankers we got. And they still lost $2 billion and counting.’  Mayor Bloomberg agrees.  Asked about the $2 billion loss, the mayor called it a ‘hiccup,’ insisting there’s a ‘general consensus’ that Dimonis one of the smartest people in the financial industry.’ And two days ago, at their annual meeting, JPMorgan Chase shareholders approved a $23 million pay package for CEO Dimon.

Critics say this takes ‘failing up’ to a whole new level and wonder what it will take to actually tarnish the social honor of financial elites.  But there are indicators that their status has already taken a hit, e.g., plummeting approval ratings, street protest.  And the finance sector is facing recruitment problems for the first time in memory, as the cachet of working on Wall Street is replaced by stigma — at least on college campuses.  Overall, though, there doesn’t seem to be much evidence that financial elites have suffered any considerable loss of status in ‘establishment’ political-media-academic circles.

This a useful case for thinking about how social status works, and how status hierarchies change (or resist change).  It also relates to debates about America’s ‘two-tiered’ justice system.  A white-collar criminologist, William Black, has been particularly critical of the media’s reluctance to even describe fraud and other illegal behavior in the financial sector as ‘crime.’  At the same time, we’ve been witnessing the ‘criminalization‘ of political dissent and economic hardship (e.g., debt, homelessness, poverty in general).

Blog #4: Inside Job

During my spare time yesterday, I re-watched the documentary by Charles Ferguson that highlighted and analyzed the financial crisis that America suffered in the late part of this past decade. My personal knowledge of the crisis only stretched as far as the news covered it. Such films as,”Capitalism: A Love Story,” by Michael Moore, shocked me back then and every time I watch these types of documentaries. Inside Job, went more into detail of the governments cooperation with the private financial sector, from President Regan’s deregulation in the financial sector, to the laissez faire approach the government took during the George W. Bush presidential era.

There was a huge amount of risk that was involved with the housing market. (Starting from the bottom up) Subprime loans were handed out from banks to individuals who couldn’t pay back. The banks would approve loans to individuals who wouldn’t fit the criteria of “bankable” meaning they couldn’t provide information that would assure the bank that their annual income or assets would cover the monthly payments.  Banks sold these loans and mortgages over to investment banks who packaged them into CDOs. Then insurance companies joined into the mess with credit default swaps (CDS) which insured CDOs. Both CDOs and CDS were all rated AAA by many rating agencies. Then in 2007, when the market for CDOs collapsed, investment banks were left with loans and real estate that they couldn’t unload and since they took on more assets than they could handle, many failed and required government intervention.

The blame should have fallen on the CEOs and other big players in the SEC and federal government that allowed for this risky behavior to continue. At the same time there has to be some blame to be put on the individuals. Those who were trading CDOs, those in charge of giving insurance coverages to those CDOs (CDS), to those who foolishly took out subprime loans or mortgages. Even though the movie generated outcry and a positive response to the atrocities, my feeling is that, just like every powerful documentary, the feelings are temporary. Out of every 100 people who watch the movie, possibly only 2-5 people actually go out of their own time and are proactive in the solution.

Blog #3: Too Big to Fail

     I found the documentary Inside Job to be an interesting take in describing the financial meltdown that occurred in September of 2008.I thought that it was a simple, straight forward analysis of the situation. The movie clearly takes the position that deregulation is evil and one of the sole causes of the crash. As a political science major, one quickly learns that every issue has more then one side, so I did some research examining critiques of the film as well. Most documentaries are politically motivated. I am not saying that this is necessarily a bad thing, but keep that in mind before blindly believing every word spoken in a politically charged and motivated documentary. I found an interesting article that criticizes the directors hollywood gotcha movements and his failure to include prominent guests such as Greenspan, Paulson, and Bernanke among other things (they are in cahoots with the evil corporations and banks, their opinions do not matter!) Here’s the link for the review http://spectator.org/archives/2010/11/03/inside-job

     I am joking, obviously, but my point is, both political parties are to blame for the economic meltdown. I also do not buy 100% into the notion that de-regulation was the sole cause of the banks running hog-wild. That doesn’t mean that it could have played a part, or that the director didn’t bring up interesting topics. I am merely saying that as a rational viewer, one must realize that the director (whether they be a liberal, conservative, socialist, fascist, communist etc. etc. etc.) is motivated by their own views. So, as the viewer, we must listen to what the movie has to say, but also see what else is out there. This is of course unless you like blindly following the masses without doing any research on an issue (which seems to be happening more and more with political issues on the right and left lately). I guess that’s fine too. Just please stay away from the poll-booths.