Last Sunday afternoon I joined twenty or so others at the Renton library to watch the muckraking documentary An Inside Job. The two hour video tells how deregulation and a revolving door between regulators and industry fueled risky practices and huge profits on Wall Street. The two hour video is filled with interviews with knowledgeable insiders from government and academia. The video has the highest production values — meaning it has plenty of eye candy and tasteful and appropriate music and animations.
In short, Wall Street owns Congress and the White House.
But it didn’t used to be that way.
The interviews with several Harvard University economics professors were especially delicious. Many of these economists were on the payroll of banks and investment houses, as well as serving as directors of corporations. Wasn’t it a conflict of interest, akin to a regulator being employed by a drug company?
Alan Greenspan stuck to his anti-regulation stance almost to the endÂ (= the banking crisis of 2008).Â Right before Charles Keating was sent to prison, Greenspan wrote a letter in his defense.
Earlier, the Savings & Loan debacle, which cost taxpayers $140 billion, was due to deregulation.Â Â Glass Stegall was repealed in the Gramm-Leach Bliely Act (aka “Citigroup Relief Act”).Â Â Clinton was as guilty of deregulation as many Repugs.Â Â Bush 2 gutted the SEC staff, leaving only a single person for one important division.
The movie portrayed the recent financial reforms as wholly inadequate.
Another good part of the video was the historic footage showing how Wall Street senior executives held senior White House economic positions in administrations from Clinton to Obama. All of Obama’s economic team were Wall Street insiders who had been responsible for the disaster. The bailouts of AIG and (indirectly) Goldman Sachs were particularly dishonorable. A year after being bailed out by the government Goldman Sachs and other Wall Street firms were handing out 12 and 16 billion dollar bonuses to employees.
The movie documented the hundreds of billions of dollars in fines that banks and Wall Street firms payed recently.Â Lawbreaking is just standard business practice.Â Â (And what’s the Republican response? Eliminate the laws and regulations.)
The movie was rated PG-13. But the only, mildly risquÃ© section was an interview with a high class call girl who described the widespread use of prostitutes by Wall Street executives and trades.
Riding back in the car, my friend said that when she used to work in a resort in NY, Wall Street folks would have prostitutes, cocaine and champagne delivered to their rooms. She insisted that they lack all morals. I suggested that they did what they could get away with. The system is broken. I mentioned Hannah Arendt’s book The Banality of Evil, which suggested that even the Nazi crimes of the Holocaust were more bureaucratic than vicious. People were just doing their jobs. Yes, there was criminal activity, but most of the players probably just got caught up in the excesses.