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spires from Carfax

Inside Job (film)

Books + Ideas, — March 2011

This documentary about the global financial crisis fitted a surprising amount in - it was high on information and low on dramatisation and special effects - while maintaining some kind of a story line and narrative drive.

If anything, Inside Job covered too much - mortgage excesses, securitisation, deregulation, conflicts of interest for academic economists, banker remuneration, credit, and more. As an explanation of the financial crisis this is a little too scattered to be really convincing. It is also rather US-centric and doesn't give a feel for how much of what it covers had parallels elsewhere (only Iceland really gets much attention). Personally I'm with the credit cycle crowd as far as the underlying cause goes, so I was disappointed that Hyman Minsky didn't get a mention.

The personal angle is appealing — and I'd never seen some of the figures who "star", despite reading about them — but in places it seemed a little overdone. So the interviews with economists, bureaucrats, and officials who are entirely unashamed of what they did and not at all apologetic make for compelling viewing, but it's hard to judge how selective the footage is and the effect is largely anecdotal. Similarly, the parts about the crass culture of Wall Street (drug use, prostitutes, etc., which presumably got the film its 12+ rating) were fascinating but something of a distraction — focusing on this is like worrying about whether the guy mugging you has bad breath or not!

Given the constraints of a film aimed at a mass audience, however, that's fairly minor nit-picking. I'll give this one 4/4 for watchability and 3/4 for ideas.

At dinner afterwards (in an excellent Lebanese restaurant in Jericho) I had an argument with one of the people we'd seen the film with, who thinks that provided the government doesn't bail out investment banks they could be completely deregulated. It seems to me that that might make sense in a utopia where investment banks only swapped derivatives with one another and had no connections with the real economy, so only their shareholders would be hurt if they blow up. But the real world doesn't work anything like that. The failure of a Goldman Sachs (or even a small player like Macquarie Bank) will always (barring containment regulation much stronger than Glass-Steagall) have huge effects on the whole banking sector and the broader economy, making "don't ever bail out a bank" an ideal that it's simply not going to be optimal for governments to put into practice.


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