Apologists for the financial industry talk of rational actors pursuing their interests in ways that may have been greedy but never veered into illegal or unethical behavior. After all, many executives, such as Dick Fuld, of Lehman Brothers, who believed in profit-making instruments like collateralized debt obligations and credit-default swaps, wound up losing their jobs and their companies. Doesn’t that prove their good faith? Ferguson will have none of it. He uses interviews and historical information to suggest that many of the transactions weren’t rational at all. They may have been profitable in the short term, but they were destructive to the companies the executives worked for, and he demonstrates that anyone with common sense and a skeptical view of unregulated financial markets could have seen the dangers coming. None of the senior public officials with an ideological commitment to deregulation, like Alan Greenspan, Hank Paulson, and Ben Bernanke, and none of the investment-bank executives who made hundreds of millions from the C.D.O. boom were willing to speak to Ferguson on camera. So he brings forth the savants who warned of the impending crisis early on: Nouriel Roubini, of New York University, whose musical Persian-Israeli-Turkish-accented English is delightful; and Raghuram Rajan, now of the University of Chicago, who, in 2005, while serving as the chief economist of the International Monetary Fund, delivered a paper warning of the disaster to come in front of an audience that included Alan Greenspan and Larry Summers, and was ignored or criticized for his efforts. Roubini and Rajan, awed by the size of the crisis they were unable to prevent, are now sombre models of contained ego and radiant pride.
Nothing like the same could be said of the academic economists, including Glenn Hubbard and Frederic Mishkin, of Columbia Business School, and Martin Feldstein and John Campbell, of Harvard, who hem and haw and evade the simplest questions about conflict of interest or bad advice. Ferguson, interviewing them from behind the camera (Matt Damon narrates the film), questions them with increasing exasperation, and, one after another, the academics disgrace themselves. Ferguson finds a hero in none other than Eliot Spitzer, who prosecuted fraud in the financial industry in 2002. Five years ago, expensive evenings with hookers and drugs were part of the exhilarated Manhattan madness of the investment-banking life. The underlings who procured such services—hiding the costs in phony expense chits—could now be flipped and forced to testify against their bosses, who may be guilty of much more consequential malfeasance. With perfect tact, Spitzer says that he might not be the most appropriate person to suggest such a course for prosecutors. But he suggests it nonetheless. ♦
[Review via The New Yorker]