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The financial fallout was an 'Inside Job'

Director Charles Ferguson.

TEXT OF INTERVIEW

Kai Ryssdal: I know I said yesterday that I'm not a big fan of anniversary stories, but this is kind of a big week. Two years ago today, Lehman Brothers went broke, kicking off a stretch of a crazy couple of months that we're still trying to recover from.

Documentary filmmaker Charles Ferguson has a new movie out -- "Inside Job, it's called -- that tries to explain what happened that fall and to figure out who's to blame.

So that's where we started when we talked, with me asking whether it's possible to blame individuals for the whole financial crisis, or whether the problems on Wall Street were more systemic?

Charles Ferguson:What has happened is that a very substantial fraction of the financial services industry has come to be outside the law, and as it has become increasingly powerful, it has attracted increasingly amoral people. Its behavior has become more and more dangerous to the financial system and to the American economy.

RYSSDAL: There was also a sort of trend of not talking about any of this stuff. There's a great moment in the film when one of the few regulators you've got on camera was Christine Lagarde, the French finance minister. And you started asking her about Lehman Brothers, and when she found out that it was going under.

FERGUSON: When were you first told Lehman in fact was going to go bankrupt?

CHRISTINE LAGARDE:After the fact.

FERGUSON: After the fact? Wow, OK. And what was your reaction when you learned of it?

LAGARDE:Holy cow.

RYSSDAL: Clearly, we're connected financially, but not so much along the lines of communication, huh?

FERGUSON: I was truly, truly dumbstruck when I learned the extent of the ignorance and disconnect in this, of the American regulatory system during the crisis. Paulson, Bernanke, were astonishingly ignorant of the consequences of their decision. They did not understand foreign bankruptcy laws, they did not understand that all transactions in London would be halted and then that would cause catastrophic financial results cascading throughout the financial system almost immediately.

RYSSDAL: I want to play something from the film. It's Allan Sloan, he's a senior editor at Fortune magazine. He's a well-respected financial writer. He tells a little story.

ALLAN SLOAN: A friend of mine who's involved in a company that has big financial presence said, "Well, it's about time you learned about sub-prime mortgages." So he set up a session with his trading desk and me. And the techie who did all this gets very excited, runs to his computer, pulls up in about three seconds this Goldman Sachs issue of securities. It was a complete disaster. Borrowers had borrowed on average 99.3 percent of the price of the house, which means that they had no money in the house.

RYSSDAL: So for all the blame that Allan puts on Goldman Sachs -- and certainly they deserve it -- what about Americans looking in the mirror and saying, you know what, a little bit of this is our fault too.

FERGUSON: Well, certainly that's true to some extent. There was a bubble, and it was a big bubble and many people bought houses that they couldn't afford and were careless with regard to the loan documentation that they signed. But over half of people who received sub-prime mortgages actually would have qualified for a less expensive prime mortgage. They were steered into more expensive sub-prime mortgages by mortgage brokers who were paid extra money the more expensive the loan they made was. So it was something that was cultivated, and in many regards, forced upon the American people by the financial services industry.

RYSSDAL: How come nobody went to jail?

FERGUSON: Well, there's a simple obvious answer and then there's a deeper, more complicated answer, which I don't fully understand. The simple obvious answer is that this has become an out-of-control industry; a very, very powerful industry.

RYSSDAL: What's the more subtle reason that you haven't quite figured out?

FERGUSON: For some reason that I truly don't understand, this situation has not generated the level of popular outrage that similar or comparable things have generated at other times in American history. There have been other times in American history -- some recent, some long ago -- when our leaders, our business leaders, and/or our political leaders, have done something terribly wrong and more than once, the American people have risen up and said, "We simply will not permit this." And that hasn't happened here, yet. I think that part of the reason that it hasn't happened might be that people think that finance is too complicated for them to understand, and that the situation is too complicated for them to understand. And indeed one reason that I made the film is to make it clear that actually they can understand it.

RYSSDAL: Charles Ferguson, his new film is about the financial crisis and the events of fall two years ago and how it got there. It's called "Inside Job." Mr. Ferguson, thanks so much for your time.

FERGUSON: Thank you.

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It's Jan 7, 2011 and the republican majority have now taken their seats in the house thanks to the tea party movement. Again, like in the 90s republicans will duke it out with a democratic president who despite what the right has alleged is not a commy' lefty, he has always been on the center. I would love to know if anyone remember the collapse of the peso in Mexico in 1994. Do you remember how the US under the pressure of the federal reserve's Allen Greenspan, and Larry summers and then under the auspice of Gringrich and even rush limbaugh they pushed to save a foreign nation ( Mexico) with billions of dollars of tax payers money. Why? To save american banks investments in the nation. Many people in Mexico died for Salinas robbery including cedillo. Was it a congressional decision??? Noooo it was under the table. America bailed out a foreign nation with billions of dollars and the American people weren't told about or consulted. Those same people, are still in goverment and they are never appointed by the American people always through some presidential decree. Sickening

I just (10/28/2010) heard an interview on MarketPlace Radio with Glenn Hubbard, featured prominently in Inside Job, as an academic facilitator of the thinking that created the environment that led to our current financial problems.

Perhaps he would be a good person to interview on the implications of the points in Inside Job. I'd like to hear some of his perspective about the issues that were raised. If he can't answer any better than in the film, you might want to consider other commentators.

"People are very upset. They feel that the country is not theirs, that a small group of wealthy people who get bailed out and bribe the government are in charge."

The answer: eliminate the limitations we've placed on those people so that they can be in charge from the getgo and have fewer people to bribe before getting their way.

Sort of like finding out a thief snuck around your virus checker to nab your credit card and you answer by getting rid of your virus checker.

Personally, I'd look for a non-bloated, but stronger checker and making it harder for the thief, but sorry that's the Socialist in me.

Quote from Robert Schiller in this weeks Bloomberg Businessweek: "People are very upset. They feel that the country is not theirs, that a small group of wealthy people who get bailed out and bribe the government are in charge." Amen.

From the transcript:"The simple obvious answer is that this has become an out-of-control industry; a very, very powerful industry." Yes, particularly with regard to the major international financiers, a la Wall Street, in contrast to the smaller regional and local commercial banks. For instance, the recent, so called, Basel III announcement from The Bank of International Settlements, whereby, in effect, the local banks (which finance small business) "pay" for Wall Street's shenanigans. Indeed, the international financiers are so powerful that the existence, anywhere, of government of the people, by the people, and [most importantly] for the people is essentially a mirage.

I think there is no public outrage because unlike in the Great Depression where people lost 100% of their savings, in this Great Recession they have lost only about 25%. They still have plenty left to play with. Here in California there remains a lot of wealth, the highways are clogged with SUVs, Mercedes, BMWs and the malls and resturants are busy. They like to complain but I see a lot of money in houses, vehicles and toys. These wealthy Californians still like to play that bunco game called the stock market so they want the status quo and financial business as usual.

It is truly amazing that the "tea party" could grab any voters at all with a "delegulation is better" platform. within the past two years we have had the massive financial meltdown, this year we have had a serious mine accident, the BP oil leak, and salmonela contamination of our egg supply. All have involved lax or poor regluation and inspection.
There is also a big push to build more and more nuclear power plants. Will anyone feel safe living near one of these new plants if further degegulation takes place?

1 problem with the Tea Party movement: the focus. They are deadset focused on JUST the government and too little on businesses. So far, the only word I hear regarding the crisis is 'Let the companies fall'. The ones that caused those companies to fall wouldn't feel one bit of the hurt from losing that company (remember, golden parachute?).

Where's the 'don't let it happen again?' How does giving such companies even MORE free power via less regulation going to stop it? Perhaps when I hear more anti-bigbusiness to go with anti-biggovernment I might put more trust in them.

Good piece. I strongly suggest that much more attention needs to be paid to the bankruptcy "reforms" done by Bush and the Republican House and Senate during 2005/06, which essentially made it more difficult for regular folks to declare bankruptcy. It almost seems like they were expecting more people to begin to have difficulty repaying their private debts in the years to follow. Guess what...they were right. I think these laws and their backers should undergo more intense scrutiny and the findings incorporated into a broader conversation about American PRIVATE debt and who owns this debt, then and now. Thanks again, Marketplace. Keep up the good work.

Your answer to who is saying "We simply will not permit this" is the Consumer Protection Agency.

The people that do not want this agency? That's right, your who's who list of the instigators of the last and future economic collapse.

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