In the film Inside Job, the only man not visibly wearing a suit and tie is a psychotherapist specialising in the sexual disorders of bankers and hedge-fund operators. So says Philip French in a review for the Observer. The film, which explains how the financial crash of 2008 happened, opened in the UK last Friday. On Wednesday, I heard an interview with its director Charles Ferguson on Radio 4's programme Front Row. And although I joke about the absurd degree of specialisation involved in maintaining the psycho-sexual health of a hedge-fund operator, that's the only bit that's funny. Because some people will die of heart attacks caused by the stress of losing their jobs in this wrecked economy. Others, in the UK, will die because of cuts to the National Health Service. And others will merely become unhappy. I'm unhappy because Oxfordshire county council wants to close twenty libraries — it says cuts mean it no longer can run them, and so much for education and teaching children to read. So I want to ask a question.
The Radio 4 interview is linked from Front Row's page for Wednesday 16th February. It starts just over 13 minutes into the programme, following a snatch of The Archers and an interview with Bob Geldof. In case you'd rather read than listen, I've transcribed it below. The initials JW, CF, and SF stand for the presenter John Wilson; for Charles Ferguson; and for the BBC's economics editor Stephanie Flanders. And there's an excerpt from the film in which a banker speaks. I've identified him as "Banker", though I was tempted to write a ruder word. Here's my transcript:
In economics news today, sterling fell sharply in the wake of warnings from the Governor of the Bank of England of rising inflation. Mervyn King said, we are only now seeing the impact of the 2008 events. The events he referred to, of course, were the ones that saw banks collapsing under the weight of their own dealings and having to be bailed out with billions from us, the taxpayers.
As the bankers count their bonuses, we have a chance to see exactly how they all got us into this mess. The film Inside Job has already bagged an Oscar nomination in the Best Documentary category. It weaves together interviews with bankers, economists, and financial regulators, to present a case of corporate collusion and theft on a grand scale:
Banker: It turns out that, er, that the prudential regulation and supervision was not strong in Iceland, and particularly —
CF: So what made you think that it was?
Banker: I think that, er, you go with the information you have, and, and generally, er, the view was that, that Iceland had very good institutions, it was a very advanced country.
CF: Who told you that? What kind of research did you do?
Banker: You talk to people, you have faith in, er in the central bank which actually did fall down on the job.
CF: Why do you have faith in a central bank?
Banker: Well, that faith — you, er — because you go with the information you have.
CF: How much were you paid to write it?
Banker: I was paid, er — I think the number was — it's public information.
JW: A scene from Inside Job. In a moment we'll hear from the BBC's economics editor Stephanie Flanders what she made of it. But first I spoke to the director Charles Ferguson. I suggested that his film will make a lot of viewers very angry. Was he?
CF: Well, I wouldn't say that I became an angrier person. But certainly I was shocked at what I found. By the time I started making the film, it was already clear and I already knew, that there had been a fair amount of rather bad behaviour. But I must say that I was truly stunned by what I found when we engaged in the research for the film. I was really really stunned. Both by the incompetence of the American governmental response to the crisis, and also by the just incredibly unethical behaviour in which — and frequently I think illegal, frequently criminal, behaviour — in which American investment bankers engaged.
JW: The interviewing style, combative; and you needed to know your facts inside out. And the stock in trade of your interviewees, the ones at the centre of the crisis, is very often to bamboozle and to obfuscate and to say this is all very complicated. So you must have known the story: you had to rake through the facts and the figures before you set out with your camera.
CF: We did — I conducted about six months of research before we conducted our first interviews, before we filmed our first interviews. It also certainly helped that I had a background that was relevant: I have a PhD in political science long ago, far away, and my PhD adviser was actually an economist by training.
JW: And very often during the interviews, you let them hang themselves. Several of your interviewees begin to squirm and refuse to answer the questions quite a way into the film. What was the process by which you gave them enough rope to do that job? What was the pitch to these CEOs?
CF: Well, it wasn't primarily CEOs, by the way. The most difficult, confrontational, interviews were with former government officials and/or senior academics. Most of the CEOs, in fact every single one of the CEOs, refused to be interviewed on camera, and most of them refused to speak with me even off the record. But, we did approach a large number of people, and some of them said yes. We told them that we were making a documentary about the financial crisis; we didn't conceal what our intent was. Now of course, nor did I say, I've uncovered highly compromising information about you and I'm going to ask you about it. I didn't tell people that. But nor did I say — . You know, it's not like I promised to discuss one subject and then discussed another: we were honest with people. Sometimes they asked additional questions and we answered them.
JW: And one of the more shocking aspects of the documentary is the way that you reveal how so many of the academics specialising in the field of economics appear to have been bought off, all supplementing their teaching income with consulting jobs for the very companies about which they are writing reports on behalf of the government.
CF: Yes, and I wouldn't quite call it supplementing their income, I would call it multiplying. These people's private consulting incomes are typically five to ten times their academic incomes. They make really serious money, millions of dollars, sometimes tens of millions of dollars, doing this.
JW: One of your financial analysts, looking at the way in which the banks seem to have the whole system tied up with the Federal Reserve and the people who are supposed to be regulating the system, describes it as a pissing contest. He says, mine's bigger than yours. It was all men at the centre of this situation, and that is the culture that you turned your camera on.
CF: It was a very macho culture. That was part of the problem. Many people said that to me. It was a very common refrain, that there was so much money and so much ego, that people's behaviour became really quite disconnected from reality.
JW: And you reveal that cocaine use and the use of prostitutes as part of these business deals was widespread.
CF: Yes, and I put that in the film for two reasons The first reason I put it in the film is that it formed part of this culture of disconnection from reality. These people had so much money, and the way that they used it was to insulate themselves from all of the personal and emotional forces that might otherwise have called their behaviour into question. You know, if all the people around you are financially dependent on you, then they're probably not going to tell you you're doing something unsustainable and unethical and insane and you should stop. That was the first reason I put that in the film.
The second reason I put that in the film is because it's pertinent to the quite scandalous fact that there have literally been zero criminal prosecutions related to the crisis in the Obama administration. One excuse that sometimes government officials and prosecutors give is that these are very complicated cases and it's very difficult to get people to talk.
Well, if in fact you're dealing with an industry in which the use of prostitution and cocaine are endemic, which is the case here, then if you really wanted to get people to talk, you could. If you have an industry all of whose incentives, or most of whose incentives, reward unethical personal behaviour, then not surprisingly you're going to attract very unethical people to that industry. And that's a great deal of what happened in American investment banking.
JW: Charles Ferguson who made the Oscar-nominated film Inside Job. I'm joined by Stephanie Flanders, the BBC's economics editor, who's seen the film. Stephanie, forensic analysis of the deals that led to the crash three years ago. But does it tell us anything that we didn't already know, or rather I should say that you didn't already know?
SF: Well, what I didn't know and what other people didn't know I hope is slightly different, at least on average. I do think that what was striking about it is that it's the first — . There've been a lot of documentaries and some very good ones. I think this is one of the better ones, if only that it brings a lot of very high production values to it, this very difficult area. It starts with this cautionary tale about Iceland, which is just beautiful pictures of Iceland and it kind of pulls you in. You've got Matt Damon narrating — I think for Brits it will be probably the one and only film they see which includes Matt Damon and the Financial Times chief economic commentator Martin Wolf in the same film.
But I did think he got to some things; and actually, at the end of the interview that you've just done, I think that this idea that the outrage at the lack of accountability at some of the things that had gone on in Wall Street is not so much that he revealed things that hadn't been revealed at least about the bankers, but pointing up — . I certainly hadn't seen anyone point out the fact that they were all going to prostitutes and they were all taking drugs and wouldn't this have been a bit of leverage for a savvy attorney to get in there and start making some indictments. So I think that was something he added to it.
I think also as you suggested in your interview, it's this excruciating interview footage which I was surprised that people who really ought to know better, and as you said were quite savvy players on this scene, were completely floored at various points and come off looking evasive or stupid or both.
JW: Incredibly skilfully conducted those interviews, and very subtle as well. As you say, he leads them on, but he leads them into corners from which they can't run.
SF: I think so, and that's possibly because they didn't see him coming. I think well maybe they hadn't seen — I mean, Charles Ferguson also did a very forensic film about Iraq and I suspect if they'd seen that film before they did the interview, they might not have done the interview.
JW: The title of course is a crime reference, Ferguson arguing that this is a multibillion-dollar heist: the Inside Job. So although it starts as an investigation and ends as a polemic in a way, asking why the bankers are not in jail. Is he overstating the case do you think?
SF: Well there is a slight — the problem I had with the film and I should say I did think it was a good watch — it was probably a bit long and towards the end you do get this sense that it's bringing in absolutely everything bad that's happened in global capitalism in the last twenty years and somehow tying it together as a conspiracy between the banks and government. You know, the rising inequality — just everything is thrown together and I think at that point you might well start to lose most audiences.
But I also thought there was an interesting thing. I mean this is the first film I've seen pick on not just the bankers but also the academic economists for being in the pockets of the banks and taking all these very lucrative contracts from the banks. I think he's right, and it's an interesting point which is actually a big debate now within the economic profession — you know, should we be revealing who's funding our research, just like medical researchers do. But he takes it a bit far because frankly there are plenty of economists who got this wildly wrong for free. They weren't being paid by the banks, they just were completely wrong in what they thought would happen with these financial contracts. So in a sense he's almost giving too much benefit of the doubt to the economists because they were incompetent not corrupt.
JW: Fascinating stuff. Thanks very much to Stephanie Flanders. Inside Job opens in selected cinemas across the country on Friday: the certificate is 12A.
So that's the film. And I want to ask a question. Because if you're reading this, you're a programmer. And while some programmers write programs that design oil rigs or allocate mobile-phone cells, others work for banks. In Britain, because we don't manufacture stuff any more, I expect most work for banks. Some, I suppose, code innocent non-investment-banking things like those irritating interaction sequences for cash machines. You know; the ones that never tell you the machine is empty until after you've typed your PIN, asked for cash, selected the amount, and decided not to have a receipt. Or like the event handler that deletes £20 from your account on the first microsecond after you've gone a penny overdrawn. Which is fair enough, because there's a lot of interest on a penny, and your bank can't afford to lose money.
But there must be other programmers who are coding trading algorithms for hedge funds, or functions that distinguish good credit default swaps from bad credit default swaps, or other functions that distinguish safe mortgage holders from really really risky mortgage holders. And clearly, a lot of these programmers got it very badly wrong. Dear Reader, did you help crash the economy?