May 18 (Bloomberg) -- The chief executives of U.S. investment banks that led to the financial crisis should be removed from their jobs, a documentary shown at the Cannes Film Festival advocates.
“Inside Job,” directed by filmmaker Charles Ferguson, says Wall Street bosses should be as accountable as those executives who were imprisoned for the collapse of U.S. savings-and-loans institutions.
“I think it’s inexcusable that they still have their jobs,” said Ferguson in a Cannes interview. “There haven’t yet been adequate or full criminal investigations, which is partly why we can’t say exactly who should go to prison, but it is extremely clear there was massive fraud.”
Ferguson spoke out after bankers came under attack in other films such as “Wall Street: Money Never Sleeps” by Oliver Stone (also at this year’s Cannes Festival) and “Capitalism: A Love Story” by Michael Moore. Ferguson’s previous film, “No End in Sight: The American Occupation of Iraq,” was nominated for an Oscar.
“Inside Job,” narrated by Matt Damon, spotlights the events that led to the collapse in September 2008 of Lehman Brothers Holdings Inc., the $700 billion U.S. bailout of the financial system, and the worst recession since the 1930s.
Ferguson -- who holds a doctorate from the Massachusetts Institute of Technology -- shows how finance got the world economy in a pickle. His explanation is contained in one word: deregulation.
Rules that banned retail banks from also being investment banks were lifted, he says, allowing financial institutions to take big risks with other people’s money. It was, as the Financial Times’s Martin Wolf puts it in the movie, “a great big national, and not just national, Ponzi scheme.”
Astronomical take-home packages and year-end bonuses rewarded the risk takers, who splurged on houses in the Hamptons, yachts, private jets, holiday homes, and prostitutes. A woman who once ran a prostitution ring says half of her 10,000 clients were from big-name banks, many charging their corporate cards.
An impressive lineup of talking heads is rolled out on film: financier George Soros; economists Nouriel Roubini and Martin Feldstein; former New York Governor Eliot Spitzer; and Federal Reserve ex-chairman Paul Volcker, among others. Those who come away looking best include French Finance Minister Christine Lagarde and International Monetary Fund Managing Director Dominique Strauss-Kahn.
Ferguson said in the interview that U.S. President Barack Obama and his team were unlikely to enact deep change. “The people in charge of fixing this problem are in most cases people who created the problem,” he said. “So it’s rather difficult for me to believe that they’re going to be interested in reversing everything that they’ve done for the last 20 years.”
The story that Ferguson tells in his documentary is, by now, a familiar one, tackled in dozens of business books, and in Moore’s satirical movie.
Unlike Moore, however, Ferguson does not indict capitalism as a whole. “I think it’s perfectly okay to make profits as long as you do it by doing something constructive and legitimate,” said the filmmaker, recalling that he had started and invested in companies.
Ferguson also adds a new angle to the meltdown tale: He highlights the practice among academics at top U.S. universities of being on the board of, or consultants to, companies.
The relationship isn’t disclosed in some cases. According to Ferguson, Columbia Business School Professor Frederic Mishkin (who served on the Federal Reserve Board of Governors from 2006 to 2008) was paid $124,000 by the Icelandic Chamber of Commerce to write a report on the country’s financial sector. There was no mention of the fact that he was paid to write the report, said the film.
On Mishkin’s CV, the documentary shows, the title of the report was changed to “Financial Instability in Iceland” from “Financial Stability in Iceland.” Mishkin is interviewed on camera and puts that down to a typographical error.
Ferguson said he hoped his movie would “move people to take action” and demand full justice in the investigation of the crisis.
In the world of academia, he said, “I anticipate that there will be a lot of unhappiness. But that’s just too bad, because that’s true. I’ve shown what’s true.”
(Farah Nayeri writes for Bloomberg News. The opinions expressed are her own.)
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