I concede the documentary “Inside Job” is right that the same part of the brain stimulated by money is also turned on by cocaine and sex, so please quit pointing that gun at my navel. If you promise not to shoot I’ll comment on the film and forswear spending any more of your money on whores and mansions and private jets.
First, let’s not blame the destruction of the international financial system entirely on Wall Street, where dwell many but not all of the multi-billion-dollar thieves. There are also high-powered criminals like me in other parts of the country and around the world, and not just in the stock market and banking but in housing and real estate as well.
The documentary begins by noting that cold little Iceland, with a gross domestic product of less than twenty billion dollars, deregulated and privatized its three largest banks and one-third of the former financial regulators went to work for the banks which borrowed a hundred and twenty billion dollars for geothermal and other investments. This process resulted in massive public losses and huge private gains. That seemed tolerable.
In September 2008 I did worry when Lehman Brothers, a huge investment bank, filed the largest bankruptcy in the history of the United States. At the same time insurance giant AIG collapsed. What happened? According to the documentarians, problems had begun during the administration of Ronald Reagan as savings & loans were deregulated and thus enabled to “loot” companies. The most reviled of these crooks was Charles Keating, whose passion for deregulation had been aided by five U.S. Senators – “The Keating Five – featuring John McCain and John Glenn.
Economic wizards and future governmental guardians such as Alan Greenspan, Robert Rubin, and Lawrence Summers championed the wonders of deregulation that in 2001 caused internet companies to crash into a hole of “laundered money and cooked books.” Naturally, Countywide and other home loan titans did not need oversight as they concocted “countless complex adjustable rate mortgages” that saddled customers with loans soon larger than they could carry. Meanwhile, enterprising financiers created credit default swaps that snared many into insuring the same property.
To help his country, Henry Paulsen left Goldman Sachs and sold four hundred eighty-five million dollars of its stock, as required, to become Secretary of the Treasury. He received a tax break and saved forty million or so. That’s public service. I guess you’re angry because I was one of the people who gave unsound companies, like Merrill Lynch and Moody’s as well as Lehman Brothers and AIG, artificially high AA and AAA dependability ratings that helped the recipients – the top executives, not the shareholders – sweep in billions “just before home foreclosures skyrocketed.”
Perhaps I should’ve been embarrassed that the top five Lehman executives had made a billion dollars from 2000-2007 while presiding over a financial cesspool. And a little cringing probably would’ve been advisable when Countrywide chief Angelo Mozillo gobbled four hundred seventy million in company stock as the nation collapsed. It was noble but surprising the government pounced to save scoundrels and incompetents with hundreds of billions in bailout money
I cannot refute the assertion that the study of economics has been corrupted by the merry-go-round from universities to government and back. You can derisively call me professor all you want but look at the new guy, Barack Obama, who condemned the lack of oversight but chose retreads like Lawrence Summers, as his chief financial adviser, and Timothy Geithner, as Secretary of the Treasury, and Ben Bernanke, for another term as chairman of the Federal Reserve bank. The problem is the same part of the brain that loves money, cocaine, and sex also craves power.
Editorial note: Actor Matt Damon narrated “Inside Job,” a 2010 release