The Capitol City MoveOn Council is showing the film, Inside Job, which details the financial collapse of '08.
The documentary is in five parts. It begins with a look at how Iceland was highly deregulated in 2000 and its banks were privatized. When Lehman Brothers went bankrupt and AIG collapsed on September 15, 2008, Iceland and the rest of the world went into a global recession.
Part I: How We Got Here
The American financial industry was regulated from 1940 to 1980, followed by a long period of deregulation. At the end of the 1980s, a savings and loan crisis cost taxpayers about $124 billion. In the late 1990s, the financial sector had consolidated into a few giant firms. In 2001, the Internet Stock Bubble burst because investment banks promoted Internet companies that they knew would fail, resulting in $5 trillion in investor losses. In the 1990s, derivatives became popular in the industry and added instability. Efforts to regulate derivatives were thwarted by the Commodity Futures Modernization Act of 2000, backed by several key officials. In the 2000s, the industry was dominated by five investment banks (Goldman Sachs, Morgan Stanley, Lehman Brothers, Merrill Lynch, and Bear Stearns), two financial conglomerates (Citigroup, JPMorgan Chase), three securitized insurance companies (AIG, MBIA, AMBAC) and three rating agencies (Moody’s, Standard & Poors, Fitch). Investment banks bundled mortgages with other loans and debts into collateralized debt obligations (CDOs), which they sold to investors. Rating agencies gave many CDOs AAA ratings. Subprime loans led to predatory lending. Many home owners were given loans they could never repay.
Part II: The Bubble (2001-2007)
During the housing boom, the ratio of money borrowed by an investment bank versus the bank's own assets reached unprecedented levels. The credit default swap (CDS), was akin to an insurance policy. Speculators could buy CDSs to bet against CDOs they did not own. Numerous CDOs were backed by subprime mortgages. Goldman-Sachs sold more than $3 billion worth of CDOs in the first half of 2006. Goldman also bet against the low-value CDOs, telling investors they were high-quality. The three biggest ratings agencies contributed to the problem. AAA-rated instruments rocketed from a mere handful in 2000 to over 4,000 in 2006.
Part III: The Crisis
The market for CDOs collapsed and investment banks were left with hundreds of billions of dollars in loans, CDOs and real estate they could not unload. The Great Recession began in November 2007, and in March 2008, Bear Stearns ran out of cash. In September, the federal government took over Fannie Mae and Freddie Mac, which had been on the brink of collapse. Two days later, Lehman Brothers collapsed. These entities all had AA or AAA ratings within days of being bailed out. Merrill Lynch, on the edge of collapse, was acquired by Bank of America. Henry Paulson and Timothy Geithner decided that Lehman must go into bankruptcy, which resulted in a collapse of the commercial paper market. On September 17, the insolvent AIG was taken over by the government. The next day, Paulson and Fed chairman Ben Bernanke asked Congress for $700 billion to bail out the banks. The global financial system became paralyzed. On October 3, 2008, President Bush signed the Troubled Asset Relief Program, but global stock markets continued to fall. Layoffs and foreclosures continued with unemployment rising to 10% in the U.S. and the European Union. By December 2008, GM and Chrysler also faced bankruptcy. Foreclosures in the U.S. reached unprecedented levels.
Part IV: Accountability
Top executives of the insolvent companies walked away with their personal fortunes intact. The executives had hand-picked their boards of directors, which handed out billions in bonuses after the government bailout. The major banks grew in power and doubled anti-reform efforts. Academic economists had for decades advocated for deregulation and helped shape U.S. policy. They still opposed reform after the 2008 crisis. Some of the consulting firms involved were the Analysis Group, Charles River Associates, Compass Lexecon, and the Law and Economics Consulting Group (LECG).
Part V: Where We Are Now
Tens of thousands of U.S. factory workers were laid off. The new Obama administration’s financial reforms have been weak, and there was no significant proposed regulation of the practices of ratings agencies, lobbyists, and executive compensation. Geithner became Treasury Secretary. Feldstein, Tyson and Summers were all top economic advisors to Obama. Bernanke was reappointed Fed Chair. European nations have imposed strict regulations on bank compensation, but the U.S. has resisted them.
About the filmmaker...
For over 20 years, Ferguson had been intensely interested in film, and regularly attended film festivals such as the Telluride Film Festival for over a decade. In mid-2005, after learning that no major documentary film covering US policy in Iraq was being made or was planned, he formed Representational Pictures and began production of No End In Sight.
No End In Sight won a special jury prize for documentaries at the 2007 Sundance Film Festival and was nominated for an Oscar in 2008 in the documentary feature film category.
Inside Job, a feature length documentary about the financial crisis of 2007-2010, was screened at the Cannes Film Festival in May 2010 and the New York Film Festival and was released by Sony Pictures Classics in October 2010. It received the 2010 Academy Award for Best Documentary Feature. Ferguson credits narrator Matt Damon for contributing to the film, specifically the structure of the ending, in addition to his narration duties.
On May 1, 2011, The New York Times reported that Ferguson agreed to make a film about Wikileaks founder Julian Assange for HBO Films.
A native of San Francisco, Ferguson was originally educated as a political scientist. A graduate of Lowell High School in 1972, he earned BA in mathematics from the University of California, Berkeley in 1978, and obtained a Ph.D. in political science from M.I.T. in 1989. Ferguson then conducted postdoctoral research at MIT while also consulting to the White House, the Office of the U.S. Trade Representative, the Department of Defense, and several U.S. and European high technology firms. From 1992–1994 Ferguson was an independent consultant, providing strategic consulting to the top managements of U.S. high technology firms including Apple Inc., Xerox, Motorola, and Texas Instruments.
In 1994, Ferguson founded Vermeer Technologies, one of the earliest Internet software companies, with Randy Forgaard. Vermeer created the first visual website development tool, FrontPage. In early 1996, Ferguson sold Vermeer for $133 million to Microsoft, which integrated FrontPage into Microsoft Office.
After selling Vermeer, Ferguson returned to research and writing. He was a visiting scholar and lecturer for several years at MIT and Berkeley, and for three years was a Senior Fellow at the Brookings Institution in Washington DC. Ferguson is the author of four books and many articles dealing with various aspects of information technology and its relationships to economic, political, and social issues. Ferguson is a life member of the Council on Foreign Relations, a director of the French-American Foundation, and supports several nonprofit organizations.