Oscar acceptance speech for "Inside Job"

March 2, 2011 9:38 AM

In his Oscar acceptance speech, documentary filmmaker Charles Ferguson reminded viewers worldwide that "not a single financial executive has gone to jail" for the fraud that created the 2008 financial meltdown. His film Inside Job (on Netflix DVD) explains, among other things, that the crisis was avoidable. See also the Inside Job trailer and a subsequent followup video in which Ferguson says that many sources "mysteriously backed out" before being filmed. He also spoke at MIT in January.
posted by mark7570 (55 comments total)

P.S. Just found the video of the speech itself, embedded inside this HuffPo page.
posted by mark7570 at 9:48 AM on March 2, 2011

Previously.
Also, here is the Oscar acceptance speech referred to in the FPP.
posted by chavenet at 9:49 AM on March 2, 2011

No financial executive should go to jail for what resulted from acts of financial terrorism. Obviously.

Day by day and almost minute by minute the past was brought up to date..
posted by nickrussell at 10:01 AM on March 2, 2011 [1 favorite]

Does Ferguson state what specific crimes any "financial executives" committed? Did he also investigate what government officials may have been involved in the financial meltdown? Is he also calling for jail time for those who created the regulatory environment that helped spawn the financial meltdown?
posted by davidmsc at 10:20 AM on March 2, 2011 [1 favorite]

Does Ferguson state what specific crimes any "financial executives" committed? Did he also investigate what government officials may have been involved in the financial meltdown? Is he also calling for jail time for those who created the regulatory environment that helped spawn the financial meltdown?

Let me guess, you haven't watched the movie.
posted by odinsdream at 10:22 AM on March 2, 2011 [19 favorites]

Stupid != Illegal
Greed != Crime
posted by falameufilho at 10:25 AM on March 2, 2011 [1 favorite]

The man alleges fraud which does "= Crime" as you would put it.
posted by cyphill at 10:39 AM on March 2, 2011 [2 favorites]

It would be nice if stupid were at least a fireable offense.
posted by zjacreman at 10:43 AM on March 2, 2011 [3 favorites]

"You come here today, and say your sorry, trust us, we won't do it again. Well, I have some constituents in my home state who robbed some of your banks. And they say the same thing!"

posted by stbalbach at 10:44 AM on March 2, 2011 [9 favorites]

That speech was great and I was so glad he won and said what he said. (No, I haven't seen the movie yet, but it's waiting at the top of my queue for Netflix to send it to me next week.)
posted by immlass at 10:47 AM on March 2, 2011

"You come here today, and say your sorry, trust us, we won't do it again. Well, I have some constituents in my home state who robbed some of your banks. And they say the same thing!"

Love that Capuano quote. As they say in the business,
"Robbing a bank's got nothing on running a bank."
posted by ceribus peribus at 10:48 AM on March 2, 2011

What fraud were the executives responsible for?

And Bernie Madoff went to jail. Doesn't that count?
posted by Pastabagel at 10:50 AM on March 2, 2011 [1 favorite]

According to several friends at my Oscar party, Madoff was not a 'financial executive'. I believe by that they mean he was not a CEO or something at a major bank. Also, Madoff had nothing to do with the financial meltdown - he was Ponzi schemer pure and simple.
posted by spicynuts at 10:52 AM on March 2, 2011 [2 favorites]

Madoff went to jail because he stole from rich people. You see how that works?
posted by euphorb at 10:55 AM on March 2, 2011 [38 favorites]

My guess is that were all facts on the table, the vast majority of financial executives involved in the Wall Street collapse in 2008 did not commit criminal acts such as securities fraud or wire fraud. Illegality is not equivalent to immorality or greed. You actually have to satisfy all the elements of a criminal statute to prove a crime. Furthermore, the SEC has shown in recent weeks that it has no qualms about indicting members of the Wall Street elite, such as we recently saw with Rajat Gupta. In many cases, it is very hard to prove guilt because of the fine line between things like insider trading and securities fraud and mere negligence.

We didn't exactly see a bunch of Internet exeuctives going to jail around the collapse of that bubble. Certainly, many of them were just as morally culpable as the financial executives at the end -- knowing that a systemic breakdown was inevitable, but still riding the wave, trying to cash in before the whole ship sunk.

It seems that fixing the system would be alot easier, actually, if Wall Street was made up entirely of the charlatans they are made out to be. Just get rid of everyone and get some honest, working folk from Oklahoma to trade securities futures and CDO's and you've fixed everything.
posted by gagglezoomer at 10:57 AM on March 2, 2011 [2 favorites]

And Bernie Madoff went to jail. Doesn't that count?

Interestingly Madoff is a "victim" of the meltdown, and had nothing to do with causing it. If there was no meltdown, Madoff would be able to run his scam for years. But when the market collapsed, Madoff's clients started divesting from Madoff's "fund" and the whole thing fell apart.

So it doesn't count.
posted by falameufilho at 10:57 AM on March 2, 2011 [3 favorites]

Does Ferguson state what specific crimes any "financial executives" committed? Did he also investigate what government officials may have been involved in the financial meltdown? Is he also calling for jail time for those who created the regulatory environment that helped spawn the financial meltdown?

Last September I interviewed Charles Ferguson. Here's his answer to your first question:

If someone had told me back in late 2008 when I started making the film, “In six months, you are going to discover all the major investment banks were not only selling securities they knew to be defective, but also had begun designing securities that would fail in order to profit by betting against them,” I would have said, “No, that’s too much. Even in this environment, that wouldn’t be permitted. They would become pariahs and go to jail.” Well, it turned out everyone WAS doing it, and they hadn’t become pariahs because they are the whole industry. None of them have gone to jail. Literally, none.

posted by alzi at 10:57 AM on March 2, 2011 [35 favorites]

What fraud were the executives responsible for?

Probably, if you googled "world record for most times the word 'shit' was used in congress", you would find the part of the congressional investigation where a banker is being grilled about how he recommended 'shit' packages while the banker's company was heavily invested in the failure of those same packages.

It's a pump and dump scheme writ large.
posted by Trochanter at 11:03 AM on March 2, 2011 [2 favorites]

The only crime that was committed was when the Fed handed the drunk back his keys after nearly driving the country off the road without so much as a slap on the wrist
posted by Civil_Disobedient at 11:04 AM on March 2, 2011 [2 favorites]

In six months, you are going to discover all the major investment banks were not only selling securities they knew to be defective, but also had begun designing securities that would fail in order to profit by betting against them

The SEC attempted to prosecute this, but there is a rather persuasive argument that there is nothing illegal about doing this as long as the person buying those securities has an apparent ability to evaluate them. I know it sounds crazy, but that's how a lot of established securities law works. Big boys are allowed to rip off other big boys. Goldman can knowingly sell faulty CDO's to a german bank, but they can't do that to a grandmother. Heck even the SEC's case wasn't predicated on "Goldman knew these things were going to fail and they defrauded the buyer" but rather was driven by the arcane relationship between Goldman and the purported third party CDO Manager/Insurer.

It is perverse - no doubt.


But even if that particular activity were illegal it had a very very small role in the whole financial crisis.
posted by JPD at 11:08 AM on March 2, 2011 [5 favorites]

Steal from the rich? Jail!
Steal from the middle class and poor? Profit!
posted by nevercalm at 11:15 AM on March 2, 2011 [1 favorite]

Madoff went to jail because he stole from rich people. You see how that works?

Madoff actually stole from more poor people than rich if you look at the number of charities and pension funds he ripped off.

Also, how did the financial crisis affect the poor disproportionately from the rich? Everyone got fucked, including thousands of financial sector employees. The fake wealth that was "destroyed" was mostly held by the investor class and the resulting destruction of jobs was burdened by all workers, not just poor and blue collar. Most rich people are still rich, some rich people are now poor and poor people are still poor. A very few were able to unjustly enrich themselves on the backs of America, rich and poor, and in a perfect world they would pay that money back, but that's like all of history.

Enact more laws that more perfectly prevent excessive speculation and then relax, cause this will happen again 10 years from now.
posted by gagglezoomer at 11:28 AM on March 2, 2011 [3 favorites]

What fraud were the executives responsible for? ...

Here's a wee example:

http://fcic.gov/documents/view/2153

...These mortgages were sold to Fannie Mae, Freddie Mac and other investors. Although we did not underwrite these mortgages, Citi did rep and warrant to the investors that the mortgages were underwritten to Citi credit guidelines.

In mid-2006 I discovered that over 60% of these mortgages purchased and sold were defective. Because Citi had given reps and warrants to the investors that the mortgages were not defective, the investors could force Citi to repurchase many billions of dollars of these defective assets. This situation represented a large potential risk to the shareholders of Citigroup.

I started issuing warnings in June of 2006 and attempted to get management to address these critical risk issues. These warnings continued through 2007 and went to all levels of the Consumer Lending Group.

We continued to purchase and sell to investors even larger volumes of mortgages through 2007. And defective mortgages increased during 2007 to over 80% of production....

The mortgages being discussed went into mortgage backed securities, a lot of which were bought by pension funds. Those mortgage backed securities didn't exactly perform as expected, since the mortgages were a lot less sound than represented, and now I seem to hear a bit of brouhahaha going on around the country about pensions, the shortfalls thereof, and how the difference will be made up, or a reduction in the benefits realized.
posted by de void at 11:29 AM on March 2, 2011 [2 favorites]

Matt Taibbi: Why Isn't Wall Street in Jail?
Financial crooks brought down the world's economy — but the feds are doing more to protect them than to prosecute them

"The Financial Industry Has Become So Politically Powerful That It Is Able To Inhibit the Normal Process of Justice And Law Enforcement"

Pentagon Tries to Blame Financial Crisis on Foreign Financial Terrorists

Is McKinsey & Co. the Root of All Evil?
posted by kliuless at 11:33 AM on March 2, 2011 [7 favorites]

de void -

Technically not fraud, as the banks said "This is what they are, and if they aren't we'll buy them back". Would be fraud if they knew they wouldn't be around to stand up for their rep & warrantee obligations.
posted by JPD at 11:35 AM on March 2, 2011 [1 favorite]

God the Rajat Gupta/McK thing is totally deserving of a post.
posted by JPD at 11:36 AM on March 2, 2011 [1 favorite]

JPD, does Citi report to investors what their buyback liability is?

Can Citi stand up for their potential liability on buybacks (80% of 2007 mortgage production!?) without another infusion of (taxpayer-sourced?) capital?

They lied on the quality of 80% of their product at one point in time, but it's all ok because they can be trusted to buy them back!?
posted by de void at 11:48 AM on March 2, 2011 [1 favorite]

JPD, does Citi report to investors what their buyback liability is?

Sort of. The problem is that they fight the R&W in court so they won't ever disclose in their accounts what the number is. They are obligated though to reveal in their MD&A how large the claims that have been submitted are. You can also get a sense of what actual severity of those claims is both by looking at history and by look at what the companies (fannie, freddie, monoline insurers make up the vast bulk of the claimants btw, not RMBS owners) making those claims have shown a willingness to settle for.

Bank of America actually has a much bigger R&W problem then Citi does.
posted by JPD at 11:56 AM on March 2, 2011 [1 favorite]

Matt Taibbi: Why Isn't Wall Street in Jail?

Discussed here, in case anyone missed it.
posted by homunculus at 12:16 PM on March 2, 2011

How the rich soaked the rest of us.
The astonishing story of the last few decades is a massive redistribution of wealth, as the rich have shifted the tax burden. (by Richard Wolf). An article with some interesting graphs.
posted by adamvasco at 1:13 PM on March 2, 2011 [4 favorites]

Madoff went to jail because he stole from rich people. You see how that works?

Nice sounding story with 22 favs, but it's exactly wrong, Madoff didn't differentiate who he stole from, including non-profits, educational, etc..
posted by stbalbach at 2:16 PM on March 2, 2011

I don't know that it matters that he stole from the poor as well. I think the point is that he was prosecuted because he stole from the rich.

I expect he might have been prosecuted as well for having a Ponzi scheme that preyed on the poor. But we may never have heard about it, because they don't have that much money to steal, and the less you steal, the less of a big deal it is seen as.
posted by Astro Zombie at 2:31 PM on March 2, 2011 [3 favorites]

It's hard to believe that, this late in the game, anyone can doubt what Ferguson has laid out... let alone making ludicrous claims about 'mysterious invisible traders'.

Those who do have missed a lot of essential interviews, discussion and reading; they can start to go back and read a couple of years of Matt Taibbi to get the clues about what else to read. Start with Screwed 101 before you try to wheel your barrows full of steaming social-engineering shit into 301.
posted by Twang at 2:34 PM on March 2, 2011 [1 favorite]

Twang said: "...they can start to go back and read a couple of years of Matt Taibbi..."

"Inside Job" actually does a phenomenal job of tying everything together in a little over an hour and a half.

---

Guys, let's not talk about Bernie Madoff. The situation is actually a lot more screwed up than one individual. The American public needs to understand -exactly- what happened, because I'm pretty positive that at least 90% of the US population doesn't. That's a problem, and the only viable solution to educating people is to get them to watch this movie. It's geared towards a general audience and is very well done.

By not prosecuting anyone, the US government is making a mockery of the country's legal system and exacerbating the problem of major financial institutions having a stranglehold on US economic policy. This cannot continue if one wants to see the US survive the next few decades.
posted by lemuring at 3:16 PM on March 2, 2011 [3 favorites]

"but also had begun designing securities that would fail in order to profit by betting against them"

Just out of curiosity, how do you differentiate such securities from those that were designed to go up in value, in the event that others based on subprime real estate went down in value?

It seems like the whole point of the financial side of subprime-based securities was that there wasn't supposed to be a situation where both sides of the equation collapsed at once.

(...except, of course, that they were so poorly designed that they could / did.)
posted by markkraft at 3:22 PM on March 2, 2011

Just out of curiosity, how do you differentiate such securities from those that were designed to go up in value, in the event that others based on subprime real estate went down in value?



There were a series of securities that a few investment banks created at the behest of a few hedge funds (magnetar and Paulson are two names specifically cited - though I would be surprised if there were not others) who wanted them created specifically so they could buy protection on them. All is well and good but there is evidence that the investment banks allowed the hedge funds to play a role in selecting the RMBS that were used in creating the securities. Those HF then chose RMBS they felt were the most egregiously misrated by the agencies.

The investment banks then turned around and sold the newly created CDOs to other clients. But the reason why this skirts the line of legality is because the investment bank has no fiduciary responsibility to their clients. Its strictly a dealing relationship. Caveat Emptor and what not. You can also argue that the banks themselves thought Paulson et al were wrong (And their other actions certainly would provide plausibility). The other out they had was the the HF were also buying the riskiest pieces of the securities they created to fail. They could argue that the original client was actually betting the security was undervalued - although they were only doing that for other unrelated reasons.

Where the IBs did potentially commit fraud had to do with what they told the third party manager and insurer about how the original securities were selected.
posted by JPD at 3:48 PM on March 2, 2011 [1 favorite]

buy protection = bet on the security defaulting
posted by JPD at 3:48 PM on March 2, 2011

I haven't watched the film, but it is my understanding that the bond ratings companies were induced to uprate the mortgage-backed securities to help sell them to large-scale investment interests. The complexity of the pricing scheme was such that it would be impossible for someone without access to the original algorithms to actually figure out what they were worth. Was this point touched on in the film? If so, was it clear how the ratings firms were induced to uprate the toxic securities?
posted by Mental Wimp at 3:49 PM on March 2, 2011

Doh! Preview would have helped me, wouldn't it, JPD.
posted by Mental Wimp at 3:51 PM on March 2, 2011

I really can't stomach the arguments that this isn't "technically illegal, you know." This morning I heard on the radio that our city just finalized a law to require panhandlers to get a permit in order to panhandle. If they don't get the permit (which is free, but requires a background check) and get caught panhandling twice, they'll be fined and charged with a misdemeanor.

Let's just review, please:

Ask someone for money on a street: Crime.

Literally steal people's pensions, life savings, destroy their homes and investments: Whoa slow down there, this is a Complex Legal Issue that requires Serious Consideration for Decades and OHHEYLOOKOVERTHERE.
posted by odinsdream at 6:32 PM on March 2, 2011 [3 favorites]

By not prosecuting anyone, the US government is making a mockery of the country's legal system and exacerbating the problem of major financial institutions having a stranglehold on US economic policy. This cannot continue if one wants to see the US survive the next few decades.

Name one person and the crime they are allegedly guilty of.

Literally steal people's pensions, life savings, destroy their homes and investments: Whoa slow down there, this is a Complex Legal Issue that requires Serious Consideration for Decades and OHHEYLOOKOVERTHERE.

Nobody's homes were destroyed. The only thing that was destroyed was the illusion that houses could gain 10% in value every year for two decades straight and that you could somehow refi your way out of a too expensive mortgage payment.

My 401(k) was back at even within a year of mid-2008. The only people who got "stolen" from were the colossal idiots who sold at the bottom of a market.

(Also, thank you colossal idiots. Sure, I lost 7% of my account IN ONE DAY. But thanks to your panic, the market crashed even further. I'm sitting at about double my 2008q2 balance. I *might* be able to eat when I retire now.)
posted by gjc at 7:25 PM on March 2, 2011

Oh, and also: disappearing value is not stealing. The value lost on assets wasn't taken. It just disappeared. You willingly bought a thing at $100 and now nobody will pay more than $50 for it. Nobody has stolen from you.
posted by gjc at 7:27 PM on March 2, 2011 [1 favorite]

I don't know what to tell you - that's how the law worked. I'm not formulating a defense, I'm just telling you why people aren't in jail.
posted by JPD at 7:29 PM on March 2, 2011

That's kind of the story though. The regulatory system is so jobbed that even given all that happened and continues to happen there are no laws on the books to prosecute.

Starting to sound like Cato the elder here with his "Carthage must be destroyed" thing, which he would tag to every speech he made in the senate, but this shit won't change until campaign finance gets fixed. It's really at the root of everything.
posted by Trochanter at 8:05 PM on March 2, 2011 [2 favorites]

I don't even know where to begin here. First of all see the film. It's far from the romantic polemics of Michael Moore.

Second, listen to the award winning episode of This American Life that tries (and succeeds) in explaining what happened:
http://www.thisamericanlife.org/radio-archives/episode/355/the-giant-pool-of-money

These bastards lied to people about the value and security of the financial products they created and sold. They represented them as secure and sold them to customers (pension funds, investors etc.) with the PRIME SELLING point being that they were extra secure (that they would not lose value). The exact opposite was the case, they knew this, and in fact planned it because they were going to directly benefit when those products failed.
They then directly lied to congress about this, with obfuscations that would make Bill Clinton look frank and forthcoming.
If you can't see a problem with this, then enjoy the world you're getting, it's gonna suck. And suck hard.

gjc, your reply makes me so sad. You are the middle class that is being pitted against the poor in this ideological debate. You blame the "idiots" (the poor), forgive the robber barons on a technicality, and finish with the satisfaction that you're fine, so screw everyone else (and thank them for being stupid). Just wow.
posted by asavage at 10:18 PM on March 2, 2011 [11 favorites]

They're baaaaack...

Two Countrywide Bank co-founders with as much as $1 billion in private equity power behind them are laying plans to launch a new bank based in Westlake Village.
posted by telstar at 11:03 PM on March 2, 2011

Name one person and the crime they are allegedly guilty of.

Here's Forbes' take on it. Insider trading and Section 302 certification fraud, for starters.

Let's say gjc buys stock in Lehman brothers at $50 based on great fake accounting results, and when the real cash situation of the company is discovered, the stock goes to $0 as Lehman topples into bankruptcy. Nobody took that $50 from your pocket, so nobody should go to jail, right? It just disappeared! It's not theft. You should have done your homework and gone into their vault and counted the money yourself as a diligent investor, rather than believe the reports they are legally obligated to produce as a public company.
posted by benzenedream at 1:16 AM on March 3, 2011 [2 favorites]

Nobody's homes were destroyed. The only thing that was destroyed was the illusion that houses could gain 10% in value every year for two decades straight and that you could somehow refi your way out of a too expensive mortgage payment.

There are homes in my neighborhood that have been abandoned by both buyers and banks. They're now unsellable because of water damage, mold growth and general decay. They'll need to be bulldozed.
posted by odinsdream at 6:22 AM on March 3, 2011

Name one person and the crime they are allegedly guilty of.

They called him "the gorilla" (behind his back (combination of management style and looks)).

Fraud.

A couple weeks after Lehman Brothers went bankrupt, Richard Fuld was called before congress to explain what happened.

Victim of the unforeseeable, his stance.

But like all CSPAN hearings there is always a special moment, one reaction or a simple story that often codifies things for me.

Lehman had been purchasing mortgages from a company called First Alliance. A vice president was sent to California to peruse operations and report back. I imagine he spent an alcohol livened dinner with the First Alliance powers, who gloated over their genius in generating gold from garbage.

The memo that fell on Fuld's desk included:
-First Alliance is a financial sweatshop, specializing in high pressure sales to people who are in a weak state.
-First Alliance is the used car salesman of blemished credit lending making loans where the borrower has no real capacity for repayment.
-At First Alliance it is a requirement to leave your ethics at the door.

As the CEO what do you do?
A) Jump out of your chair and cry, "Holy fuck! What we are buying, re-packaging and selling is worthless, call the authorities, halt all business with them, we're getting these leeches shut down."
B) Buy the company.

Fuld licked his lips and order up a controlling interest in the company, changed the management to "try to tighten lending practices" (which kinda shows he knew the practices were producing polluted product) and with things chugging along and hundred of millions of dollars being injected into First Alliance, sent the same VP to eyeball the new acquisitions' operations.

I figure a further wine and dine occurred, stories of craft (and graft) were exchanged. The ensuing report stated:
"First Alliance is still violating the Truth and Lending Act"

First Alliance were making out like bandits. Senior citizens began complaining about being pressured and swindled. News organizations caught wind of the stench, investigated and exposed the lending practices. First Alliance was sued in a class action lawsuit, so declared bankruptcy and disappeared, the invisible carcass was convicted of fraud and fined 50 million dollars. Lehman was found responsible for aiding and abetting the fraud scheme and fined 10% of the overall damages (which they challenged and I think settled for a lesser amount).

What transpired was the very antithesis of fairness.

I mean it just blows my mind that you could have before your very eyes, "loans where the borrower has no real capacity for repayment" and Fuld meanders off on explaining that there was a mathematical formula that made these investments secure and that they held a position of x percent default (where x represents a number well beyond any historic default rates of the real estate market) so their position was even more secure, more conservative and more extra wonderfully default proof than many of the competitors on 'the street', even though the value of a loan that can't be repaid would seem to be null ... in Fuld's world it represented many many zeros.

There was no honest mistake. No justifiable misunderstanding. Rather a calculated engagement. And it was systematic

"No real capacity for repayment" represented as solid investment is a deception deliberately designed to secure unfair or unlawful gain ... a.k.a: fraud ... technically.
posted by phoque at 8:24 AM on March 3, 2011 [3 favorites]

Let me guess, you haven't watched the movie.

Ding ding ding! Give that man a prize! I enjoy documentaries only if they feature animals. Boring financial "movies" - not so much. Especially when you can tell that they are, quite simply, about nothing.
posted by davidmsc at 11:01 AM on March 3, 2011

facepalm.jpg
posted by Trochanter at 1:44 PM on March 3, 2011 [2 favorites]

davidmsc has no skin in the game. Easy to walk away.
posted by telstar at 1:50 PM on March 3, 2011

Ding ding ding! Give that man a prize! I enjoy documentaries only if they feature animals. Boring financial "movies" - not so much. Especially when you can tell that they are, quite simply, about nothing.

The fuck? Could you maybe be bothered to not contribute to a discussion you're apparently not interested in?
posted by odinsdream at 2:01 PM on March 3, 2011

Ding ding ding! Give that man a prize! I enjoy documentaries only if they feature animals. Boring financial "movies" - not so much. Especially when you can tell that they are, quite simply, about nothing.

Isn't this equivalent to sticking your fingers in your ears and screaming "LalalalalalallaIcan'thearyou!"
posted by Mental Wimp at 8:42 AM on March 4, 2011

Regarding another Oscar-nominated documentary: Natural Gas Industry Attacks Oscar-Nominated Film “Gasland” for Chronicling Devastating Impact of Hydraulic Fracking
posted by homunculus at 1:53 PM on March 4, 2011