Inside Job, the new documentary that attempts to explain the financial crisis in two hours or less by simplifying complex problems into categories of good and bad, earned praise by most reviewers. How can you not enjoy a film that makes smart people look idiotic? Everyone watching the movie feels the effects of the recession and thus the film appeals at a base level to almost everyone. Who doesn’t know someone that has lost a job, taken a pay-cut, or can’t get a loan?
While watching supposedly smart investment bankers blunder appeals to our populist rage, I found the documentary lacking scope. The film fails because it draws conclusions too quickly, points out villains without explanation, and makes some shaky arguments. For instance, the film asserts that obtaining jobs in the high tech sector, the new big industry, excludes those without access to higher education. Yet the film never explains how that is different than all those Ivy Leaguers who wound up on Wall Street, as if somehow Wall Street was more accessible than the tech industry.
Too many interviews rely on a “gotcha moment,” then cut away leaving the banker, professor, regulator, activist, looking like a fool. The populist inside me laughed, but if you’re looking for a reasoned explanation of the recession, Inside Job won’t give it to you. I would rather see the whole interview, not a tagline.
When Inside Job flashes a single statistic putting Countrywide as the leader of subprime loans, it fails to tell the whole story. While more dry than the film, the authors of All the Devils are Here provide an excellent account of Countrywide’s hesitation to enter the subprime market, while everyone else around them was reaping in millions. What makes Countrywide amazing is how quickly they rose once in the game.
The audience doesn’t see that Countrywide entered into a Faustian bargain by entering the subprime market. We don’t get the complex story; we get a snapshot of people to despise. Fun to watch, but lacking in substance.
Furthermore, the documentary glosses over the significance of investment banks going public. Certainly it mentions the fortunes they made, but it casts aside the more compelling story of what happens when companies who underwrite securities have stockholders that demand rising profits.
It’s like this: ABC Corp is reaping in millions by buying and bundling subprime loans. You own several shares of XYZ Corp, which isn’t involved in subprimes. You see ABC’s profits so you and other stockholders demand more profits. XYZ then enters subprimes. That’s a crucial part of the story, and Inside Job missed it. Or rather, it flippantly touched upon it without emphasizing how important it is. There are lessons to be learned and questions to ask: Do you blame Goldman Sachs managers or do you blame the stockholders demanding rising profits from the company? Or both?
As for a substantive discussion on incentives, the film fails to emphasize the results of separating the lender and the borrower. Do you blame the lenders, the borrowers, the banks that buy the loans?
The answer to all these questions in the film is to blame the banks, and to some extent the government.
Fine, but let’s at least discuss the stockholders who own the banks. Let’s discuss the role of the Federal Reserve, let’s discuss regulations. Inside Job says that’s not an option. Banks are bad, the masses are good.
I get the populist rage; I just don’t think the story is that simple.