Inside Job

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A movie for every day of the year – a good one

07 September

US government takes over Fannie Mae and Freddie Mac, 2008

On this day in 2008, the US government placed two national organisations, the Federal National Mortgage Association (aka Fannie Mae) and the Federal Home Loan Mortgage Corporation (aka Freddie Mac) into “consertavorship”, in much the same way that someone takes power of attorney over the estate of a relative who has lost their mind. Fannie Mae existed to lend out money to people who wanted to buy a house. Freddie Mac bought those mortages, repackaged them and then sold them on in a secondary market, thus increasing the amount of money available for mortgages. All well and good, until there’s a run on the market, as there was in the financial meltdown of 2007-2008. The federal government’s move marked an attempt by the US government to “backstop” the crisis and also indicated a dawning understanding that it, too, was a player in the “free market”. Action or not, within a week Lehman Brothers bank had filed for bankruptcy and Merrill Lynch bank had been bought by the Bank of America at a discount of 61% of its September 2007 price. The crisis, backstopped or not, went on.

Inside Job (2010, dir: Charles Ferguson)

Charles Ferguson’s documentary, narrated soberly by Matt Damon, sets out to explain how exactly the financial crisis came about. It kicks off in Iceland and shows us how a small prosperous country with regulated money markets became a basket case in short order. What happened, according to Ferguson and the plethora of highly qualified talking heads he calls in evidence, is that the country was the victim of a highly organised Ponzi scheme, one which also caught out the bulk of the developed world, a scheme, moreover, allowed by governments, run by banks, endorsed by auditing firms, encouraged by ratings agencies. And paid for by us. “The financial lobby captured the political system,” is Nouriel Roubini of New York University business school’s assessment. Among the film’s other worrying revelations is the fact that President Obama is employing the same people who caused the mess (and became billionaires in the process) and that there are five financial lobbyists for every member of Congress. So, unless things change, it’s going to happen all over again. Inside Job is an angry but admirably patient film. The bit about credit default swaps lost me, I must admit, but as a whole it is still probably the best explanation of how a “subprime” mortgage crisis became a global recession, for this layman at least. Though as the financial crisis proved, when markets get so complicated that only computers can understand them, perhaps everyone is a layman.

Why Watch?

  • Why we went bust – explained
  • How to stop it happening again
  • Not afraid to point the finger – we were gangbanged by the banks
  • Facts, figures, historical analysis – it’s got them

Inside Job – at Amazon

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© Steve Morrissey 2013

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