Academic

The film Inside Job offers a stark contrast to the subject of tomorrow?s Conglomerate book club -- All the Devils are Here. Both movie (directed by Charles Ferguson and narrated by Matt Damon) and book (co-authored by Bethany McLean and Joe Nocera) provide vivid narratives. Both do an admirable job of explaining some of the complex financial transactions at the heart of the financial crisis. But where the book tells a series of stories of the policymakers and captains of finance with a considerable degree of richness and nuance, Inside Job, by choice and because of the limitations of its medium, has all the subtlety of attack journalism. The film tells the story of the financial crisis largely through a series of interviews with politicians, economists, two law professors (Frank Partnoy and Michael Greenberger), and even a few bankers. But the interviews are by no means the same. The director could have all but slapped a white hat on the good guys (Eliot Spitzer, Nouriel Roubini, Raghuram Rajan) and a black one on the interview subjects meant to be shamed and blamed.

These ?bad guys? are an odd lot because bigger fish (Greenspan, Paulson, Mozilo) did not agree to be interviewed. The filmmaker was able to interview former Fed Governor Frederic Mishkin (now returned to Columbia?s business school), Martin Feldstein a director of AIG and an economist at Harvard, and Glenn Hubbard, Chairman of the Council of Economic Advisors under President G.W. Bush (also author of the 2003 Bush tax cuts and now the dean at Columbia?s business school). From watching them squirm, it appears that these subjects did not realize they were being invited to their own dissection on the editing table.

Putting my professional empathy aside, academics that enter the policy-making realm should be held accountable for their work. And while the management of the crisis offered only choices between evils, the regulatory and business choices that led to the crisis do not enjoy the same defense. For example, Mishkin?s defense that the Federal Reserve did not know of the scope of abusive practices in the subprime mortgage market doesn?t explain the Board?s gross failure to investigate and regulate consumer lending effectively.

Yet the film?s black/white hold the gray explanation of the crisis ? venal gambles by a metastasizing financial sector enabled and then underwritten by a captured federal government ? leaves the audience with the same effects as a good raging scream: initial righteous catharsis followed by that hollow feeling that maybe nothing has changed or even a creeping suspicion that the rage may have found some of wrong targets or missed others altogether. Indeed, I was struck after watching the film that ?Freddie Mac? and ?Fannie Mae? were seldom uttered at all during the film. The role of those two giants in the economic and political flustercluck of the crisis evidently didn?t fit the filmmaker?s narrative. Asking Barney Frank, who was interviewed and effectively issued a white hat by the filmmaker, about the role of those two firms in the crisis might have raked the coals a little more evenly.

I left the theater not having learned very much about the crisis (but that is not a damning flaw; I?ve spent a long time studying the crisis), but mulling the difficult political challenge that has not dissipated. That is, how to channel the justifiable rage of middle America at what happened towards repairing and remaking effective legal institutions. The Dodd-Frank Act displayed flashes of deep understanding of what went wrong, but is at best an incomplete, compromised Rube Goldberg response. There is much still to be done, but how to energize the public to turn back the issue attention cycle towards further reform while neither fanning destructive flames ? like ?End the Fed? ? that would only consume those institutions that are critical to preventing future crises nor falling back into debilitating pessimism?