Staff at banks such as RBS should be retained by longer-term incentive schemes such as the one being introduced at Barclays. Inside Job clearly catches some of the anti-banker mood, and the public is quite right to be outraged at how banks refinanced at the taxpayers' expense are paying outsized bonuses. This inability to challenge trading desks generating billions in phantom profits was endemic. A risk manager once told me that to raise an issue that undermined the bank's multi-billion-dollar profits would have been to "sign his own death warrant". But to imply that all deregulation in the last 20 years was a conspiracy perpetrated by an academic elite of economists in the pay of the banks is paranoid and absurd.Īn oversight by the film was to ignore how risk managers at many banks knowingly failed to voice their fears about the way their companies operated. Yes, deregulation did go too far – particularly with the repeal of the Glass-Steagall Act of 1933, which might have prevented banks gambling with depositors' money. There may be people lower down who knowingly did criminal things, but that is a different matter.Ī weak point was the anti-free market and conspiratorial tone of the film. At worst he perhaps should have known more about what was going on, but really he's just the nice old geezer at the top who shakes people's hands at cocktail parties. Chuck Prince, the CEO of Citigroup at the time of the crisis, may have been overpaid – but I don't think he was particularly at fault. One was the vilification of individual people. I have an issue with some of the elements pursued in the rest of the film. It also showed very accurately the denial by everybody inside or outside the industry that such a crisis was even occurring – even up to the last minute before Lehman's bankruptcy. The explanation of what happened was a chilling re-run of all the events that led up to the financial crisis. "The film's first half-hour was absolutely dead-on. Maybe Inside Job will make us more savvy in time for the next crash. How does one go into battle yelling slogans about credit default swaps? The bankers know ignorance is their trump card. Still, no matter how much it is explained, the general public is not going to understand. It helps that Summers looks like a mafia boss, but the difficulties in making the case against him are shown by the need to explain financial products like credit default swaps and how securitisation was used by banks to increase their borrowing. Summers exemplifies the links between cheerleaders in academia, Wall Street, supine regulators and an ignorant Capitol Hill that Ferguson stresses were at the root of the problem. In Inside Job, the name that keeps cropping up is Larry Summers, a friend of President Bill Clinton and more recently Barack Obama. The UK's chief villian, however, is probably the disgraced, but largely unpunished, banker Sir Fred Goodwin, the former boss of Royal Bank of Scotland, once the fifth-largest bank in the world. Over here, the relationship between academia and business appears to be more arm's length, though London Business School dean Sir Andrew Likierman sits on the Barclays board, while Howard Davies, who argued for light-touch regulation while head of the Financial Services Authority, has become director of the London School of Economics. Whether they took large slugs of cash for writing poorly researched, cheerleading reports on the economic miracle in Iceland (pre-crash), as former US central banker Frederic Mishkin is found doing, is less clear. There are plenty of economists who believed the banks understood what they were doing and supported deregulation. The spotlight has largely bypassed academics in the UK.
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