Tue, Oct 19, 2010, 9:28PM EDT - U.S. Markets closed
The collapse of Lehman Brothers in September 2008 sparked a global financial crisis that pushed the U.S. economy into the worst recession since the Great Depression. Two years later, billions upon billions of taxpayers' dollars have been spent on government bailouts to save the banks that started the contagion, yet not one person has been held accountable or slapped with criminal contempt.
In his new documentary Inside Job, filmmaker Charles Ferguson spoke to some of the biggest names from Wall Street to Washington to academia to get a first hand account of what caused the 2008 financial meltdown and how the financial system reach its breaking point.
Ferguson points to 20 years of deregulation, rampant greed (a la Gordon Gekko) and cronyism. This cronyism is in large part due to a revolving door between not only Wall Street and Washington, but also the incestuous relationship between Wall Street, Washington and academia.
The conflicts of interest that arise when academics take on roles outside of education are largely unspoken, but a very big problem. "The academic economics discipline has been very heavily penetrated by the financial services industry," Ferguson tells Aaron in the accompanying clip. "Many prominent academics now actually make the majority of their money from the financial services industry, not from teaching or research. [This fact] has definitely compromised the research work and the policy advice that we get from academia."
Example after example of this revolving door between Academia and Wall Street and academia and Washington are brought to light in Inside Job. Ferguson showcases this unspoken problem by actually interviewing a number of academics with ties to the government and/or financial sector. To wit:
Martin Feldstein is currently the George F. Baker Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research. While holding advisory positions in both the Reagan and GWB administration he also served on the board of both AIG and AIG Financial Products from 1988-2009.
Glenn Hubbard is currently the Dean of the Columbia Business School. Hubbard was Chief Economic Advisor during the Bush Administration, currently on the board of Met Life and previously on the board of Capmark.
Frederic Mishkin is currently a professor of finance and economics at the Columbia Business School. From 2006-2008 he was a member of the Federal Reserve Board. Also in 2006, he was paid $124,000 by the Icelandic Chamber of Commerce to write a report on Iceland's financial sector.
Academics at 20 Paces
After the premiere of the film this month, Mishkin wrote a piece in the Financial Times accusing Ferguson of ambush journalism. "In July 2009, I agreed to be interviewed on camera for a film that was presented to me as a thoughtful examination of the factors leading up to the 2008 global economic collapse," Mishkin writes. "About five minutes after the microphone was clipped to my lapel, however, it became clear that my role in the film was predetermined - and I would not be wearing a white hat."
Feguson tells Aaron there is little truth to what Mishkin contends. "I conducted an interview with professor Mishkin that lasted over an hour and touched on many subjects. I certainly did ask him his views on the crisis, but it did turn out that professor Mishkin did have a number of things to conceal and he became very uncomfortable during the interview."
Since our interview, Ferguson wrote a response to Mishkin in the FT. "Professor Frederic Mishkin misrepresents both his own activities, including his interview for my film, and the widespread conflicts of interest which have distorted academic economics and its role in the financial crisis," Ferguson writes. "The only reason we now know of Prof Mishkin's payment for the Iceland report is that he was later forced to disclose it when he was appointed to the U.S. Federal Reserve Board."
Feguson is astonished by the lack of regulation demanding financial disclosure of all academics and is now pushing for it. "At a minimum, federal law should require public disclosure of all outside income that is in any way related to professors' publishing and policy advocacy," he writes. "It may be desirable to go even further, and to limit the total size of outside income that potentially generates conflicts of interest."
It should be noted that Ferguson himself has ties to academia. He spent many years as a visiting scholar at M.I.T. and U.C. Berkley.
Inside Job is currently playing in theatres nationwide.
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