ROBERT SIEGEL, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.
MELISSA BLOCK, host:
And I'm Melissa Block.
"Inside Job," that's the title of a new documentary about the global economic crisis of 2008 that led to global recession. The film is a searing look at the financial industry, the big players and the culture that led to the meltdown.
(Soundbite of film, "Inside Job")
Unidentified Man #1: We're dealing with Type A personalities, and Type A personalities know everything in the world.
Unidentified Man #2: Banking can became a pissing contests, you know, mine's bigger than yours, this kind of stuff. It was all (unintelligible) incidental.
Unidentified Man #3: Fifty-billion-dollar deals were not large enough. So we'd do $100-billion deals.
BLOCK: That's just a taste of the candid commentary elicited from Wall Street insiders and experts by filmmaker Charles Ferguson. His last documentary, titled "No End in Sight," about the Iraq war, was nominated for an Oscar. I asked Ferguson what his assumptions were when he started making "Inside Job".
Mr. CHARLES FERGUSON (Filmmaker, "Inside Job"): By the time I decided to make the film, which was after the world came to the edge of collapse in September, 2008, by that time I already realized that there had been a fair amount of bad behavior in the financial industry. So I thought that I was prepared. It turned out, however, that I wasn't. I had grossly underestimated the level of extraordinarily unethical and even fraudulent behavior that had occurred on such a large scale and was really quite shocked when I found it.
BLOCK: Interesting to me that you say you were shocked because this is well-trampled ground by now in books and in magazine articles and on this radio program about just what led up to the meltdown. What were the revelations for you?
Mr. FERGUSON: I started doing research for the film in the fall of 2008, and when we were already filming, in the middle of 2009, the world first learned, and we were among the first to learn, actually, that not only had the investment banks been creating and selling securities that they frequently knew were defective and likely to go bad, but they had been in fact designing them to go bad so that they could profit by betting against them.
And if somebody had told me that in the fall of 2008, that this had gone on on a huge scale, tens of billions of dollars, I would have said no, that's just too extreme. People don't do that. And if you do do it, you would go to jail.
They did do it, and nobody's gone to jail.
BLOCK: You include a scene from a Senate hearing, where Senator Carl Levin is interrogating some of the top executives of Goldman Sachs about, well, is this ethical? Do you have a problem with this?
Mr. FERGUSON: Yes. And this is after Senator Levin has read from memos in which people describe deals as being crappy and so on. Their answers are extremely dispiriting.
(Soundbite of film, "Inside Job")
Senator CARL LEVIN (Democrat, Michigan): And when you heard that your employees in these emails, in looking at these deals, said God what a (BEEP) deal, God what a piece of crap, did you feel anything?
Unidentified Man #4: I think that's very unfortunate to have on email.
Sen. LEVIN: Are you...?
(Soundbite of laughter)
Unidentified Man #4: And very unfortunate.
Sen. LEVIN: On email? How about feeling that way?
Unidentified Man #4: I think it's very unfortunate for anyone to have said that in any form.
Mr. FERGUSON: Not unfortunate as in unethical or disastrous or it's really a quite extraordinary hearing.
BLOCK: You make some claims toward the end of the film that have to do with academia, with people at institutions of higher learning. And your claim is that the financial industry has corrupted the study of economics itself. What do you mean by that?
Mr. FERGUSON: What you find is that very prominent professors of economics, often people who have also held high government posts, are paid to testify in Congress. They are paid to be expert witnesses in both civil and criminal trials. They're often paid to write papers that praise the financial services industry and argue on behalf of deregulation of the industry. They make millions, in some cases tens of millions, of dollars doing this. And this is usually not disclosed. And in fact, university regulations do not require disclosure of these payments.
BLOCK: You include an exchange that gets increasingly angry with Glenn Hubbard, he was the chief economic adviser to President George W. Bush, he's now dean of Columbia Business School. And you're asking him about this outside income that you're talking about, the income he gets from being on the boards of companies in the financial services industry. And it leads up to this. Let me play you this bit of tape.
(Soundbite of film, "Inside Job")
Mr. FERGUSON: Do they include other financial services firms?
Mr. GLENN HUBBARD (Dean, Columbia Business School): Possibly.
Mr. FERGUSON: You don't remember?
Mr. HUBBARD: This isn't a deposition, sir. I was polite enough to give you time, foolishly I now see. But you have three more minutes. Give it your best shot.
BLOCK: Charles Ferguson, tell me about that moment in Glenn Hubbard's office.
Mr. FERGUSON: Well, the entire interview was fairly contentious, as you can imagine. It surprised me somewhat to realize that these people were not used to being challenged, that they'd never been questioned about this issue before. They clearly expected to be deferred to by me and I think by everybody.
BLOCK: You have not been invited back, safe to say, to Glenn Hubbard's office.
Mr. FERGUSON: No, I think it'll be quite a long time before I have lunch with Glenn Hubbard.
BLOCK: Charles Ferguson, you make it very clear in your movie that you want accountability. In fact, you want people locked up for criminal activity. Who would you want to see put in jail?
Mr. FERGUSON: Well, at the level of individuals, that's for a judicial proceeding to decide. But I think the important point is that in prior financial crises caused by large-scale fraud, for example the late 1980s savings and loan crisis, financial executives were prosecuted and imprisoned. And in this crisis, where it's clear that large-scale fraud has occurred, it is extremely alarming and depressing that there has not been a single criminal prosecution.
BLOCK: Well, if you look at the one prosecution that there has been, a high-profile prosecution of the two Bear Stearns hedge fund managers on fraud, they were both acquitted and acquitted very quickly by a jury in New York. And people looking at that case say it's not so easy to make these cases.
Mr. FERGUSON: Well, it depends how hard you try. First of all, they were, by investment banking standards, not terribly high-level executives. There has not been a single prosecution of a senior financial services executive, either in investment of commercial banking.
Secondly, that prosecution shows several things about the weakness of the government's efforts and the role of the economics discipline. One reason that they were acquitted was that Glenn Hubbard was paid $100,000 to testify in their defense.
It's a very common thing for professors of economics to testify as expert witnesses in both civil and criminal cases. And it's also very dispiriting that the government has not chosen to use the same tools that it routinely uses when it's prosecuting organized crime cases.
When the government goes after organized crime cases, the government is frequently quite ruthless and understandably so in obtaining evidence. And so that kind of energy and determination has been completely absent with regard to the financial crisis.
BLOCK: Do you think, though, there are legal experts who say, who look at these cases and say it may be that the law wasn't broken, that the companies and institutions used existing laws to their benefit. We may not like the way they did it, but the laws were not broken.
Mr. FERGUSON: Well, in some cases, that's probably true. And the laws should be fixed, which has not been the case. But more importantly, as a practical matter, it's impossible to do what they did without committing criminal fraud. And so I think that it's overwhelmingly likely that large quantities of criminal fraud were committed.
BLOCK: Charles Ferguson, thanks very much.
Mr. FERGUSON: Thank you.
BLOCK: Charles Ferguson's documentary opening next week in New York and around the country after that is titled "Inside Job." Transcript provided by NPR, Copyright NPR.