The bad guys got away with it

BOOK REVIEW: Inside Job: The Financiers Who Pulled Off the Heist of the Century by Charles Ferguson

Three years after the USA housing bubble and subsequent financial meltdown the bad guys have got away with it.

Inside Job is a highly readable book which makes it clear corporate maleficence on the part of the banks did not arise out of the clear blue sky; it was a result of the normalisation of fraudulent practice.

There have been many books written about the financial mess caused by the economic crash of 2007, some of which, such as Michael Lewis’s book The Big Short, assert Wall Street ran off a cliff due to stupidity.

On the contrary Charles Ferguson believes that over the last thirty years money has got into bed with politics and the subsequent progeny are not pretty.

The deliberate erosion of checks and balances designed to keep the financial oligarchy under control has allowed bankers to become crooks. They have bought the support and connivance of the Democrats, Republicans, academia and possibly most importantly the ratings agencies, over the last thirty years.

Before the current crisis, major banks had been caught assisting corporate fraud by Enron and others, laundering money for drug cartels, and the Iranian military, aiding tax evasion, colluding in fixing prices and committing many forms of financial fraud. Little has been done to prevent these abuses.

Everybody, including the ratings agencies, found the mortgage market easy pickings. The fees for rating mortgage backed securities boomed to the extent that Moody’s, for example, became the most profitable company in the Fortune 500.

The ratings were totally divorced from the real situation. By 2009 more than 90% of all 2006 and 2007 AAA subprime backed securities were rated as junk; Lehman Brothers had an AA rating within days of failing.

On the eve of the meltdown in 2007 fools were convinced by sharks that investing in securities based on housing mortgages was a no-brainer. This turned out to be true, but not quite in the way intended.

No banker has been prosecuted, no banker has gone to jail; nor has the US government under President Obama attempted to use civil lawsuits, asset seizures, or restraining orders to extract fines or restitution from those responsible for sending the world economy into recession.

Before the Madoff scheme collapsed there was strong suspicions that he was a fraud. JPMorgan Chase’s executive committee openly discussed the possibility of a Ponzi scheme, but Madoff produced half a billion dollars in fee revenue for JPMorgan, so the suspicions were never pursued.

When Greece applied to join the ECC Goldman Sachs used financial jiggery pokery to create highly favourable currency swaps which improved the look of Greece’s books no end. Not incidentally the transaction also produced large fees for Goldman Sachs. Such sleight of hand fee generating manoeuvres became commonplace for other investment banks.

This book holds not only the Bush administration, but the administration led by Barak Obama responsible for the lack of action in the wake of the current economic fiasco which has yet to come to a conclusion.

It is easy to tell the story of the results financial debacle of the last few years; it is less easy to find remedies. Many pundits have pounded their keyboards in indignant fury writing polemics nailing the usual suspects to the wall; nobody has so far offered a solution.

The political and financial system in the US and perhaps the rest of the world are broken and nobody has a clue as to how to fix it.

This book is no different; Charles Ferguson ends the book hoping America will get lucky and some bright spark will arise from somewhere and throw the moneylenders out of the temple.

It will be recalled that has been tried before, without much success.

Inside Job is available on Kindle for $US9.99.