The film Inside Job offers in-depth evidence of the complex relationship between government and business by showing how business under the auspice of capitalism and government under the mantle of democracy is collusive and incestuous in their ultimate pursuit of profit and power. The film clearly captures the systemic corruption of the United States by greedy and morally unbalanced industry leaders and their cohorts who engineered a financial catastrophe in 2008 not seen since the great depression. The film’s writer and director Charles Ferguson contends that the collapse of the financial industry could have been prevented had there been more regulation of Wall Street. He clearly establishes his line of reasoning through a series of interviews with many of the major players in government and the financial industry who indirectly and in some cases directly contributed to the financial fiasco of 2008. The financial collapse was caused by three main contributing factors; first, a toxic sub-prime mortgage market engineered by the financial industry; second, government’s failure of regulatory enforcement of the financial industry and Wall Street; and third, a collusive relationship between business leaders and government officials elected to curtail the same crisis they helped create.
The financial collapse of 2008 resulted from a toxic sub-prime mortgage market engineered by an out-of-control industry that led to its inevitable implosion. In September 2008, the global financial market was rocked to its core when the sub-prime market tanked. As a result, a global recession followed and the national debt doubled, millions of people lost their life savings and were left unemployed. The film Inside Job highlights much of the underpinnings surrounding what has been called by Ferguson “the heist of the century.” The collapse didn’t just happen though; as the film depicts, the antecedent of the financial crisis can be traced back to the 1980s when President Ronald Reagan deregulated much of the financial industry. The Reagan administration deregulated savings and loan companies in 1982, allowing them to make risky investments with their clients’ money, most of the savings and loan companies failed as a result these high-risk investments and caused many Americans to lose their life savings. Before deregulation, banks only sold mortgages to customers who were good risks and could pay them back over time. But deregulation created a platform for uncertain financial instruments and promoted high-risk mortgages that were packaged together and resold as collateralized debt obligations (CDOs) to speculative investors. Most of the investors did not understand the complexities of CDOs but knew they would generate huge short-term profits. By September 10th, 2008, the rampant greed on Wall Street had hit a bulwark; its fake cloak of honor and trust, and sacredness of obligation to put customers first was removed and its true form was apparent. The Glass-Steagall Act, also known as the Banking Act of 1933 had been enacted to prohibit collusion between investment and commercial banks, but the passing of the Gramm-Leach-Bliley Act of 1999 made significant changes to Glass-Steagall and repealed its restrictions on bank and securities-firm affiliation. The new law sought to modernize the financial industry by removing the very barriers that Glass-Steagall had erected to curb the greed of rogue capitalist bankers and to contain the moral hazard that engulfed Wall Street. Laissez faire economics is a theory advocated by Scottish economist and father of capitalism Adam Smith, his theory assert that human beings are naturally motivated by self-interest and when left alone in their economic activities a balanced system of production and exchange based on mutual benefit emerges. In the 1980s, Smith’s theory was implemented by the Reagan administration through deregulation. Sadly, the moral hazard motivated by the self-interest of Wall St. executives would prove Smith’s theory to be deeply flawed. In 2007, Foreign Policy magazine published an article by Robert B. Reich titled “How Capitalism is Killing Democracy.” In the article Reich asserts:
“Though free markets have brought unprecedented prosperity to many, they have been accompanied by widening inequalities of income and wealth, heightened job insecurity, and environmental hazards such as global warming. Democracy is designed to allow citizens to address these very issues in constructive ways. And yet a sense of political powerlessness is on the rise among citizens in Europe, Japan, and the United States, even as consumers and investors feel more empowered. In short, no democratic nation is effectively coping with capitalism's negative side effects.”

Reich’s claim is very telling and reads like the script of Inside Job. In the movie, Senior Editor of Fortune Magazine Allan Sloan maintain that it was utterly mad that Goldman Sacs borrowers had borrowed on average 99.3% of the price of a house, which meant they had no money in the house and if anything went wrong they would simply walk away from the mortgage. The loans were rated as AAA, the highest rated investment grade regarded as safe as government bonds. Chief Executive Officer of Goldman Sacs at the time was Henry Paulson. Paulson went on to be the Secretary of Treasury. His appointment is evidence of the close link between business and government. Keynesian economics is a concept that advocates that in order for an economy to grow and be stable, active government intervention is required. There was government intervention as Inside Job depicts, but it was collusive at best. A system of quid pro quo between the financial industry and government was the status quo, democracy had become duopolistic, and it did not matter which party was in power as neither one enforced regulations.
Government’s failure of regulatory enforcement of the financial industry and Wall Street bankers promoted a “greed is good” culture that was perpetuated by predatory executives. Government’s roll is to protect society; similarly, business leaders and bankers’ roll should be to enforce fiduciary responsibility while protecting its customers. However, the bottom line is the only concern of most highly paid executives. Regulation has been and continues to be an issue on Wall Street. One way to fix it is to hold the heads of large corporations accountable for any negligence, unethical business practices, and morally hazardous behavior that happens under their leadership. Andrew Lahde, a former Wall Street hedge fund manager claims that the culture of greed is still very popular. In a letter he wrote to The Financial Times on the cusp of the meltdown in 2008, he said:
“I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.” (Lahde)
Business school professors and top management should heed Lahde’s letter and try to alter this rationale in the minds of our future leaders of industry. It is exactly this kind of moral pollution that needs to be checked and corrected at the highest levels and in business schools. In Inside Job, former New York Attorney General, Eliot Spitzer, made very glaring remarks about the lack of enforcement of the financial industry by the Securities and Exchange Commission when he says, “in the absence of meaningful federal action, and there has been none and giving the clear failure of self-regulation it has become necessary for others to step in and adopt the protections needed.” Spitzer was essentially referring to a lack of corporate governance by the financial industry during the downturn of the Internet bubble, which also resulted in huge implications and financial losses. He also noted that the financial industry created no real products of value, unlike the high-tech industry that actually created products from which their profits derived. Ergo, people felt less swindled by the Internet bubble than by the purposefully engineered sub-prime mortgage collapse.
In 1933, in his first inaugural address, President Franklin Delano Roosevelt advised us against a return of the evils of the old order. His advice was given during the Great Depression, a time of unparalleled financial and societal hardship in the United States. President Roosevelt said:
Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men.
Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance; without them it cannot live.

On Friday September 12th, 2008, an emergency meeting was held which included Wall Street top executives and high-ranking government officials, including then New York Federal Reserve President, Timothy Geithner; Secretary of Treasury Hank Paulson and Securities and Exchange Commission Chairman Christopher Cox. The Wall Street executives were Morgan Stanley Chief Executive John Mack, a hardnosed competitor famous for his saying: “There’s blood in the water, lets go kill someone.” Citigroup Inc. head Vikram Pandit, and representatives from the Royal Bank of Scotland Group PLC, Merrill Lynch Chief Executive John Thain (then highest paid executive in America), J.P. Morgan Chase CEO Jamie Dimon and Goldman Sachs Group CEO Lloyd Blankfein, among others. The room was filled with some of the most influential and powerful men in the country. These titans of industry have large sums of money to throw around at politicians. CEO John Mack revealed some of his political influence when Gary J. Aguirre, a former Securities and Exchange Commission (SEC) enforcement lawyer raised questions about whether the SEC ignored the toughest cases of alleged Wall Street wrongdoing. Aguirre also accused the agency of firing him after he pressed unsuccessfully to interview the Morgan Stanley’s John Mack who was suspected of insider trading. Aguirre contended that the agency did not want to interview the Wall Street tycoon because of his "political clout." Mack was a major fundraiser for the Bush campaign; he raised more than $200,000 for President Bush in 2004 (Gross). Lloyd Blankfein and others from Goldman Sachs contributed $994,795 to Democrats in the 2008 Presidential race (Malkin). On the one hand, one can argue that campaign contributions are perfectly legal but on the other hand one has to question whether these exorbitant amounts of contributions are part of a revolving quid pro quo agenda. Charles Ferguson in an interview with Charlie Rose asserted that three changes could be made to make the system work better. First, change the roll of money in elections, second, pay regulators well, and three, and enact a regulatory body that will enforce the regulatory laws that exist. Until that happens or an attempt is made to move in that direction our system will be damaged beyond repair, and according to Matt Taibbi’s article in Rolling Stone, “Everything will stay fucked up, and nobody will go to jail.” Works Cited

http://www.ft.com/home/us (Lahde A.) Lahde Capital letter to Investors. Retrieved June 25, 2012 http://money.cnn.com/2010/07/02/news/economy/jobs_gone_forever/index.htm (Isidore C.) 7.9 million jobs lost - many forever. Retrieved June 24, 2012 http://www.newsweek.com/2007/10/13/dems-are-the-new-republicans.html (gross D.) Dems Are the New Republicans. Retrieved June 24, 2012 http://www.nypost.com/p/news/opinion/opedcolumnists/all_the_president_goldman_men_ (Malkin M) All the President’s Goldman men. Retrieved June 25, 2012