A popular documentary, Inside Job, captured kudos at the 2010 Academy Awards. Its hard-hitting analysis marked a milestone among filmmakers for shining light in the dark corners of Wall Street. Writer, producer and director Charles Ferguson provided a public service by exposing key perpetrators.
Laudable yet incomplete, Ferguson’s popular film left unaddressed the all-important “how.” The storyline left moviegoers with the impression that the film’s featured insiders operated virtually alone in perpetrating history’s greatest heist. In truth, the real “inside job” is far more sinister and remains ongoing.
The latest Wall Street mega-fraud required that “the mark” (the public) first be induced to embrace a mindset that grants financial signals not just deference but outright dominance. The pre-staging of that perspective required education to internalize a shared consensus that then worked its way into policymaking and law.
To suggest that those portrayed could commit a crime of such enormity without broad-based acquiescence leaves a defrauded public looking for culprits in the wrong places. While those Ferguson featured should be indicted and prosecuted, their conviction alone would leave untouched the internalization of a consensus mindset fully capable of enabling the next fraud.
To preclude the next swindle requires that a long-deceived public grasp the common source of this deceit. While it’s true that those featured are masterful manipulators of Wall Street conditions, those conditions are “downstream” of a widely shared viewpoint.
This fraud-enabling perspective first gained traction in the US as the “Chicago model” with careful nurturing by proponents at the University of Chicago and other top universities. This money myopic world view soon matured into the “law and economics” movement that gradually embedded this shared belief in the US law and then re-branded this mindset worldwide as the US-discrediting “Washington consensus.”
Those portrayed in Inside Job are problematic. But they alone are not the perpetrators. Incarcerate or execute those portrayed and the problem remains.
The real perpetrator is a false “generally accepted truth.” The culprit in this ongoing fraud is a finance-fixated mindset — firmly embedded in academia — that induces us to believe that financial signals should determine our course, both personally and even geopolitically.
Over decades, that mental framework worked its way into the law of the land. Pension plans, for example, are required by law to pursue the best risk-rated returns with little regard for the non-financial impact of their investments.
Pension fiduciaries dare not concern themselves with issues outside the narrow framework of the money-myopic consensus mindset. To do so risks a lawsuit by pension beneficiaries and the federal law was written to ensure that noncompliant fiduciaries lose.
As funds under management in the US surged from $800 billion in 1980 to $16.6 trillion by April 2007, the impact of this “Chicago” mindset grew apace. Retirement funds, in turn, provided a ready market for those selling subprime mortgages that were certified as safe by corrupt securities’ ratings from Moody’s, Standard and Poor’s and Fitch.
Wall Street analysts liken the subprime swindle to a financial heart attack from which recovery is destined to be long and labored. Yet not a word has been muttered about the mindset that enabled this latest mega-fraud and will, if not changed, ensure the next con.
The power of shared beliefs is a force easily underestimated. A similar displacement of facts with consensus beliefs induced the US invasion of Iraq. We now know that the intelligence on which the US relied was manipulated around a preset agenda. The duplicity that undermined US national security mirrors the deceit that ravaged Baby Boomer retirement security.
These parallel frauds dramatically weakened the US financially, militarily and diplomatically. If such deception is not treason, what is?
Recovery from this ongoing fraud requires that we recognize the internalized nature of this duplicity. Even now, we Americans are still being induced to freely embrace the very forces that jeopardize our freedom.
US national security lies as much in our financial strength as in our military capabilities. To restore that strength requires a sensible and sustainable path forward. At present, we grant deference to a mindset that, by law, displaces those values not calculable in money. To survive and thrive, both democracies and markets require better signals.
Over several decades, we were induced to view the pursuit of financial returns as a proxy for our pursuit of happiness. Today’s outcomes became predictable once we could be seduced to embrace that false equivalence and embed its flawed metrics in law.
Inside Job revealed the most visible perpetrators. Though that’s a good start, the real inside job continues to jeopardize our security, both national and financial. The most troublesome culprit remains securely embedded inside a shared mindset patiently awaiting the next opportunity.