【InsideJob】【监守自盗】英文字幕.doc

Inside JobIceland is a stable democracywith a high standard of living - and, until recently -and government debt.We had the complete infrastructure of a modern society.Clean energy, food production.Fisheries with a quota systemto manage them.Good healthcare, education,clean air.Not much crime.Its a good place for families to live.We had almostend-of-history status.But in 2000, Icelands governmentbegan a broad policy of deregulation -disastrous consequences -and then for the economy.They started by allowing multinationalcorporations like Alcoa -aluminum-smelting plants - and exploit lcelands geothermaland hydroelectric energy sources.Many of the most beautiful areasin the highlands -are geothermal.So nothing comeswithout consequence.At the same time -Icelands three largest banks.The result was one ofthe purest experiments -ever conducted.We have had enough.How could all of this happen?Finance took overand more or less wrecked the place.In a five-year period,these three tiny banks -outside of lceland - borrowed 1 20 billion dollars - 1 0 times the sizeof Icelands economy.The bankers showered moneyon themselves -There was a massive bubble.Stock prices went upby a factor of nine.House prices more than doubled.Icelands bubble gave rise to peoplelike Jon Asgeir Johannesson.He borrowed billions to buy uphigh-end retail businesses in London.He also boughta pinstriped private jet - a 40-million-dollar yacht -Newspapers always hadthe headline:This millionaire boughtthis company -or in France or wherever - instead of saying:This millionaire tooka billion-dollar loan - to buy this company,and he took it from your local bank.The banks set upmoney market funds -deposit-holders to withdraw money -in the money market funds.The Ponzi scheme neededeverything it could.American accounting firmslike KPMG -and investment firms -And American credit-rating agenciessaid lceland was wonderful.In February 2007 -to the highest possible rate, triple-A.It went so far as the government heretraveling with the bankers -When Icelands banks collapsedat the end of 2008 -in six months.There is nobody unaffectedin Iceland.A lot of people lost their savings.Yes, thats the case.Government regulators who shouldvebeen protecting the citizens -You have two lawyers fromthe regulator going down to a bank -When they approach the bank - they would see 1 9 SUVsoutside the bank.You enter the bank - and you have the 1 9 lawyerssitting in front of you, right - very well prepared,ready to kill any argument you make.And then, if you do really well,theyll offer you a job.One-third of Icelandsfinancial regulators -But this isa universal problem, huh?In New York,you have the same problem, right?What do you thinkof Wall Street incomes these days?Excessive.Ive been toldits extremely difficult for the lMF -I wouldnt say that.We deeply regret our breachesof U.S. law.Theyre amazed at how much cocainethese Wall Streeters can use -and go to work the next day.I didnt knowwhat credit default swaps are.Im a little bit old-fashioned.Has Larry Summersever expressed remorse?I dont hear confessions.The governmentsjust writing checks.Thats plan A, thats plan Band thats plan C.Would you support legal controlson executive pay?I would not.Are you comfortable with the levelof compensation in financial services?If theyve earned it, yes, I am.-Do you think theyve earned it?And so youve helped these peopleblow the world up?You could say that.They were having massiveprivate gains at public loss.When you think you can createsomething out of nothing - its difficult to resist.Im concerned peoplewant to go back to the old way -prior to the crisis.I was getting a lot of anonymouse-mails from bankers saying:You cant quote me,but Im really concerned.Why do you think there isnt -being undertaken?Because thenyoull find the culprits.You think Columbia Business Schoolhas any conflict-of-interest problem?I dont see that we do.The regulators didnt do their job.They had the power to do every casethat I made. They just didnt want to.Lehman Brothers,one of the most venerable - and biggest investment banks,was forced to declare itself bankrupt.Another, Merrill Lynch,was forced to sell itself today.World financial markets are way down,following dramatic developments - .In September 2008 -investment bank Lehman Brothers - and the collapse of the worldslargest insurance company, AIG -Fears gripped markets overnight - .Stocks fell off a cliff.The largest single point dropin history.Share prices continued to tumble -of the Lehman collapse.The result was a global recession -tens of trillions of dollars - rendered 30 million peopleunemployed -of the United States.With the destructionof equity and housing wealth - the destruction of income,of jobs - 50 million people globally couldend up below the poverty line again.This is justa hugely, hugely expensive crisis.This crisis was not an accident.It was causedby an out-of-control industry.Since the 1 980s -has led to a series -financial crises.Each crisis has causedmore damage -more and more money.After the Great Depression - the United States had 40 yearsof economic growth -The financial industrywas tightly regulated.Most regular bankswere local businesses - prohibited from speculating - with depositors savings.lnvestment banks, which handledstock and bond trading -In the traditionalinvestment banking model - the partners put the money up -very carefully.They wanted to live well - but they didnt want to bet the ranchon anything.Paul Volcker servedin the Treasury Department -Federal Reserve from 1 979 to 1 987.Before going into government -at Chase Manhattan Bank.When I left Chaseto go in the Treasury in 1 969 -of $45,000 a year.Forty-five thousand dollars a year.Morgan Stanley, in 1 972 -1 1 0 total personnel - one office,and capital of 1 2 million dollars.Now Morgan Stanleyhas 50,000 workers - and has capital of several billion -in the 1 980s,the financial industry exploded.The investment bankswent public -of stockholder money.People on Wall Streetstarted getting rich.I had a friendwho was a bond trader - at Merrill Lynch in the 1 970s.He had a job as a train conductorat night -and couldnt support them -By 1 986,he was making millions of dollars -it was because he was smart.The highest order of businessbefore the nation -our economic prosperity.In 1 981 , President Ronald Reaganchose as Treasury secretary -Merrill Lynch, Donald Regan.Wall Street and the presidentsee eye to eye.Ive talked to leaders of Wall Street.They say, Were behindthe president 1 00 percent.The Reagan administration -and financial lobbyists - started a 30-year periodof financial deregulation.in 1 982,the Reagan administration -savings-and-loan companies -investments with depositors money.By the end of the decade -companies had failed.This crisis cost taxpayers$1 24 billion -their life savings.It may be the biggest bank heistin our history.Thousands of executives went to jailfor looting their companies.One of the most extreme caseswas Charles Keating.Mr. Keating, got a word?In 1 985, when federal regulatorsbegan investigating him -named Alan Greenspan.In this letter to regulators - Greenspan praised Keatingssound business plans and expertise -Keating to invest customers money.Keating reportedlypaid Greenspan $40,000.Keating went to prisonshortly afterwards.As for Alan Greenspan -chairman of Americas central bank -Greenspan was reappointed -and George W. Bush.During the Clinton administration -under Greenspan -Robert Rubin -investment bank Goldman Sachs - and Larry Summers,a Harvard economics professor.The financial sector,Wall Street being powerful - having lobbies, lots of money - step by step,captured the political system.Both on the Democraticand the Republican side.By the late 1 990s, the financial sectorhad consolidated - into a few gigantic firms,each of them so large -the whole system.And the Clinton administrationhelped them grow even larger.ln 1 998,Citicorp and Travelers merged - to form Citigroup -company in the world.The merger violatedthe Glass-Steagall Act -after the Great Depression -with consumer deposits -risky investment-banking activities.It was illegal to acquire Travelers.Greenspan said nothing.The Federal Reserve gave theman exemption for a year -ln 1 999,at the urging of Summers and Rubin -the Gramm-Leach-Bliley Act -as the Citigroup Relief Act.It overturned Glass-Steagall -for future mergers.Why do you have big banks?Because banks like monopoly power,lobbying power.Because banks knowthat when theyre too big -Markets are inherently unstable.Or at least potentially unstable.An appropriate metaphoris the oil tankers.They are very big - and therefore,you have to put in compartments -the sloshing around of oil -The design of the boathas to take that into account.And after the Depression -these very watertight compartments.And deregulation has ledto the end of compartmentalization.The next crisis cameat the end of the 90s.The investment banks fueleda massive bubble in lnternet stocks -in 2001 - that caused $5 trillionin investment losses.The Securities and ExchangeCommission, the federal agency -to regulate investment banking -In the absence of meaningfulfederal action -of self-regulation - its become necessary for othersto step in -Eliot Spitzers investigationrevealed the investment banks -they knew would fail.Analysts were being paid based onhow much business they brought in.What they said publicly was quitedifferent from what they said privately.Infospace,given the highest possible rating -as a piece of junk.Excite, also highly rated,called such a piece of crap.The defense that was profferedby many of the investment banks - was not youre wrong - it was, Everybodys doing it,everybody knows its going on.Nobody should relyon these analysts anyway.ln December, 2002 - 1 0 investment banks settledthe case for a total of $1 .4 billion -to change their ways.Scott Talbott is the chief lobbyist forthe Financial Services Roundtable - one of Washingtonsmost powerful groups -worlds largest financial companies.Are you comfortable with the fact thatseveral of your member companies -in large-scale criminal activity?-l- Youll have to be specific. And first of all, criminal activityshouldnt be accepted, period.Since deregulation began,the worlds biggest financial firms -money, defrauding customers -again and again and again.Credit Suisse helped funnel moneyfor Irans nuclear program - and for lransAerospace Industries Organization -Any information that would identify itas lranian would be removed.The bank was fined $536 million.Citibank helped funnel $1 00 millionof drug money out of Mexico.Did you comment thatshe should, quote:Lose any documents connectedwith the account?I said that in a kidding manner.I did not mean it seriously.Between 1 998 and 2003 -by more than $1 0 billion.These accounting standardsare complex -over which experts often disagree.CEO Franklin Raines, who used to bePresident Clintons budget director - received over $52 millionin bonuses.When UBS was caught helpingwealthy Americans evade taxes -with the government.Would you be willingto supply the names?-lf theres a treaty framework.Youve agreed you participatedin a fraud.But while the companies faceunprecedented fines -have to admit any wrongdoing.When dealing with this many products,this many customers, mistakes happen.The financial services industryseems to have a level of criminality -You know, when was the last timethat Cisco - or lntel or Google or Apple or IBM,you know-?I agree about high-techversus financial services-High-tech is a creative business - where the value generation -actually creating something new.Beginning in the 1 990s -and advances in technology -financial products called derivatives.Economists and bankersclaimed they made markets safer.But instead,they made them unstable.Since the end of the Cold War - a lot of former physicists,mathematicians - decided to apply their skills - not on, you know,Cold War technology -And togetherwith investment bankers-You know, as Warren Buffett said,weapons of mass destruction.Regulators, politicians,business people -the threat of innovation -of the financial system.Using derivatives -on virtually anything.They could bet on the rise or fallof oil prices - the bankruptcy of a company,even the weather.By the late 1 990s - derivatives were a 50-trillion-dollarunregulated market.ln 1 998,someone tried to regulate them.Brooksley Born graduated firstin her class at Stanford Law School -to edit a major law review.After running the derivatives practiceat Arnold & Porter - Born was appointed by Clinton -Trading Commission -the derivatives market.Brooksley Born asked meif l would come work with her.We decided that this was a serious,potentially destabilizing market.In May of 1 998, the CFTC issueda proposal to regulate derivatives.Clintons Treasury Departmenthad an immediate response.I happened to gointo Brooksleys office -the receiver on her telephone -from her face.And she looked at me and said,That was Larry Summers.He had 1 3 bankers in his office.He conveyed itin a very bullying fashion -Banks were now reliant for earningson these activities.And that led to a titanic battleto prevent this from being regulated.Shortly after the phone callfrom Summers - Greenspan, Rubin,and SEC chairman Arthur Levitt -condemning Born -to keep derivatives unregulated.Regulation ofderivatives transactions -by professionals is unnecessary.She was overruled, unfortunately.First by the Clinton administration -In 2000, Senator Phil Gramm tooka major role in getting a bill passed -derivatives from regulation.They are unifying markets,reducing regulatory burden.I believe we need to do it.It is our very great hope -to move this year - on legislation that,in a suitable way -for OTC derivatives.I wish to associate myself -of Secretary Summers.ln December of 2000,Congress passed -Modernization Act.Written with the helpof financial-industry lobbyists -of derivatives.After that, it was off to the races.Use of derivativesand financial innovation - exploded dramatically after 2000.By the time George W. Bushtook office in 2001 -was vastly more profitable -than ever before.Dominating this industrywere five investment banks - two financial conglomerates -companies -And linking them all togetherwas the securitization food chain.A new systemwhich connected trillions of dollars -with investors all over the world.Thirty years ago,if you went to get a loan for a home -expected you to pay him or her back.You got a loan from a lenderwho wanted to be paid back.Weve since developed securitization,whereby people who make the loan -if they fail to repay.In the old system, when a homeownerpaid their mortgage every month -to their local lender.And since mortgages took decadesto repay, lenders were careful.In the new system, lenders soldmortgages to investment banks.The banks combinedthousands of mortgages and loans - including car loans, student loans,and credit card debt -collateralized debt obligations -The investment banks then soldthe CDOs to investors.Now when homeowners paidtheir mortgages -all over the world.The investment bankspaid rating agencies - to evaluate the CDOs -were given a triple-A rating -investment grade.This made CDOs popularwith retirement funds -highly rated securities.This systemwas a ticking time bomb.Lenders didnt care anymore aboutwhether a borrower could repay -riskier loans.The investment banksdidnt care either.The more CDOs they sold,the higher their profits.And the rating agencies, which werepaid by the investment banks -of CDOs proved wrong.You werent gonna be on the hook,there werent regulatory constraints.So it was a green light to justpump out more and more loans.Between 2000 and 2003 -made each year nearly quadrupled.Everybody in this securitizationfood chain -until the end - didnt care aboutthe quality of the mortgage.They were caringabout maximizing their volume -In the early 2000s -in the riskiest loans, called subprime.When thousands of subprime loanswere combined to create CDOs -triple-A ratings.Now, it would have been possibleto create derivative products - that dont have these risks -of deductibles -that can be taken on, and so forth.-They didnt do that, did they?-They didnt.In retrospect, they shouldve done.So did these guys know they weredoing something dangerous?I think they did.All the incentives financial institutionsoffered to their mortgage brokers the most profitable products -If they make more money,thats where theyll put you.Suddenly, hundreds of billionsof dollars a year -the securitization chain.Since anyone could geta mortgage -and housing prices skyrocketed.The result was the biggestfinancial bubble in history.Rea