Opinion.

“Nobody ever tells you what really happened.”

–Bill Clinton

The import of Moore’s film is that true news–investigation, understanding and dramatic explanation–about the Great Recession is precious to come by. He surely does not bring it. Very plausibly he can be forgiven his failure: he may not know enough (few do); surely he found problems in gaining access.

Damningly, though, he may not even have had the indignant curiosity. One has heard of the private jet, the entourage, the working man’s uniform. He is, of course, a pop entertainer, and presumably he keeps in mind that he’ll never go broke underestimating the grasp of his audience, and seldom has he underestimated that grasp. He also knows that a comically presented superficial take on truly bad news sells.

So we should expect what we see in this movie.

However, Capitalism: A Love Story does cause one to ask yet again: Where can we learn about the why of the Great Recession? Perhaps another way of asking the question is, Which people can we trust to bring it to us?

In my own limited digging, these names come to mind so far: Matt Taibbi, Kevin Phillips, Australian Prime Minister Kevin Rudd, Congressman Barney Frank, Senator Byron Dorgan, Michael Lewis, Charles Gasparino, Paul Volcker, Joe Nocera and Bethany McLean, and Nassim Taleb.  Stanford professors Kenneth E. Scott and John B. Taylor have written a valued background piece in The Wall Street Journal back in July, 2009, on opaque complexity in the Financial Sector in the lead-up to the Great Recession. William D. Cohan’s book, House of Cards, is a useful if somewhat tabloid work: I think it shocking that along with Gasparino’s commentary it may be the only narrative to tell the personal stories of typical villains and fools in this sad chapter; at least it denotes Homo sapiens–not “forces” and “dynamics” such as those emphasized by academic and operational economists–as being at the center of the mess: accounts which do not make Homo sapiens the causative focus are dubious as to bringing explanations of the catastrophe and an idea of remedies.

Moore’s film makes you think about the above tiny insightful group because Capitalism: A Love Story does not begin to get at the heart of the matter as does that group. The worst is that Moore trivializes the foolishness and villainy among politicians and financiers, and ignores the pathetic, self-serving failures of the mainstream media to investigate and alert. Of course, no one in the media, even were they to have warned us, would have dared to call out the abject ignorance, dumbing down, and painful distraction of the American people. The customer is always right.

As the movie moves along, Moore is, if anything, basically careless about, if indeed not determined to avoid, any explanatory news. He spends too little time on (and in some cases no time), and makes few useful distinctions about, the culpable power players: the pols, regulators, financial sector leaders, hedge fund managers, economists, and lobbyists. The spirit of these bad times is not really dramatized. Footage of a few villainous principals is shown, and they are called evil capitalists; but the great deception of the Great Recession is not done justice. Capitalism: A Love Story becomes a tired and careful replay of the fail-safe entertainment formula of the victimized salt-of-the-Earth populist being wronged, pluckily organizing, and winning a few limited and largely token battles against the Robber Barons. It’s the old Hollywood formula of saints versus devils. American Founding Fathers are quoted at the end saying things such as: Banks can become more fearsome than armies. But, finally, Moore punts on the logical alternative to his version of “capitalism,” namely socialism (as opposed to most Americans who would never call for socialism). Instead, he calls for a return to “democracy.” It is not clear what he might mean here.

In short, Capitalism: A Love Story is son of Roger and Me. Has it put butts in cineplex seats? That’s the only real question in Hollywood.

Let’s consider a few favorable comparisons to Moore’s bad film.

Here are some words from Michael Lewis in his August, 2009, article in Vanity Fair about A.I.G. and the insane credit default swaps (CDS’s) it issued through its London-based “Financial Products Division”  headed by Joe Cassano:

“A.I.G. F.P.’s willingness to assume the vast majority of the risk of all the subprime-mortgage bonds created in 2004 and 2005 had created a machine that depended for its fuel on subprime-mortgage loans. ‘I’m convinced that our input into the system led to a substantial portion of the increase in housing prices in the U.S. We facilitated a trillion dollars in mortgages,’ says one trader. ‘Just us.’ Every firm on Wall Street was making fantastic sums of money from this machine, but for the machine to keep running the Wall Street firms needed someone to take the risk…. The people inside the big Wall Street firms who ran the machine had made so much money for their firms that they were now, in effect, in charge. And they had no interest in anything but keeping it running. A.I.G. F.P. wasn’t an aberration; what happened at A.I.G. F.P. could have happened anywhere on Wall Street…and did.”

As you know, A.I.G. sold “insurance” against bond defaults, notably those structured with subprime mortgages, to major Wall Street investment banks in the era in which leveraging moved up to the recklessness of 40-1 and above. The “hedging” via A.I.G. et al. was a fundamental means of understating on their books the true risks to the Wall Street banks.

And here are some words from Scott and Taylor in an op-ed in The Wall Street Journal in July, 2009:

“To better understand the magnitude of the problem…we examined the details of several CDOs (Collaterized Debt Obligations)….One example is a $1 billion CDO squared created by a large bank in 2005. It had 173 investments in tranches issued by other pools: 130 CDOs, and also 43 CLOs (Collaterized Loan Obligations) each composed of hundreds of corporate loans. It issued $975 million of four AAA tranches, and three subordinate tranches of $55 million. The AAA tranches were bought by banks and the subordinate tranches mostly by hedge funds….Two of the 173 investments held by this CDO squared were in tranches from another billion-dollar CDO (and so on through considerably amplified complexity beyond this already enormous complexity). …With so much complexity, and uncertainty about future performance…the securities are difficult to price and the trading dried up. Without market prices, valuation on the books of banks is suspect and counterparties are reluctant to deal with each other.”

In short, the complexity grew enormously, and in many financial sector institutions the inmates in effect were running the asylum. Catastrophe arising from excessive risk, as well as simply from the prudent assumption of the possibility of such risk by increasingly uncertain counterparties, was assured.

This news isn’t in Capitalism: A Love Story. It would take a young, ingenious storyteller full of energy and spite to invent how to tell the terrible drama.

Old Aesop might well give us a moral here: once you make the financial sector a nation not of strong-if-prudently-adaptive laws (call them here, “regulations”), you are sure to learn painfully the truth the elderly Mark Twain lamented: “People are no damned good.” Homo sapiens wants to get back to that Paradaisical Garden, mythical as it is (AKA, “I’m going to get mine!”), and he/she is positively ingenious in trying to do so with astronomical margin to spare, given too much of a chance. Moore quotes Jefferson, Franklin and Adams at the end of his movie, but I don’t think he is anywhere near their blend of idealism and cynical practicality. When I saw Alan Greenspan pictured with Rubin, Summers and Geithner–Moore’s Devil’s Quartet–I at once thought of how right fellow-sinner Greenspan has always been at least about the danger of centrally planned economies, if not about Ayn Rand and her folly. So I didn’t pick up the stone at my feet when I saw Greenspan, though I’m glad he’s out of the picture even though he’s in Moore’s picture.