26th October 2011
So where can we turn to for a fresh perspective outside of the financial village to shed light on the ‘why' and ‘what now'? There is an array of films, documentaries and books out there that may help provide some answers to the state the world finds itself in today.
For example, while we may recall famous films as Rogue Trader, which may help explain the more recent UBS rogue trader scandal, there are up-to-date takes on today's global crisis to consider.
Here Mindful Money takes a look at how various forms of creativity taps the truth behind the financial crisis.
Charlotte Higgins asks on her Guardian blog whether it's possible to make "good art out of the financial crisis". "The answer is, obviously, for anyone who saw Enron, yes. But one of the keys to Enron's success was, for me, its departure from realism – which of course is so much easier in theatre than film…Tellingly, perhaps, Enron wasn't even ostensibly about the financial crisis of 2008; but it was certainly "about" it."
Margin Call, however, is a film by first-time writer-director JC Chandor, and based on one day in an investment bank; it stars, among others, Kevin Spacey and Jeremy Irons. In summary, the bank sees the writing on the wall, and its CEO decides to shed a ton of mortgage-backed securities onto its customers, in a move that may save the bank's balance sheet but potentially ruin its reputation.
Joe Weisenthal on the Business Insider blog comments: "They have serious discussions where they go over numbers at big boardroom tables. Traders talk to clients and use phrases like "offloading risk." And they even talk about Value At-Risk. Also: There are Bloomberg terminals galore in the movie." While it may get rave reviews from people in finance, he concludes, it is unlikely to have much commercial appeal.
Daniel Gross from Yahoo Finance says: "Unlike the HBO movie Too Big To Fail, which featured occasional caricatures of familiar characters, Margin Call doesn't dumb down the complex backstory!" Yet despite this, the film is more about, he says – "What happens when an organization faces a crisis and its survival is in doubt? Who steps up, who is sacrificed and who is willing to compromise his beliefs?" It is more about the moral complexity than the financial detail.
But does it succeed as art, or, indeed, giving viewers greater insight into the financial crisis? Neither, it seems, according to many reviewers. Higgins says: "The reason I think it struggles successfully to attain status as either a truly successful thriller or tragedy is that the stakes are low. The jeopardy is: these bankers may become slightly less rich. Now of course it is true that the financial crisis visited real tragedy on all kinds of people, but this is a film emphatically not about those who lost their homes or businesses in the sub-prime crisis…"
There's also the problem that the financial crisis was very complex. How do you explain derivatives to an audience, when even bankers, economists and finance ministers struggled?
Turning to last year's ‘Wall Street: Money Never Sleeps', starring Michael Douglas, Wendy Ides says in the Times (paywall) that "the rapacious greed of the world of high finance feels a little after the fact." She adds: "The financial crisis is a story that moves faster than a Hollywood drama can keep up with."
Alternatively, the one film – or really, documentary – that truly explores the root causes of the financial crisis and, according to bloggers and reviews, does an excellent job, is Inside Job. Such a good job, in fact, it won an Oscar for best documentary.
"Even before the dust has settled, the financial crisis is a subject that's been waiting for the right filmmaker to come along and nail it," says Philip French in The Observer. "Ferguson (director) has a particularly rare combination of assets as a non-fiction filmmaker. He knows how to break down a subject so that it makes fresh sense, to get crucial access to both helpful and hostile interviewees, to corner those running for cover with killer questioning, and to shoot his movies with care and polish."
It takes an investigative stance, rather than the slick glamour of Hollywood blockbusters, to help explain the backdrop. "Anyone unclear on the difference between, say, collateralised debt obligations and credit-default swaps will be helpfully enlightened here, and shown how the colossal gambles of financial institutions amounted to a kind of roulette game with global markets," says French. "Ferguson digs into the psychology of trading, and the madness of bonuses – how the whole culture was incentivised, and still is, to encourage the riskiest and most profitable sales of subprime debt."
The documentary includes brief interviews with some US citizens, including those who have lost their homes and currently live in a Florida encampment called Tent City. But mostly it comprises interviews with those academics, policy makers and investment bankers, including a revealing and uncomfortable George W Bush's chief economic advisor Glenn Hubbard, stresses Tim Robey in the Daily Telegraph. "The main thrust of Ferguson's argument becomes the corruption of a system whose gamekeepers are also its poachers: regulation an
d safety mechanisms are hardly top priorities when the alleged protectors of the economy have so much vested in its exploitation."
It seems that the speed with which the crisis precipitated, and the complexity and sheer amount of material that Ferguson has assembled, makes for a complex narrative, but one that works – in contrast to its fictional Hollywood counterparts.
If you'd rather read about the crisis, there is the contemporary thriller on the world of high finance – The Fear Index by Robert Harris. The book is set in a Geneva-based algorithmic hedge fund. The company at the heart of his story has developed an artificially intelligent, "self-learning" computer model that trawls the world for information, allowing its traders to anticipate market movements prompted, usually, by some disaster or failure.
But having delivered this novel about predicting the future, Harris says in the Guardian: "I've written a piece of fiction that suddenly starts coming true around me – the markets are crashing and people are blaming algorithms. I worry I'm going to be devoured by my own monster." As a guide to what hedge funds actually do, the book is fairly instructive – and without realising, Harris has created a novel that adds to our understanding of market collapse.
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