Is “Inside job” doing an inside job on us?

“Inside Job” the Oscar winning documentary on the financial crisis that has put the global financial stability in jeopardy touches upon most issues and actors involved, spending even several minutes of the role of cocaine and prostitutes. Yet, amazingly, it does not mention even once the Basel Committee for Banking Supervision, the global bank regulator and that in my opinion is the one most to blame for the crisis.

Should it? In one of the opening scenes of “Inside Job” refers to the Securities and Exchange Commission’s meeting on April 28, 2004 when the SEC authorized the investment banks to dramatically increase their leverage, among other when investing in securities backed by mortgages to the subprime sector. That SEC resolution explicitly made an explicit reference that it has all to be done “consistent with the Basel Standards”.

Is “Inside job” doing an inside job on us?

Scary indeed!

Over 90 percent of the direct explanation of this crisis is to be found in the more than two trillions lost over a very short period of time, in triple-A rated securities collateralized by lousily awarded mortgages in the subprime sector. The marketability of these securities, and of the value of an AIG´s triple-A ratings, had been so extremely, almost obnoxiously, increased by the Basel Committee when they, in June 2004, with Basel II, allowed the banks to invest in these securities requiring only a 1.6 percent of a quiet loosely defined capital, signifying that the banks could leverage their equity over 60 times, signifying that if a bank expected to made a .5 percent margin on a triple-A rated securities they could make over 30 percent of return on their equity.

I just saw the “Inside Job” the film about “The Global economic crisis of 2008 cost ten millions of people their savings, their jobs, and their home. This is how it happened”. The movie is promoted as “Scarier than anything Wes Craven and John Carpenter have ever made”

Covering in a good and expensive production almost all under the sun, like money laundering by Riggs bank for Pinochet, academicians writing papers without disclosing that they have been paid to do so, the role of prostitutes and cocaine in finance, as well as most of the other actors we have seen related to this crisis over the last couple of years, the movie does not mention, not even once, the Basel Committee and it brethren the Financial Stability Board; just like the recent over 2.000 pages of financial reform approved by the US Congress does not mention them either.

Since the Basel Committee and the Financial Stability Board are now preparing Basel III, that is indeed as scary as it gets!

Mary and Richard Corliss of the Time opine “If you´re not ENRAGED by the end of the movie, you weren´t paying attention”. I paid much attention and by the end of the movie I was also enraged AT the movie.