I was listening to the C-SPAN Q&A podcast which was an interview with producers Leslie and Andrew Cockburn on their new independent film called American Casino which chronicles the breakdown of subprime lending via Wall Street. The starting point is subprime mortgage lending in poor neighborhoods of Baltimore.
The foil is Phill Gramm, Chairman of the Senator Finance Committee who in a masterstroke of politcal management, on December 15, 2000 at 7pm, appended a 260 page financial de-regulation bill to an 11,000 page appropriations bill just before the holidays, and because it was in the 11th hour, it was likely few read it and Clinton signed it. The bill exempted the financial instruments used in the credit boom from federal and state regulations – free of any supervision.
Gramm is now Vice Chairman of UBS.
This topic is nothing we haven’t heard before but its focus on Gramm is an interesting angle. I listened to the entire C-SPAN interview and while I enjoyed it, the story feels a bit tardy (although certainly very important because the pain is still playing out).
This systemic breakdown will continue to facsinate many for generations to come – hopefully serve as case study fodder at MBA programs as well.
The film credit pronouces:
“AMERICAN CASINO IS A POWERFUL AND SHOCKING LOOK AT THE SUBPRIME LENDING SCANDAL. IF YOU WANT TO UNDERSTAND HOW THE US FINANCIAL SYSTEM FAILED AND HOW MORTGAGE COMPANIES RIPPED OFF THE POOR, SEE THIS FILM.”
-Joseph Stiglitz, Nobel prize-winning economist
A few days after I heard the podcast, a federal judge threw out the lawsuit by the city of Baltimore against Well Fargo:
ruling that the city could not prove that the bank’s lending practices had resulted in broad damage to poor neighborhoods.
Perhaps a case of bad timing for the film makers? But but still a compelling story.