I am glad that Academics tied up with messing up the USA society and political economy are being fingered, named and shamed by this director and author. I observed this abuse while studying at Texas A & M University personally a little over a decade ago. –KAS
Two years after directing the Academy Award-winning documentary, “Inside Job,” filmmaker Charles Ferguson returns with a new book, “Predator Nation: Corporate Criminals, Political Corruption, and the Hijacking of America.” Ferguson explores why no top financial executives have been jailed for their role in the nation’s worst economic crisis since the Great Depression. We also discuss Larry Summers and the revolving door between academia and Wall Street, as well as the key role Democrats have played in deregulating the financial industry. According to Ferguson, a “predatory elite” has “taken over significant portions of economic policy and of the political system, and also, unfortunately, major portions of the economics discipline.”
AMY GOODMAN: Talk about—what is so fascinating in Predator Nation is looking at the academic part of the network that you talk about misleading us, the ivory tower.
CHARLES FERGUSON: Yes, this is a problem that I think many Americans remain unaware of. I was quite struck when my film was released that most people who saw the film and spoke with me afterwards commented that the section on the economics discipline was the most surprising and shocking to them. What has happened is that over the same period of time, roughly the last 30 years, that money has become so much more important in American politics, it has also become more important in American academia. And the same interest groups, companies, industries, that began contributing to political campaigns and building up lobbying organizations and engaging in revolving-door hiring in the political sphere also began doing the same thing in American academia, to the point that now there is actually an industry, an industry that’s probably a couple of billion dollars a year, of selling academic expertise for people who have public policy or legal or law enforcement problems.
AMY GOODMAN: Charles, let’s go to a clip of Inside Job that deals with this, the links between academics at elite institutions in the U.S. and the financial industry. Here you talk to economics professors at Columbia as well as at Harvard.
CHARLES FERGUSON: Over the last decade, the financial services industries made about $5 billion worth of political contributions in the United States. That’s kind of a lot of money. That doesn’t bother you?
MARTIN FELDSTEIN: No.
MATT DAMON: Martin Feldstein is a professor at Harvard and one of the world’s most prominent economists. As President Reagan’s chief economic adviser, he was a major architect of deregulation. And from 1988 until 2009, he was on the board of directors of both AIG and AIGFinancial Products, which paid him millions of dollars.
CHARLES FERGUSON: You have any regrets about having been on AIG’s board?
MARTIN FELDSTEIN: I have no comments. No, I have no regrets about being on AIG’s board.
CHARLES FERGUSON: None?
MARTIN FELDSTEIN: That I can say. Absolutely not. Absolutely not.
CHARLES FERGUSON: OK. You have any regrets about AIG’s decisions?
MARTIN FELDSTEIN: I cannot say anything more about AIG.
GLENN HUBBARD: I’ve taught at Northwestern and Chicago, Harvard and Columbia.
MATT DAMON: Glenn Hubbard is the dean of Columbia Business School and was the chairman of the Council of Economic Advisers under George W. Bush.
CHARLES FERGUSON: Do you think the financial services industry has too much political power in the United States?
GLENN HUBBARD: I don’t think so, no. I certainly—you certainly wouldn’t get that impression by the drubbing that they regularly get in Washington.
MATT DAMON: Many prominent academics quietly make fortunes while helping the financial industry shape public debate and government policy. The Analysis Group, Charles River Associates, Compass Lexecon, and the Law and Economics Consulting Group manage a multi-billion-dollar industry that provides academic experts for hire. Two bankers who use these services were Ralph Cioffi and Matthew Tannin, Bear Stearns hedge fund managers prosecuted for securities fraud. After hiring the Analysis Group, both were acquitted. Glenn Hubbard was paid $100,000 to testify in their defense.
CHARLES FERGUSON: Do you think that the economics discipline has a conflict of interest problem?
GLENN HUBBARD: I’m not sure I know what you mean.
CHARLES FERGUSON: Do you think that a significant fraction of the economics discipline, number of economists, have financial conflicts of interests that in some way might call into question or color—
GLENN HUBBARD: Oh, I see what you’re saying. I doubt it. You know, most academic economists, you know, aren’t wealthy business people.
MATT DAMON: Hubbard makes $250,000 a year as a board member of MetLife and was formerly on the board of Capmark, a major commercial mortgage lender during the bubble, which went bankrupt in 2009. He has also advised Nomura Securities, KKR Financial Corporation and many other financial firms.
AMY GOODMAN: That was a clip of the Oscar-winning documentary Inside Job, narrated by the actor Matt Damon. Our guest is Charles Ferguson, who’s followed up this film with Predator Nation: Corporate Criminals, Political Corruption, and the Hijacking of America. Now, can you talk about how these academics, who also become pundits on television, which is a lot of how people come to understand the issues, missed the financial crisis of 2008, certainly didn’t predict it, but they were profiting from it, Charles Ferguson? And bring in Larry Summers when you’re talking about all of this, who was formerly the president of Harvard.
CHARLES FERGUSON: Yes. Unfortunately, Larry Summers, who I’ve known slightly for a very long time, is kind of Exhibit A with regard to this phenomenon. So, there is now—the revolving door is now a kind of three-way or triangular affair involving academia, politics and policy positions, and major industries, and financial services is probably the most important of them. Slightly behind would be energy and telecommunications.
Larry Summers, first as an academic and then as a senior government official—by this point, he’s held almost every senior policy position in economics—argued strongly for and participated in a very serious way in the deregulation of the American financial services industry. After he left the Clinton administration, where he eventually became secretary of the treasury, he became president of Harvard. And even while serving as president of Harvard, he began making large numbers of speeches to financial organizations for very high rates of pay. And also, he began consulting for hedge funds. After he was forced out as president of Harvard, he increased his consulting activities, earning $5 million a year for one day a week of work at a hedge fund called D.E. Shaw, and making over a million dollars a year giving speeches to financial organizations. And at the same time, he continued to participate in policy debates. And most famously, in 2005, he was president at the Jackson Hole conference, which is the most important annual conference of central bankers in the world. And at that conference, Raghu Rajan, who was then—he’s a very famous economist who was then the chief economist of the IMF—delivered a paper in which he warned about the growth of risk in the financial services industry and the potential for a catastrophic economic meltdown as a result of increased risk taking in finance. And Summers, at the end of Rajan’s presentation, stood up and very, very brutally criticized him and dismissed all of his concerns.
So, there have been many other examples of other people who have engaged in similar behavior. Glenn Hubbard is certainly one. Glenn Hubbard is now a senior economic adviser to the Romney campaign. It’s unfortunately become a completely bipartisan issue. Economists who support both political parties have very strong financial ties to the financial services industry and have continued to support deregulation.