Alterations of Reality
It’s time to call it a day.
Burst your pretty balloons,
Taking the moon away.
—The Smoking Popes, “The Party’s Over”
Testifying before the Congressional Committee for Oversight and Government Reform on 23 October 2008, Alan Greenspan was asked by Henry Waxman to explain how he came to be in a “state of shocked disbelief” concerning the economy. “I found a flaw,” he answered, “in the model that I perceived as the critical functioning structure that defines how the world works.” When Waxman rephrased—“In other words, you found that your view of the world, your ideology, was not right, was not working”—Greenspan nodded. “Precisely. That’s precisely the reason I was shocked, because I had been going for 40 years or more [on this model] with very considerable evidence that it was working exceptionally well.”
While some will argue with Greenspan’s interpretations of that “very considerable evidence,” his expression of shock surely resonated. As reported in Leslie and Andrew Cockburn’s American Casino, many members of the collapsing financial services industry were similarly alarmed, their expectations and fortunes suddenly transformed. The documentary, which opens today at New York’s Film Forum, begins by posing a question: “The U.S. government has pledged over $12 trillion on behalf of American taxpayers to bail out Wall Street. Most people would like to know why.” Greenspan and other authorities don’t exactly have answers, other than admitting they were somehow wrong about what could happen in an increasingly unregulated system. And so the film seeks explanations elsewhere, speaking with journalists, lawyers, and victims of the collapse, specifically, people who have lost homes they (thought they) purchased with the help of subprime mortgages.
Featuring interviews with experts as well as those who signed subprime mortgage contracts, the film includes montages under music by Moby, Bruce Springsteen (singing Woody Guthrie’s “I Ain’t Got No Home”), and artists like the Smoking Popes, tracks addressing the class and race politics of depression and loss. As its title indicates, American Casino argues that the subprime system was fundamentally and always risky, with the bulk of that jeopardy imposed on borrowers. Financial reporter Mark Pittman observes that banks were behaving “like a bookie,” but not telling borrowers they were being treated as “chips.” It didn’t matter to lenders that consumers didn’t understand how their contracts worked, as long as money was flowing to the top. And so, while Phil Gramm’s July 2008 assessment that the United States was becoming “a nation of whiners” seemed insensitive to those who were suffering material and actual losses, his attitude was hardly unique. Michael Greenberger, former Director for Trading and Markets at the Commodity Futures Trading Commission, says Gramm’s work to deregulate banks (beginning in 2000, when he was chair of the Senate Finance Committee) led directly to the crisis. “The lack of supervision,” Greenberger says, “freed Wall Street to essentially shoot itself in both feet.”
The problem was and seems always to be greed. As Greenberger puts it, “Banks got so cocky because they thought they were passing the risk off”—though elaborate financial tools such as Collateralized Debt Obligations (CDOs), approved by corrupt credit rating agencies. (The film includes several internal rating agency emails, including one from Standard & Poor’s that jokes, “If it was structured by cows, we’d rate it.”) Frank Raiter, former Managing Director of one such agency, resigned in 2005 because, he says, “In terms of our code of ethics, we were supposed to be maintaining and striving to develop the best criteria in the world and we weren’t doing that.”
Such practices have resulted in multiple crises. The film argues that these targeted specific communities. Its interview subjects include a high school teacher, a minister, and a clinical psychologist, all losing their homes, all educated individuals who regularly educate their communities regarding “social justice and human rights.” In fact, civil rights attorney John Relman argues, “This is the civil rights issue of the 2000s, because it just as invidious, just as destructive as the overt barriers to integration that we saw in the 1960s.” devastating whole neighborhoods, the subprime mortgage crisis was never unforeseeable. Indeed, Robert Strupp of the Community Law Center in Baltimore says, “There seems to be enough evidence to suggest that minorities were put into these loans and deceived and misled into these unsuitable loan products.” He underlines that these “liar loans” were designed as such: “These kinds of alterations of reality not being made by the borrowers.”
The documentary shows various consequences of these deceptions. Baltimore Mayor Sheila Dixon describes the municipal costs involved in policing neighborhoods full of foreclosed houses (one poignant sequence shows a city worker boarding up homes). Marketing Professor Vanessa Perry of George Washington University decodes several advertisements for subprime loans, noting the emotional appeals to fears and worries. And Reverend Almelene Emily Wade describes the effects of being suddenly homeless. “You lose more than a home,” she says, “You lose your identity… you lose your feeling of safety. You lose everything. It destroys people.” This destruction is tragic in so many ways, not least because it has affected people who, as Pittman says, did not “understand that they were in a casino.”