www.sonyclassics.com/awards-information/insidejob_screenplay.pdf
Page - 20
ANDREW SHENG: Since the, uh, end of the Cold War, uh, a lot of, uh, phys-, former
physicists and mathematicians decided to u-, apply their skills not on, you know, Cold
War technology, but on financial markets. And uh, together with investment bankers and
hedge funds –
CHARLES FERGUSON: Creating different weapons.
ANDREW SHENG: Absolutely! You know, as Warren Buffett said; you know, weapons
of mass destruction.
01:23:25.23
{ANDREW LO
PROFESSOR & DIRECTOR
MIT LABORATORY FOR FINANCIAL ENGINEERING}
ANDREW LO: Regulators, politicians, and businesspeople did not take seriously the
threat of financial innovation on the, uh, the stability of the financial system.
NARRATOR: Using derivatives, bankers could gamble on virtually anything. They could
bet on the rise or fall of oil prices, the bankruptcy of a company; even the weather. By the late 1990s, derivatives were a 50-trillion-dollar unregulated market.
01:23:54.20
In 1998, someone tried to regulate them.
Brooksley Born graduated first in her class at Stanford Law School, and was the first
woman to edit a major law review. After running the derivatives practice at Arnold &
Porter, Born was appointed by President Clinton to chair the Commodity Futures Trading
Commission, which oversaw the derivatives market.
MICHAEL GREENBERGER: Brooksley Born asked me if I would come work with her.
Uh, we decided that this was a serious, potentially destabilizing market.
{MICHAEL GREENBERGER
FORMER DEPUTY DIRECTOR (1997-2000)
COMMODITY FUTURES TRADING COMMISSION}
NARRATOR: In May of 1998, the CFTC issued a proposal to regulate derivatives.
Clinton's Treasury Department had an immediate response.
MICHAEL GREENBERGER: I happened to go into Brooksley's office. And she was just
putting down the receiver on her telephone. And the blood had drained from her face.
And she looked at me, and said: That was Larry Summers. He had 13 bankers in his
office. He conveyed it in a very bullying fashion – sort of directing her to stop.
01:25:06.03
{SATYAJIT DAS
DERIVATIVES CONSULTANT
AUTHOR, TRADERS, GUNS & MONEY}
SATYAJIT DAS: The banks were now heavily reliant for earnings on these types of
activities. And that led to a titanic battle to prevent this set of instruments from being
regulated.
ALAN GREENSPAN: Regulation of derivatives transactions that are privately
negotiated, by professionals, is unnecessary.
01:25:38.29
REP. BARNEY FRANK: She was overruled, unfortunately, uh, first by the Clinton
administration; and then by the Congress. In 2000, uh, Senator Phil Gramm took a
major role in getting a bill passed that pretty much exempted derivatives from, from
regulation.
{JULY 21, 2000
SENATOR PHIL GRAMM (R-TX)
CHAIRMAN
SENATE BANKING COMMITTEE}
PHIL GRAMM: They are unifying markets, they are reducing regulatory burden. I
believe that we need to do it.
{AFTER LEAVING THE SENATE,
PHIL GRAMM BECAME VICE-CHAIRMAN OF UBS.
SINCE 1993, HIS WIFE WENDY HAD
SERVED ON THE BOARD OF ENRON.}
Page - 25
NARRATOR: Between 2000 and 2003, the number of mortgage loans made each year
nearly quadrupled.
NOURIEL ROUBINI: Everybody in this, uh, securitization food chain, from the very
beginning until the end; they didn't care about the quality of the mortgage; they were
caring about maximizing their volume, and getting a fee out of it.
NARRATOR: In the early 2000s, there was a huge increase in the riskiest loans, called
subprime. But when thousands of subprime loans were combined to create CDOs,
many of them still received AAA ratings.
01:30:03.06
CHARLES FERGUSON: Now it would have been possible to create derivative products
that don't have these risks –
GILLIAN TETT: Um-hm.
Page - 26
NOURIEL ROUBINI: On Wall Street, this housing and credit bubble was leading, uh, to
hundreds of billions of dollars of profits. You know, by 2006, about 40 percent of all
profits of S&P 500 firms was coming from financial institutions.
01:33:20.09
{MARTIN WOLF
CHIEF ECONOMICS COMMENTATOR
THE FINANCIAL TIMES}
MARTIN WOLF: It wasn't real profits, it wasn't real income; it was just money that was
being created by the system, and booked as income two, three years down the road.
There's a default; it's all wiped out.
I think this was, in fact, in retrospect, a great big national — and not just national, global
— Ponzi scheme.
Page - 20
ANDREW SHENG: Since the, uh, end of the Cold War, uh, a lot of, uh, phys-, former
physicists and mathematicians decided to u-, apply their skills not on, you know, Cold
War technology, but on financial markets. And uh, together with investment bankers and
hedge funds –
CHARLES FERGUSON: Creating different weapons.
ANDREW SHENG: Absolutely! You know, as Warren Buffett said; you know, weapons
of mass destruction.
01:23:25.23
{ANDREW LO
PROFESSOR & DIRECTOR
MIT LABORATORY FOR FINANCIAL ENGINEERING}
ANDREW LO: Regulators, politicians, and businesspeople did not take seriously the
threat of financial innovation on the, uh, the stability of the financial system.
NARRATOR: Using derivatives, bankers could gamble on virtually anything. They could
bet on the rise or fall of oil prices, the bankruptcy of a company; even the weather. By the late 1990s, derivatives were a 50-trillion-dollar unregulated market.
01:23:54.20
In 1998, someone tried to regulate them.
Brooksley Born graduated first in her class at Stanford Law School, and was the first
woman to edit a major law review. After running the derivatives practice at Arnold &
Porter, Born was appointed by President Clinton to chair the Commodity Futures Trading
Commission, which oversaw the derivatives market.
MICHAEL GREENBERGER: Brooksley Born asked me if I would come work with her.
Uh, we decided that this was a serious, potentially destabilizing market.
{MICHAEL GREENBERGER
FORMER DEPUTY DIRECTOR (1997-2000)
COMMODITY FUTURES TRADING COMMISSION}
NARRATOR: In May of 1998, the CFTC issued a proposal to regulate derivatives.
Clinton's Treasury Department had an immediate response.
MICHAEL GREENBERGER: I happened to go into Brooksley's office. And she was just
putting down the receiver on her telephone. And the blood had drained from her face.
And she looked at me, and said: That was Larry Summers. He had 13 bankers in his
office. He conveyed it in a very bullying fashion – sort of directing her to stop.
01:25:06.03
{SATYAJIT DAS
DERIVATIVES CONSULTANT
AUTHOR, TRADERS, GUNS & MONEY}
SATYAJIT DAS: The banks were now heavily reliant for earnings on these types of
activities. And that led to a titanic battle to prevent this set of instruments from being
regulated.
ALAN GREENSPAN: Regulation of derivatives transactions that are privately
negotiated, by professionals, is unnecessary.
01:25:38.29
REP. BARNEY FRANK: She was overruled, unfortunately, uh, first by the Clinton
administration; and then by the Congress. In 2000, uh, Senator Phil Gramm took a
major role in getting a bill passed that pretty much exempted derivatives from, from
regulation.
{JULY 21, 2000
SENATOR PHIL GRAMM (R-TX)
CHAIRMAN
SENATE BANKING COMMITTEE}
PHIL GRAMM: They are unifying markets, they are reducing regulatory burden. I
believe that we need to do it.
{AFTER LEAVING THE SENATE,
PHIL GRAMM BECAME VICE-CHAIRMAN OF UBS.
SINCE 1993, HIS WIFE WENDY HAD
SERVED ON THE BOARD OF ENRON.}
Page - 25
NARRATOR: Between 2000 and 2003, the number of mortgage loans made each year
nearly quadrupled.
NOURIEL ROUBINI: Everybody in this, uh, securitization food chain, from the very
beginning until the end; they didn't care about the quality of the mortgage; they were
caring about maximizing their volume, and getting a fee out of it.
NARRATOR: In the early 2000s, there was a huge increase in the riskiest loans, called
subprime. But when thousands of subprime loans were combined to create CDOs,
many of them still received AAA ratings.
01:30:03.06
CHARLES FERGUSON: Now it would have been possible to create derivative products
that don't have these risks –
GILLIAN TETT: Um-hm.
Page - 26
NOURIEL ROUBINI: On Wall Street, this housing and credit bubble was leading, uh, to
hundreds of billions of dollars of profits. You know, by 2006, about 40 percent of all
profits of S&P 500 firms was coming from financial institutions.
01:33:20.09
{MARTIN WOLF
CHIEF ECONOMICS COMMENTATOR
THE FINANCIAL TIMES}
MARTIN WOLF: It wasn't real profits, it wasn't real income; it was just money that was
being created by the system, and booked as income two, three years down the road.
There's a default; it's all wiped out.
I think this was, in fact, in retrospect, a great big national — and not just national, global
— Ponzi scheme.
