"American Casino" may be mis-titled in some respects because although it acknowledges the casino-gambling principles behind the world financial meltdown that have been obvious and undeniable for many years, the most revealing facet this very fine "Frontline"-style documentary is how it portrays rabid entrepreneurialism spreading through American culture like a fatal self-replicating virus. The widespread damage -- not just financial, but physical and emotional -- is devastating, and the majority of victims in the United States are mainly the middle- and under-class. "American Casino" shows us a nationwide Hurricane Katrina, with similar political causes and consequences, that has decimated lives and property -- and was entirely man-made.
Without pushing the metaphors too far, the movie (directed by Leslie Cockburn and included in VIFF's "Follow the Money" series), traces the very real connections between the endlessly multiplying and dividing derivatives that caused the crash to the wrecked dreams and deteriorating real estate that now blight both urban and suburban areas from Baltimore to California. While people in offices were using computers to calculate "fourth-dimensional" Ponzi schemes that defied human comprehension, others were being evicted from their homes.
"Financial instruments" known as CDO-squared and CDO-cubed (Collateralized Debt Obligations) kept chopping up asset-based loans (mortgages) into exponentially smaller bits -- derivatives of derivatives of derivatives -- allowing them to be sold and re-sold with the seller taking a fee on each transaction. Meanwhile, mortgage companies under pressure to feed more transactions into the system (they made their money by taking fees off the top, too) would do whatever it takes to design phonebook-sized mortgage documents that nobody had actually read. If the numbers showed the applicant didn't make enough to qualify, the loan officers would simply adjust the income upward to fit the guidelines, often without even telling the applicant. The mission was to get the loans approved and get signatures on the documents. The mortgage companies weren't responsible if the "homeowner" suddenly found that the payments were half again as much as they'd been told and had to default. It was a challenge to even find a financial entity to which mortgage payments were being credited, because so little of a homebuyer's monthly check was going to any individual bank. Once the buyer defaulted, the house could be repossessed and re-sold to some other sucker who didn't yet understand that, in the long run, the house always wins.
The result in cities like Baltimore is that neighborhoods are being decimated by empty run-down houses, fire hazards and rodent havens that drive down property values for everyone and provide a breeding ground for crime and pestilence. What better location for a meth lab, a weapons cache or a rats' nest than an abandoned house? Entrepreneurial squatters take over a residence, risk burning it down by heating it with an open gas oven, and then rent rooms to other homeless "tenants" -- doing exactly the same thing with real property as the financiers were doing on paper: making money off the poor by selling them assets they don't actually own.
In Riverside County, California, the film finds another fresh hell: acres of foreclosed and abandoned tract houses with stagnant, junk-filled swimming pools in back. These pools have become havens for millions of mosquito larvae (an estimated 800,000 or more per pool), which carry West Nile Virus. Once a person is infected, the virus replicates not unlike the derivatives that indirectly spawned them, causing brain-swelling and, eventually, death. When unchecked self-benefit becomes the only principle of one's existence, that's the inevitable result. But by killing the host, the virus also deprives itself of a vector...
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What really gets me are the Chicago-school economists who advocate that we need still less regulation. I was predicting something like this since the mid-80s when the Canadian and US governments began de-regulating the banking and insurance industries. And I was, at the time, a mere stripling of 20-25. At the time, I would tell people that all these regulations were put in place after the Great Depression, to keep IT from happening again - and now that these regulations are being dismantled, what do we think is going to happen?
If I can see it coming, why can't the so-called experts with their deeper knowledge and experience? It baffles the mind.
Jim,
You've been one of my favorite film critics for a couple years now, but I'm finding it increasingly difficult not to cringe during some of your politically-charged reviews. Do you honestly believe that entrepreneurship is a bad thing in general? This is what text like "rabid entrepreneurship spreading through American culture like a fatal self-replicating virus" makes me think. What is wrong with people leaving these large corporations you so despise in order to start something new that can take a different approach to business? Are Mom and Pop shops just a nice term for evil capitalist enterprises out to make a buck off the sweat of honest, hard-working Americans? I know I'm putting words in your mouth, except, well, I'm not actually sure that you don't believe something like this. [JE: I don't know why you're jumping to these unsupported conclusions. See below.]
I'm a Libertarian, but I don't look at issues as black and white. I think that the free market has failed miserably with health care, and would like to see a reform of some sort. Much of the failure, though, has to do with the way insurance corporations are able to buy lobbyists who then buy Congress members. Government regulations can (notice I'm not saying "do") hurt the American public more than the lack of regulations in many situations.
I would have said after the meltdown, for instance, that if Wall Street had not been bailed out we would have recovered easily enough and Wall Street would have learned a valuable lesson. [JE: Not sure what you mean by "Wall Street." Do you mean to say you think that the large national banks like Wells Fargo and BofA, insurance companies like AIG, brokerages and investment companies like Merrill Lynch, should have been allowed to fail like Lehman Brothers did, and that you believe the economy would have recovered easily enough from that?] I think that this is still true in general, as related to the kinds of derivatives they sell, but clearly Wall Street hasn't learned anything about the way they give out bonuses. Of course it makes sense that bonuses be based on long-term growth instead of short-term. I agree that it's frightening that they don't seem to understand that.
But Wall-Street is not the only aspect of the free market. In reality, its an anomoly. The free market is based on the idea that when two people complete a transaction, both are getting what they want because one is selling for a price he sees as fair and another is buying at a price he sees as fair because otherwise they wouldn't buy or sell the product. With what Wall Street sells, no one really knows whether they want it or not, and with health care, no one really knows if a test or a drug or an operation is really necessary, or just a doctor trying to protect himself from our lawsuit-lovin' society. That makes these two areas tough for the free market.
It's easy to look at more socialized countries and think, "They have a more regulated market, and they've got better health care, government programs, etc," but it isn't really about the fact that they're less capitalistic than we are, its in what the government spends its money on. The fact that the U.S. has 1/5 the world's GDP and contributes 50% of the world's spending on military gives a good idea as to where our healthcare dollars go. You're hard on Libertarians in your writing, but we believe more strongly in free speech than any other party (Glenn Beck is a hypocrit for trying to sue that website) and doesn't support any of the wars that have occurred in the last 60 years. I think these are ideas you can appreciate. Also, there aren't many Libertarians who are born into it. It's pretty much exclusively a group of people from both major parties who are unsatisfied with party-line thinking that only looks at half of an issue. I know I'm not telling you anything you don't know with much of this, but I don't think you give other viewpoints a chance because you're hung up on Glenn Beck or some other showman.
So anyway, what do you think about entrepreneurship? I have to say, that if you really believe that entrepreneurship is similar to "a fatal self-replicating virus" that you're twisting reality to fit your views in much of the same way Republicans are with Obama's health care reform. You wrote an article not long about how people only see what they want to see on an issue, and don't look at facts, and I think you should examine yourself in this instance. I try to keep an open mind on everything political. I started off as a liberal, and became a Libertarian after majoring in economics during my undergraduate schooling. I always work to keep myself open to looking at individual issues instead applying a rigid philosophy to everything.
JE: I have no rigid philosophy, and I'm certainly not applying one here. I'm describing the approach of this MOVIE and the what it shows, not my own opinions. The movie has a take on the situation that I had not encountered before, metaphorically connecting the financial instruments behind the mortgages to the entrepreneurial squatters in foreclosed flats in Baltimore to the mosquitoes in the abandoned pools in California. It describes a particular strain of exploitive, unfettered, unprincipled entrepreneurialism -- the kind that created markets for instruments like credit default swaps and derivatives like Collateralized Debt Obligations-Squared and -Cubed, the kind that takes fees for selling mortgages under false pretenses to people who don't realize they can't afford them, the kind who rent rooms to homeless tenants in foreclosed residences they've illegally occupied -- not the old-fashioned "mom and pop" kind. (Remember when Enron created a market in weather? That, I would say, is an irresponsible form of entrepreneurialism.) I don't understand how it's not indicative of an "open mind" to accurately describe the documentary and the phenomena it reports on. To ignore describing what the movie does would seem to me to be a sign of a closed mind.
Jim, it was not immediately obvious this was a movie review. I mainly caught on because I'd already read Roger Ebert's.
The only thing I have to say where the political side is concerned is: put your money where your mouth is. Unless you want to see China and the Arab oil states owning this country, deficit spending has to be reigned in - they're the ones buying the loans that Uncle Sam takes out to pay for services the budget money doesn't cover.
So: if you want more regulation, write your Congressperson and ask them to please raise taxes, including for your income bracket. Regulation without inspectors to check that regulations are followed is pointless. And inspectors aren't cheap...unless you want them so low-paid that bribes from the regulatees start looking attractive...
JE: I'm not sure who you mean to address with this comment. The headline on the post is preceded by "VIFF," the third in an ongoing series of reports from the Vancouver International Film Festival. The first words of the piece are "'American Casino' may be mis-titled in some respects...," with a link in the title to the movie's web site, and the first sentence describes the film as "a Frontline-style documentary." How is it "not immediately obvious" that this is an account of a movie? (And where has Roger Ebert reviewed this film? I have yet to come across it.) As I said before, what I wrote accurately describes what the movie covers and the connections it makes -- and I didn't mention anything about regulation or any other proposed solutions, because the movie doesn't either. (Although the movie does point out the specific deregulations, introduced in 2000, that allowed credit default swaps to be sold without the money to back them up.) To describe, as the film does, what caused the financial collapse and the price many people are paying for it, is not to say the filmmakers (or I) "want to see China and the Arab oil states owning this country." The film reports facts. You're leaping to wild conclusions. What happened to cause the collapse of mortgage-based financial securities between 2000 and the end of 2008 has nothing to do with the Bush administration's exorbitant deficit spending during that period. You've wandered far away from anything this film says, or anything I said in the post, and I don't understand why. If you think I have inaccurately described the movie here, then please let me know, but don't misrepresent what I said or what the movie contains.
Jim, I don't think it's fair of you to accuse KWJ of misrepresenting you and the film. He made his position very clear when he wrote, "I...want to see China and the Arab oil states owning this country."
Those Cockburns.... what a family. CounterPunch imo, edited by Leslie's brother-in-law Alex, is an excellent resource.
As for "politically charged" reviews and commentaries, what's up with people being so sensitive about obvious flaws in the system being recognized?
I always "cringe" when I see folks get their panties tied in knots like as if Wall Street needs their passionate defending lest capitalism fail because a blogger or a film critic takes notice of and appreciates a finely crafted film that shows *shock* not everything is honky-dory.
I'm not sure what the insanity that we've been watching unravel on Wall Street has to do with Entrepreneurship. Looks like a big ole' Ponzi scheme to me. . . only worse because so much money was generated by fees. Not by investment, where you take a risk and really, ya know, invest, but by FEES, where perform a transaction for someone else.
I'm also not sure how anybody can really think that the problems we are dealing with now were caused by over-regulation. Seems pretty straightforward to me. . financial industry, tolerated and sometimes aided by both parties but actively supported by supply side conservatives, gets to write its own rules. Financial industry follows the rules of capitalism and acts in its own immediate self interest, long term consequences be dammed, and viola, the housing market becomes giant toxic bubble. Pop.
I'm not sure that narrative is particularly anti-capitalism. It's sure as hell for regulating the financial industry though. It doesn't make anyone a socialist to think that the banking industry (and especially the unregulated tentacles that are labeled "insurance") needs some grown ups from outside to help make the rules. They had their chance.
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