Inside Job (37 page)

Like Summers and others we shall encounter shortly, Mishkin is on the speaking circuit, too. And here, I am grateful to one effect of my film. As mentioned earlier, after the documentary was
released, Columbia Business School (and several other academic organizations) finally adopted disclosure policies. Columbia still doesn’t require disclosure of dollar amounts of outside
income, but professors are now required to disclose the identities of their clients. Here is Mishkin’s disclosure of all of his speaking engagements between 2005 and February 2012:

Bank America

Barclays Capital

Bidvest

BNP Paribas

Brevan Howard

BTG Asset Management

CME Group

Deloitte

Deutsche Bank

Fidelity Investments

Freeman and Co.

Futures Industry Association

Goldman Sachs

Goodwin Proctor

Handelsbanken

International Monetary Fund

Kairos Investments

Lexington Partners

Miura Global

National Business Travel Association

NRUCF

Penn State University

Pension Real Estate Association

Premiere, Inc.

Shroeder’s Investment Management

Treasury Management Association

Tudor Investment

UBS

Urban Land Institute

Villanova University

Richard Portes
. Although he is an American, Richard Portes is one of the most prominent economists in Europe. He is a professor of economics at London
Business School, and founder and director of the Centre for Economic Policy Research, as well as holding several other positions.

And in 2007, Professor Portes, like Frederic Mishkin, became a consultant for the Icelandic Chamber of Commerce, which in November 2007 published his opus “The Internationalization of
Iceland’s Financial Sector”, coauthored with a professor of economics at Reykjavik University. Just a year later, Iceland totally collapsed. But Portes was, if anything, more confident
than Mishkin, and apparently unaware of the fact that Icelandic bank “assets” had risen to 800 percent of GNP. His paper and accompanying PowerPoint presentation are full of phrases
like “Internationalization of Icelandic Financial Sector Is a Major Success” and “Financial Volatility Not a Threat”. Even well into 2008, Portes continued to make media
appearances on behalf of the Icelandic banks. In July 2008, three months before the implosion, Portes wrote an opinion piece in the
Financial Times
. It did not disclose that he had
ever received payments from the Icelandic Chamber of Commerce. In the article, Portes harshly criticizes another economist, Robert Wade, who had recently written an article entitled
“Iceland Pays the Price for Financial Excess”. An excerpt from Portes’s reply:

“Iceland could not get away with ‘as light a regulatory touch as possible.’ It has had to apply exactly the same legislation and regulatory framework as European Union member
states, and its Financial Services Authority is highly professional. Prof Wade repeats the common claim that Icelandic banks ‘operated like hedge funds.’ ”

And Portes’s article concludes:

“The Icelandic banks had virtually no exposure to the toxic securities that almost all other banks did buy.

“The rest of Prof Wade’s comments are political, including rumourmongering. This and his carelessness with the data are regrettable in the fragile conditions of today’s
international financial markets. He would prefer that the Icelanders adopt ‘a more Scandinavian model.’ The advice is doubtless well-intentioned, but we should not be surprised if they
ignore it.”

That was 4 July 2008. In October, the banks collapsed, and many of their executives fled to London. Some of them even had to sell their private jets, yachts, and penthouses. Those who have not
been arrested seem to be living very comfortably. Some of them, however,
have
been arrested and are facing trial. Defendants include the former CEOs of two of the three major banks, as well
as the former prime minister, Geir Haarde.

Professor Portes’s CV states that he is an adviser to two hedge funds. He is also on the speaking circuit. With no apparent irony, his speaking web page introduces him as follows:

Laura D’Andrea Tyson
. Tyson received her PhD in economics from MIT in 1974, and subsequently taught at Princeton, MIT,
Harvard Business School, and the University of California, Berkeley. She served as dean of the UC Berkeley Haas School of Business, and then of the London Business School, before returning to
Berkeley as a university professor. During the Clinton administration, she was chairman of the Council of Economic Advisers and then director of the National Economic Council. Shortly after leaving
government, Tyson joined the board of Morgan Stanley, which pays her $305,000 per year, and also of Ameritech, a regional monopoly telephone company that was later acquired by AT&T; she is now
on the AT&T board, as well as several others.

According to SEC statements, as of 2011 she earned approximately $784,000 per year in cash and stock from her four public company directorships.
²³
Tyson has also been an adviser to Credit Suisse and to an Asian private equity fund and is a member of the same Committee on Capital Markets Regulation that is cochaired by Glenn Hubbard. She was
also a principal of the Law and Economics Consulting Group and works with its successor, the Berkeley Research Group. Tyson also serves on many nonprofit boards and advisory committees, including
the Peterson Institute, the Brookings Institution, and the Center for American Progress.

Tyson has made few public statements about the crisis; when she has addressed it, she has made vague references to greed, mania, and bubbles.

She too is on the speaking circuit. Her speakers’ bureau (the Harry Walker Agency) names some of her speaking clients. Their web page for Tyson quotes glowing testimonials from past
clients including Wescorp, a credit union seized by federal regulators in 2009; the European Petrochemical Association; Northern Telecom; the Commercial Real Estate Women of San Francisco; the Vice
President of Government Affairs of Siemens Corporation; Nomura Securities; and Callan Associates, an investment consulting firm.
²⁴
UC Berkeley has no
public disclosure requirements for outside activities or income, so we do not know Tyson’s speaking income or the identities of any other consulting clients.

Martin Feldstein
. Feldstein is one of the most prominent economists in America; a professor at Harvard, he was chairman of the
Council of Economic Advisers in the Reagan administration and for nearly thirty years was president of the National Bureau of Economic Research, the economics discipline’s largest and most
prominent American research organization.

Professor Feldstein was also on the board of directors of AIG and AIG Financial Products for over twenty years, a relationship that ended only when AIG collapsed and its board was replaced. And
although he has written over three hundred papers on a wide variety of topics, you will look in vain for any writing on the dangers of unregulated credit default swaps, financial sector
compensation, or lax corporate governance. He too does a great deal of paid public speaking. His speaker’s bureau web page lists him as an expert on the housing crisis, again with no apparent
irony; no mention is made of his having been on the AIG board.
²⁵

An unedited excerpt from my filmed interview with him, portions of which appear in my film:

Hal Scott
. Like Laura Tyson and Glenn Hubbard, Scott is involved with the Committee on Capital Markets Regulation. He’s also on the board of
Lazard, an investment bank whose 2010 revenues, small by current standards, were $1.9 billion. Professor Scott frequently testifies in Congress, usually stressing the dangers of excessive financial
regulation. In 2011, for example, he urged narrow application of the “Volcker rule”limiting proprietary trading by banks.
²⁶

In early 2012 Scott spoke out publicly against the SEC and in favour of the Carlyle Group, when the Carlyle Group had attempted to embed a provision in its public stock offering that would have
prohibited shareholders from ever being able to file class-action lawsuits against it. The SEC blocked the attempt, and Carlyle retreated shortly afterwards.
²⁷
Scott declined to be interviewed for
Inside Job
and did not respond to written questions about his outside activities and income.

John Campbell
. When I interviewed him for my film in 2009, John Campbell had just become chairman of Harvard’s economics department. He’s a
prominent specialist on finance, a former president of the American Finance Association. Campbell is not deeply involved in politics, policy, or power in the fashion of a Larry Summers, Laura
Tyson, or Martin Feldstein. He is, rather, an example of the environment produced by pervasive financial sector influence. When I asked him about the causes of the crisis, he gave a long, lucid
answer in which the word “deregulation” did not appear even once. Then, when I asked him about
the conflict-of-interest issue in economics, he was by turns
oblivious and defensive. Here are some excerpts from my interview with him:

Campbell’s view is the dominant one in American universities, most of which do not disclose the outside activities of faculty members—or even university officials. Major involvement
with financial services firms also, increasingly, includes academic administrators and university presidents.

Until 2009 Ruth Simmons, while president of Brown University, was on the board of directors of Goldman Sachs. Her replacement was Debora Spar, president of Barnard College at Columbia
University, who remained on Goldman’s board as of 2012. Dr Spar’s earlier academic specialty was the study of international cartels, which must come in useful. Carol Christ, the
president of Smith College, was on the board of Merrill Lynch until it was acquired by Bank of America in 2009. Susan Hockfield has been the president of MIT since 2004; in 2012 she announced her
intention to resign upon a replacement being found. She has been on the board of General Electric since early 2007. Although General Electric is usually regarded as an industrial company, it relies
heavily on finance in two ways. First, its subsidiary GE Capital was heavily involved in the bubble and provided nearly half of GE’s corporate profits during the bubble. During the crisis
period, GE Capital lost huge sums, largely due to its bubble-related activities. (In 2004, for example, GE acquired WMC Mortgage, the sixth-largest subprime lender in the US.) Second, GE is one of
the most aggressive users of legal and financial engineering to avoid taxes.