Inside Job Page #14

GLENN HUBBARD:
I don't think so, no. You certainly, you certainly wouldn't get that

impression by the drubbing that they regularly get, uh, in Washington.

02:
24:59.12

NARRATOR:
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.

02:
25:20.04 Two bankers who used these services were Ralph Ciofi 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 dollars to testify in their defense.

02:
25:39.06

CHARLES FERGUSON: Do you think that the economics discipline has, uh, 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, a 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, uh, you know, aren't wealthy businesspeople.

Inside Job transcript – Sony Pictures – September 2010

62

02:
26:05.07

NARRATOR:
Hubbard makes 250,000 dollars a year as a board member of Met Life,

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.

02:
26:23.19 Laura Tyson, who declined to be interviewed for this film, is a professor at

the University of California, Berkeley. She was the chair of the Council of Economic

Advisers, and then director of the National Economic Council in the Clinton

administration.

Shortly after leaving government, she joined the board of Morgan Stanley, which pays

her 350,000 dollars a year.

Ruth Simmons, the president of Brown University, makes over 300,000 dollars a year on

the board of Goldman Sachs.

02:
26:55.02 Larry Summers, who as Treasury secretary played a critical role in the

deregulation of derivatives, became president of Harvard in 2001. While at Harvard, he

made millions consulting to hedge funds, and millions more in speaking fees, much of it

from investment banks.

According to his federal disclosure report, Summers's net worth is between 16.5 million

and 39.5 million dollars.

02:
27:23.25 Frederic Mishkin, who returned to Columbia Business School after leaving

the Federal Reserve, reported on his federal disclosure report that his net worth was

between 6 million and 17 million dollars.

02:
27:36.14

CHARLES FERGUSON: In 2006, you coauthored a study of Iceland's financial system.

FREDERIC MISHKIN: Right, right.

CHARLES FERGUSON: Iceland is also an advanced country with excellent institutions,

low corruption, rule of law. The economy has already adjusted to financial liberalization

– while prudential regulation and supervision is generally quite strong.

02:
27:53.17

FREDERIC MISHKIN: Yeah. And that was the mistake. That it turns out that, uh, that

the prudential regulation and supervision was not strong in Iceland. And particularly

during this period –

Inside Job transcript – Sony Pictures – September 2010

63

CHARLES FERGUSON: So what led you to think that it was?

FREDERIC MISHKIN: I think that, uh, you're going with the information you have at, and

generally, uh, the view was that, that, uh, that Iceland had very good institutions. It was

a very advanced country –

CHARLES FERGUSON: Who told you that?

FREDERIC MISHKIN: – and [they had not] –

CHARLES FERGUSON: Who did, what kind of research –

FREDERIC MISHKIN: Well, it –

CHARLES FERGUSON: – did you do?

FREDERIC MISHKIN: – you, you talk to people, you have faith in, in, uh, the Central

Bank, which actually did fall down on the job. Uh, that, uh, clearly, it, this, uh –

CHARLES FERGUSON: Why do you have "faith" in a central bank?

FREDERIC MISHKIN: Well, that faith, you, ya, d-, because you ha-, go with the

information you have.

02:
28:30.10

CHARLES FERGUSON: Um, how much were you paid to write it?

FREDERIC MISHKIN: I was paid, uh, I think the number was, uh, it's public information.

{FREDERIC MISHKIN WAS PAID $124,000

BY THE ICELANDIC CHAMBER OF COMMERCE

TO WRITE THIS PAPER.}

02:
28:43.10

CHARLES FERGUSON: Uh, on your CV, the title of this report has been changed from

"Financial Stability in Iceland" to "Financial Instability in Iceland."

FREDERIC MISHKIN: Oh. Well, I don't know, if, itch-, whatever it is, is, the, uh, the

thing – if it's a typo, there's a typo.

02:
28:55.21

GLENN HUBBARD:
I think what should be publicly available is whenever anybody does

research on a topic, that they disclose if they have any financial conflict with that

research.

Inside Job transcript – Sony Pictures – September 2010

64

CHARLES FERGUSON: But if I recall, there is no policy to that effect.

GLENN HUBBARD:
I can't imagine anybody not doing that – in terms of putting it in a

paper. You would, there would be significant professional sanction for failure to do that.

02:
29:18.25

CHARLES FERGUSON: I didn't see any place in the study where you indicated that you

had been paid, uh, by the Icelandic Chamber of Commerce to produce it. Um –

FREDERIC MISHKIN: No, I {MUMBLE} –

CHARLES FERGUSON: Okay.

02:
29:30.24

NARRATOR:
Richard Portes, the most famous economist in Britain, and a professor at

London Business School, was also commissioned by the Icelandic Chamber of

Commerce in 2007 to write a report which praised the Icelandic financial sector.

02:
29:44.12

RICHARD PORTES:
The banks themselves are highly liquid. They've actually made

money on the fall of the Icelandic krona.

These are strong banks; their funding, their market funding is assured for the coming

year.

These are well-run banks.

NEWSMAN:
Richard, thank you so much.

NARRATOR:
Like Mishkin, Portes's report didn't disclose his payment from the Icelandic

Chamber of Commerce.

02:
30:03.04

{JOHN CAMPBELL

CHAIRMAN:

HARVARD ECONOMICS DEPARTMENT}

CHARLES FERGUSON: Does Harvard require disclosures of financial conflict of

interest in publications?

JOHN CAMPBELL:
Um, not to my knowledge.

Inside Job transcript – Sony Pictures – September 2010

65

CHARLES FERGUSON: Do you require people to report the compensation they’ve

received from outside activities?

JOHN CAMPBELL:
No.

CHARLES FERGUSON: Don't you think that's a problem?

JOHN CAMPBELL:
I don't see why.

02:
30:20.03

CHARLES FERGUSON: Martin Feldstein being on the board of AIG; Laura Tyson going

on the board of Morgan Stanley; uh, Larry Summers making 10 million dollars a year

consulting to financial services firms; irrelevant.

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