The Susquehanna Valley Progressives and the Mondragon Bookstore sponsored a showing of the Oscar nominated film The Big Short at the Campus Theatre on Saturday afternoon to draw attention to the issue of Wall Street reform.
The film, attracting nearly 180 attendees, offered a succinct and captivating portrayal of the years and months leading up to the financial crash of 2008. Specifically The Big Short depicts four groups of brainy traders who saw what was coming long before the rest of us.
It casts a harsh light onto Wall Street’s “business as usual” behavior that amounted to nothing more than acts of greed and fraudulence.
Following the film, a discussion panel was held across the street at the Barnes & Noble bookstore. The panel was moderated by Charles Sackery, a retired Bucknell professor of Economics and founder of Mondragon Bookstore. The panelists included Dr. Geoffrey Schneider and Dr. Martes Vernengo, both professors of Economics at Bucknell University and Dr. Richard Orwig, Associate Professor from the Weis School of Business at Susquehanna University.
Nearly 90 participants attended the discussion, which covered topics from de-regulation, the Federal Reserve, moral and ethical implications, and international reverberations of the crash.
Dr. Schneider connected the crash directly to the elimination of key regulations. He explained “the deregulation of the 1990s created a casino economy in which unethical mortgage loan officers, investment banks, and ratings agencies manipulated complex financial instruments to take advantage of people, creating a real estate bubble. Unfortunately, despite the modest improvement in financial regulations under the Dodd-Frank Act, the casino economy still exists.”
Schneider believes that this is an important issue for the 2016 Presidential Election, noting, “many of the presidential candidates actually want to deregulate Wall Street again. Unless voters want to experience another financial bubble and crash, and get stuck with the bill for another bailout, we need strong political action to reign in the excesses of Wall Street.”
The panelists agreed that the film did a good job in terms of reflecting the accuracy of the financial crisis.
However, Dr. Vernengo said “while the film is good in portraying that the crisis was manufactured, and was a swindle of the American people by Wall Street, it does get a few things wrong and does not identify the deep causes of the crisis.”
“In particular,” he noted, “several people actually knew and said that the economy was unsustainable and the bubble would eventually burst, not just a few ‘geeks and weirdos’ (as noted in the film). And the roots of the crisis are in the increasing inequality and financial deregulation that harken back to the 1980s and 1990s.”
Dr. Orwig presented the idea of moral hazard, in which the guaranteed insulation of the markets through federal bailouts may have allowed for risky behavior.
He explained, “in a market-based, caveat emptor, and asymmetric information economy, arbitrage raises questions of moral hazard in transactions and fiduciary responsibility in brokered transactions. How much do parties to the transaction actually know versus other “fish in the school” mimicking others’ transactions on faith?”
This was the first of a series of programs hosted by the Susquehanna Valley Progressives on the issue of income inequality.
Richard Orwig says
Thank you for hosting this event! I very much appreciated the intelligent questions and discussions. Well done!!