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NEAL CONAN, host:

This week and next, we focus on the five films nominated for best feature-length documentary at the Oscars. Today, "Inside Job," an investigation into Wall Street's culture of greed and corruption that inflated the financial bubble that burst in 2008. Charles Ferguson spoke with bankers, economists, journalists, former and current officials, and with Wall Street madam Kristin Davis, who said she had about 10,000 clients during the financial boom.

(Soundbite of movie, "Inside Job")

(Soundbite of music)

Mr. CHARLES FERGUSON (Director, Writer and Producer, "Inside Job"): What fraction were from Wall Street?

Ms. KRISTIN DAVIS (Former Brothel Operator): Of the higher-end clients, probably 40 to 50 percent.

Mr. FERGUSON: And were all the major Wall Street firms represented? Goldman Sachs?

Ms. DAVIS: Lehman Brothers. Yeah. They're all in there.

Mr. JONATHAN ALPERT (Psychotherapist): Morgan Stanley was a little less of that. I think Goldman was pretty big with that.

Ms. DAVIS: A lot of clients would call me and say: Can you get me a Lamborghini for the night for the girl? These guys were spending corporate money. I had many black cards from, you know, the various financial firms.

Mr. ALPERT: What's happening is services are being charged to computer repair.

Ms. DAVIS: Trading research, you know, consulting for market compliance. I just usually gave them a piece of letterhead and said make your own invoice.

Mr. FERGUSON: So this pattern of behavior, you think, extends to the senior management of the firm?

Mr. ALPERT: It absolutely does. Yeah. I know for a fact that it does. It extends to the very top.

(Soundbite of music)

CONAN: If you're an economist, if you work in the financial sector and you've seen the film, give us a call: 800-989-8255. Email us: talk@npr.org. You can also join the conversation on our website. That's at npr.org. Click on TALK OF THE NATION.

Charles Ferguson co-wrote, produced and directed "Inside Job." He joins us from a studio in New York.

And congratulations on the nomination.

Mr. FERGUSON: Thank you, sir.

CONAN: And this is your second nomination. You were also shortlisted for the Iraq War documentary "No End in Sight." I wonder, how is it different this time?

Mr. FERGUSON: Well, I guess - I think that I know a little bit more about the film industry and how it works, and so I'm seeing a little bit more of the internal machinery, I guess, than I did the first time. But it's still a quite remarkable and still a quite surprising experience.

CONAN: Does an Oscar nomination make it easier to make another film?

Mr. FERGUSON: Let's hope so...

(Soundbite of laughter)

Mr. FERGUSON: ...because I love making movies.

CONAN: Both of these films are about process. They're ambitious undertakings. Why, after the Iraq War, did you decide to take on the financial industry?

Mr. FERGUSON: Well, it seemed irresistible. I was thinking about what film to try to make next. I developed a number of proposals, actually. But when gigantic financial institutions began collapsing on approximately a weekly basis - and then, of course, in September of 2008 on practically a daily basis - it seemed that there was something very important here. And I had a prior academic life that had trained me in some of the relevant disciplines and, you know, it just seemed like a very important thing that I thought I could do well.

CONAN: You mentioned your prior academic life. One of the most interesting parts of the film, I think, is the conflict of interest you raise amongst a lot of academics, people who teach economics at the same time they serve on boards of directors of large corporations and write articles for various publications where they don't reveal that they're being paid for that.

Mr. FERGUSON: Yes. And, in fact, I knew about that from my academic life. This problem started when - around the time that I was a graduate student in a post-doc in political science, I - the Law and Economics Consulting Group, for example, was founded in 1988. It's now a $350 million-a-year, publicly-held firm. It was founded by a group of professors at the University of California, Berkeley who had an extensive public policy, government policy involvement at the same time as they were being paid enormous sums of money to advocate regulatory and policy positions on behalf of companies and industries.

CONAN: And you also begin your film with, well, a sort of set piece on Iceland, of course the small nation that got heavily involved in the financial industry after privatization of its banks and went crashing down and is still suffering the consequences.

Mr. FERGUSON: Yes. Yes, and still very much suffering the consequences. Unemployment in Iceland had never exceeded three and a half percent during the entire post-war period. It's now, I believe, about 14. And the country has very, very serious financial problems. And it's a tragedy, because it's a beautiful place. I was very, very struck by the landscape and the people when I was there, when I was conducting research and interviewing there. It's a remarkable, beautiful place. And a small number of people, you know, less than a hundred people in the government and in the banking system destroyed this country.

CONAN: Yet, an awful lot of people in Iceland thought it was a really good idea, and they made good money at the time too. You talked about systems, and governments, and individuals, and banks, and deregulation and privatization as being responsible. Aren't individuals responsible for what they do too?

Mr. FERGUSON: Sure, of course. There's some degree of individual responsibility in any bubble, in any large scale financial phenomenon. But I don't think that's really the main story. And I don't think that American culture and the American population suddenly decided - you know, 200 million people decided to go crazy simultaneously beginning in 2001. That's not happened. What happened was a series of regulatory, political, policy, business changes that made it possible for a relatively small number of people - a few thousand, at most, a few tens of thousands of people - to create a gigantic bubble, and in effect, a national and even global level Ponzi scheme, as, in fact, Martin Wolf, the chief economic commentator of the Financial Times says in the film. That's exactly what he called it.

CONAN: Yet, there were an awful lot of people who took out loans that seemed too good to be true, should not they have known about that?

Mr. FERGUSON: Well, in some cases, people did do that, yes. So in many cases, people were - Americans were consuming when they should not have been. But, again, I don't think that that's the principal story.

You know, if you wanted or needed to buy a house anytime between 2001 and 2006, then you didn't have any choice about what had happened to housing prices. You know, you had to buy your house. And there was an enormous amount of fraud and deceit in the lending industry during this time. So people often were given loans that were far more expensive and far more dangerous in their terms than they realized, and they could and - than they could afforded.

Many people who could have afforded the high quality fixed rate prime loans were steered into far more expensive loans, which then, of course, became more difficult for them to repay when housing prices declined, when they lost their jobs. It's really quite a scandal.

CONAN: And that's something that is continuing today. Here's an email we have from Warren in San Francisco. I've seen "Inside Job" twice and have urged many others to see it. The collusion between Wall Street and Washington, both the executive and legislative branch and both parties, is appalling. Even more appalling is the lack of new safeguards that would prevent such collusion bringing down the global economy again. The former Wall Street executives currently in power have a vested interest in not establishing safeguards as the European Union has done.

And one of the points you make in the film is that some of those, you say, were involved in inflating the bubble are now in charge in the Obama administration, as well.

Mr. FERGUSON: Yes. It's an extremely disturbing phenomenon. The Obama administration's economic and regulatory team has been dominated by people who had significant roles in causing this crisis. In some cases, who've profited from it enormously. And several of them conducted themselves during the bubble in extraordinarily unethical ways. And there are even a few people in the administration, you know, where there's some question as to whether, perhaps, they might deserve to be in prison.

It's a very, very distressing, disturbing phenomenon, particularly for many of us, and I include myself, who had hoped, based on what he said during his campaign, that Mr. Obama would try and address these problems in a serious way.

CONAN: One of the people you portray your film is - I guess, one of the good guys, broadly speaking, is Barney Frank, the congressman from Massachusetts, the former chairman of the banking committee. And yet, he was also deeply involved in support for Fannie Mae and Freddy Mac, the two federal mortgage companies - the federally-backed mortgage companies that, well, proved to be such very poor risks.

Mr. FERGUSON: Yes. That's a fair criticism. You know, in a two-hour film, less than two-hour film, you can't put in everything, unfortunately. And, well, on a net basis overall, I think that Barney Frank has been a force for good in the national debate about these questions. It is absolutely right that he gave somewhat more support to Fannie Mae and Freddie Mac and to their rather questionable leaders than was appropriate, and to some extent, contributed to our problems.

However, I should say that there is a narrative from some, either ideologically conservative or some in cases partisan Republican circles, that Fanny and Freddie caused the bubble in the crisis. And if they hadn't existed or if they hadn't had their federal guarantees, or if they hadn't been supported by the Democratic Party or, you know, something like that, that this wouldn't have happened. And that is absolutely not true. It is, you know, arithmetically, factually, demonstrably not true.

They were followers, not leaders. And during a significant fraction of the relevant period, the Republicans controlled, not only the White House, but also both houses of Congress. So it is true that Barney Frank had, in some cases, in some ways, something to do with supporting Fannie and Freddie in ways that weren't good for the country. But it's not the case that, you know, that's where the core of responsibility for this law is.

CONAN: Filmmaker Charles Ferguson. "Inside Job" comes out on DVD, March 8th. You can find a link to the trailer at our website. Go to npr.org, click on TALK OF THE NATION. You're listening to TALK OF THE NATION from NPR News.

And let's get Daniel on the line, Daniel with us from Oakland.

DANIEL (Caller): Yes. Great movie. I enjoyed it thoroughly. I am an economist by training, graduated from Berkeley, University of Chicago and did graduate research at Harvard. And I thought the movie was well depicted. I'm also a money manager for private clients. And I think one of the things that I would have enjoyed to have seen in the movie is the ongoing battle of ideas between free market fundamentalism and some of the modern Keynesians, which really pretty much to say that, you know, there's a role for government, there's a role for the referee in this game.

And I think the main players in this fiasco were pretty much free market evangelists. And not to say that, you know, all of the market-based approaches are bad and that there isn't a role for markets - there are. But I think, you know, the movie was grim in going into the lead, but I think at a broader level there is a place for the ongoing battle of ideas, especially now after what's happening all over the world, where, you know, now there are more countries that are embracing free market ideas and so forth.

And so we could prevent a lot of damage outside of the U.S. if we just sort of highlight and elucidate, if you will, this ongoing battle of ideas. But other than that - that is my comment. And I really wish, you know, this was a film that the broader universe can see in terms of what the implications are if we just let markets run amuck, alone, by themselves.

CONAN: Charles Ferguson?

Mr. FERGUSON: Well, tempting though it is for somebody like me who, you know, is a former certified policy wonk and whose Ph.D. thesis adviser was an economist by training, I, you know, I just didn't think that a film like this was the place for abstract, academic debate about, you know, the economic models. I think that the film makes the point through the facts that it examines and the people and situations it examines. I think it makes the point, very clearly and convincingly, that this crisis completely discredited the hardcore extreme laissez-faire, free-markets-always-get-everything-right version of economic theory. And several of the proponents of that theory are in the film. You know, Alan Greenspan is in the film...

DANIEL: Yes.

Mr. FERGUSON: ...and his mistakes are in the film too.

DANIEL: And do you think that there's a role for, you know, the lessons learned here in the United States and for other emerging, developing economies, as they're developing their capital markets? I mean, for many places around the world, they are very much in pre-Glass-Steagall sort of wild, wild west mode right now in terms of how capital is floating around in their countries. And, so I just think that there is a place for that. And, you know, I mean, your movie was phenomenal...

CONAN: I just have to say Glass-Steagall, a regulatory law that was overturned in the late '90s, and that plays a role in the film. But we're not going to get that far into the weeds. But briefly, if you would, Charles Ferguson?

Mr. FERGUSON: Well, actually, in our travels and research for the film, I found that a number of so-called developing countries were well ahead of us in the ways that they understood that capital markets had to be regulated. And China, for example, regarded at least until recently, by many economists, as less developed and a nation that we had to give our mature economic advice to - China avoided all of this.

And I found that many people in Asia - many economists and regulators, government officials in Asia - now say, in a quite convincing and assertive way, that in their view, the American economic model is no longer something that they have to look up to, that they think, you know, is necessarily correct or has all sorts of deep lessons to impart to them.

CONAN: Well, some talking of the housing bubble in China now. But anyway, that's besides that point. Charles Ferguson, good luck on Oscar night.

Mr. FERGUSON: Thank you very much.

CONAN: Charles Ferguson joins us from New York. His Academy award-winning documentary film is called "Inside Job." It comes out on DVD, March 8th. We're going to continue or conversations with Academy award-nominated filmmakers in the feature length documentary category. Next week on TALK OF THE NATION. Join us for that. I'm Neal Conan. It is the TALK OF THE NATION from NPR News.

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