Dukes of Moral Hazard

Moral Hazard – The risk that a party insulated from risk behaves differently than it would behave if it were fully exposed to the risk.  For example, when a stock broker takes more investment risk with a client’s money than he might be inclined to take with his own money.

If you’re thinking about watching Wall Street before going to see the years-in-waiting sequel Wall Street: Money Never Sleeps, I can’t tell you whether you’ll find the first movie better than second or the second one worst than the first.   I remembered not liking the first one so much but I think now if I’ve been under appreciating it since 1987.  In that movie Bud (Charlie Sheen) is a dime-a-dozen, boiler room stock broker stuffed in a office stall with cold kung-pao, cold sales calls and bad stock leads.  But Bud has the ambition to outgrow his Long Island blue collar roots, and he cold knocks at Gordon Gekko’s (Michael Douglas) swank office.   Gekko is a wealthy, megalomaniacal stock arbitrageur, but he is also uncharacteristically impressed with Bud’s chutzpa.  He takes the young trader under his vulture wing to teach the real Wall Street racket and the techniques of illegal insider trading.  Bud has come with insider knowledge about the struggling airline where his father works as a maintenance foreman.   Bud and Gekko devise a plot to take over the airline.  When Bud figures out that Gekko’s scheme is just a self-serving con, he has a crisis of conscious.  Bud plots his own takeover.  He out-cons his mentor.  When the Feds come in and the walls come tumbling down, Bud turns evidence on Gekko.

Ivan Boesky

The Gordon Gecko character was inspired by the true story of Wall Street corporate raider Ivan Boesky whose brazen stock acquisitions and subsequent prosecution for insider trading was a legendary story of conspicuous greed.    Gekko became a reference figure in cinema, an icon of the self-indulgent Reagan era, and a commonly cited symbol of  mistrust for  the stock market itself.  Gekko’s signature line “Greed is good” is to this day a catchphrase for some, and a siren for  others.

It’s not surprising that director Oliver Stone would see the recent Great Recession, largely caused by deregulated, overleveraged Wall Street speculators, as a poetic opportunity to spring Gekko out of Club Fed.  In Money Never Sleeps it’s 2008 and Gekko’s estranged daughter is engaged to Jacob (Shia Labeouf), another ambitious young stock broker from an unpronounceable town on Long Island.  Jacob, however, has risen in the business quickly with true genius and determination.  He seeks $100 million in investment capital for his pet project, a high-tech green energy platform.  When his investment bank is raided by a sleazy takeover artist, an event that also prompts the suicide of his business mentor and father-figure, Jacob turns to future father-in-law Gekko for information and advice.  Jacob plots to sink the new corporate pirates not for money, but for personal revenge.

It’s at this point the movie wanders away from being a story about the recent Wall Street collapse and government bailout, to something else about personal corruption, revenge, and moral hazard amongst loved ones.  It is almost the inverse story of the first movie where issues of moral responsibility conducted between Bud and his father were an analogy to business ethics.  Wall Street is a movie about playing a sick game with others people’s money and future security.  I see it now as a compelling character study in the impudence these thieves had to act so outwardly greedy.  Gekko, is an Oscar awarded performance by Michael Douglas, and well deserved throughout.  In Money Never Sleeps, there is about one opportunity to revive this performance similarly.  Gekko is re-introducing himself to the public as a reformed criminal, real or put-on, we don’t know yet.    It’s the most important moment of the film and for some reason they selected to edit in fades and cross audio that completely distract from the scene.  Money Never Sleeps is full of odd distractions in editing stunts, superfluous scenes between Jacob and his witless mother, and kooky David Byrne musical interludes.  Now, I have to admit to being kind of a Credit Default Swap geek.  So I was disappointed that the story of the 2008 bank meltdowns was abandon mid-way for  a less interesting, triangular relationship plot between Gekko and the young couple (although the idea of Jacob and Gekko meeting behind the daughter’s back as analogous to “insider trading” is a clever literary tool).  I don’t want to ruin it any, but in the end Gekko, a sophisticated but troubled soul, turns into a villain of Gotham City proportions.  What’s passed off as a resolution between he and his daughter either makes a complete fool out of her or out of us.

Besides the Douglas performance, one of the other things I’ve underappreciated about Wall Street is that it’s kind of a small movie about the big subject insider trading.  I think it’s scale helps to make the subject accessible.  Wall Street:Money Never Sleeps either has no confidence in its audience or is  too lazy to take on the unwieldy subject matter.  Personally I would have preferred more dramatic exposition about sub-prime mortgages, collateralized debt obligations, and credit derivative securities; the titans and tyrants of Wall Street!   But the movie never finds its bearings.  Its actors are first rate, but underutilized.  The focus on individual ax grinding, family betrayal, and questionable redemption reduces it to TV melodrama.  It’s too bad the movie didn’t borrow more from its predecessor.  I’d still like to know more about what really happened on Wall Street in 2008 and where the hell all our money went.

Wall Street (1987, d. Oliver Stone)

Wall Street: Money Never Sleeps (2010, d. Oliver Stone)

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