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Wall Street: Money Never Sleeps

The movie response that will be covered in this essay will be on the film “Wall Street Money Never Sleeps ”.It was directed by Oliver Stone, released during 2010 and is the sequel to the 1987 film “Wall Street”.The film starts with the release from jail of Michael Douglas’ Gordon Gekko before cutting to a rather elaborate plot involving Shia LaBeouf as the young trader with (some) scruples, who’s rising in a world that just happens to be collapsing at the same time, as investment banks run by the likes of Frank Langella and Josh Brolin teeter under the weight of the 2008 financial crisis.

The story then carefully weaves in more and more to Gekko (who, conveniently, also happens to be LaBeouf’s future father-in-law, a dad to LaBeouf’s on-screen fiancee, Carey Mulligan) (Zeitchik, 2010).

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Greed seems to be Wall Street: Money Never Sleeps theme, reckless and over the top risky behaviour has lead to the bubble in the housing prices to burst due to the actions of Wall Street firms. Shia Labouf played by Jake Moore works for the Lehman Brothers-esque Keller Zabel and is mentored by managing director Lewis Zabel.

He receives a bonus of $1,450,000, before a late-night treasury meeting, which reveals that Keller Zabel is on the verge of collapse. This brings up an important ethical issue on how much bankers and traders receive in bonuses, irrelevant of the financial climate. After the collapse of several large banks during the financial crises of 2008, many are still paying their employees substantial bonuses. Many argue that the UK government have pumped billions of pounds into the banking sector, and has bailed out both Royal Bank of Scotland and Loyds Banking Group.

As a result they should have greater say in how much the banks pay out in bonuses, however the banks argue that they cannot dramatically reduce bonuses without the risk of losing top staff to banks based overseas, which are under less pressure to cut payments. Even if bonuses are cut, salaries have risen significantly to compensate, by up to 40% in some cases. This is one of the many flaws, which has been allowed to occur within the banking industry, to the point where it has become the norm (Peston, 2011).

One of the most prominent ethical issues presented in this movie is the idea of insider trading, which is the trading of stock with hidden information that the general publics is not informed about. It began with rumours being spread on “Zabel” by Bretton James who runs the rival bank Churchill Schwartz, which caused the rumours to become true, and Keller Zabel to be on the verge of collapse. Bretton James then insults Lewis Zabel by offering him $3/share when the firm was trading the previous week at $75/share.

Zabel claims that this was revenge for letting Jame’s company go under eight years ago. These series of events causes Zabel to commit suicide by throwing himself under a subway. To avenge his mentor Shia Labouf releases rumours on Churchil Shwartz, which caused their shares to drop down 8% in pre market trading costing them $120million. Insider trading can be a very powerful tool within the financial sector; it can be used to make large profits as well as destroying others. As illustrated in the movie, Lewis Zabel took his life due to the results of Insider trading.

It’s a criminal offence in most countries, however as Shia Labouf said it’s “hard to prove”, this is due to the difficulty of trying to prove what a person has heard via word of mouth. Because Insider trading is illegal, insiders who wish to exploit price sensitive information collaborate with other traders to make it harder to trace the trades back to the person who is known to have access to the information. This is called an Insider Ring. The term “moral hazard” is mentioned several times throughout Wall Street: Money Never Sleeps.

It’s first mentioned during the treasury meeting, when they are deciding whether to bail out Keller Zabel, if they bail them out what’s to say it wont occur again. Moral hazard is the idea that an individual can alter their behaviour if they know they are insured against some of the outcomes, for example if a car is not insured you would take more care than if it was. The reason moral hazard comes up several times throughout the movie is because it’s often used within the context of banks and sub prime mortgages.

This is due to the fact that before the 2008 financial crises sub prime mortgage lenders were making reckless lending decisions, they lent many mortgages to people who were unlikely to be able to pay them back. This led to large-scale mortgage defaulting, which caused many banks to go under and cause the economy to suffer. However many banks were bailed out by governments in order to reduce the economy suffering further, which is effectively rewarding them for bad economic decisions (What is Moral Hazard, 2007).

The issue of lack of corporate governance is apparent in the movie, its connected to the reasons why Keller Zabel and the other banks began to fail. A definition of Corporate Governance is a “set of relationships between a company’s directors, its shareholders and other stakeholders. It also provides a structure through which the objectives of a company are set, and the means of achieving those objectives and monitoring performance, are determined” (OECD).

Events such as soaring pay packages for top bank executives which are often driven by extraordinary risk taking rather than real sustainable profits, weaknesses in risk management, board oversight, understatement of bad loans can all be linked to poor corporate governance (Corporate Governance failure to blame for banking crises, 2009). Money laundering is another un-ethical issue, which Wall Street brings about. Gordon Gekko reveals to Shia LaBeouf that he has $100million in a Swiss account under his daughter’s name, which she will be entitled to when she turns 25.

Gordon suggests that him and his daughter travel to Switzerland sign the account over to LaBeouf’s name and he in return gives Gordon the money so that he brings it to the States in order to avoid the RAS getting involved, which is Money Laundering. To conclude there are many ethical layers within Wall Street: Money Never Sleeps, such as unjustified salaries, poor corporate governance, insider trading, moral hazard and money laundering.

These issues are very real, and still go on in our daily lives. We continue to inflate these “bubbles” until eventually they will burst, and repeat the process. Albert Einstein said, “The definition of insanity is doing the same thing over and over again and expecting different results”. This seems to be very true of the banking industry and the lack of thought of the consequences to their actions. Gordon Gekko presented us with a question, “Is Greed Good? ” I believe Greed can never be good.

Bibliography
• Corporate Governance failure to blame for banking crises. (2009, 02 24). Retrieved 05 2011 from Professional Pensions: http://www.professionalpensions.com/professional-pensions/news/1441283/corporate-governance-failure-blame-banking-crisis

• DREA. (2010, 10 30). Movie Review of Wall Street: Money Never Sleeps. Retrieved 05 2011 from Businesspundit: http://www.businesspundit.com/movie-review-of-wall-street-money-never-sleeps/

• Insider Trading. (n.d.). Retrieved 05 2011 from Moneyterms: http://moneyterms.co.uk/insider-trading/

• Kenny, J. (2009, 02 25). Corporate governance failure driving banking crises. Retrieved 05 2011 from FTadviser: http://www.ftadviser.com/InvestmentAdviser/Investments/AssetClass/Equities/News/article/20090225/2d2a7d74-034c-11de-a6db-00144f2af8e8/Corporate-governance-failure-driving-banking-crisis.jsp

• Peston, R. (2011, 01 07). Bank bonuses ‘to run to billions in 2011′. Retrieved 05 2011 from BBC NEWS: http://www.bbc.co.uk/news/business-12131092

• What is Moral Hazard. (2007, 12 11). Retrieved 05 2011 from Economicshelp: http://www.economicshelp.org/blog/economics/what-is-moral-hazard/

• Zeitchik, S. (2010, 05 14). Cannes 2010: “Wall Street: Money Never Sleeps’ issues its wake-up call. Retrieved 05 2011 from Los Angelese Times: http://latimesblogs.latimes.com/movies/2010/05/wall-street-money-never-sleeps-cannes-oliver-stone.html

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