Part of the reason why Wall Street has as much unregulated free reign as it does is because the population at large has very little understanding of the sketchy deals that are potentially going to collapse the economy. Even so, plenty of lawmakers don’t take action on large-scale fraud because they themselves are benefiting. The real lesson here is that the only person who truly cares about the well-being of your 401k is yourself. Jed Rothstein’s documentary, The China Hustle, at least presents information on an impending economic disaster in an accessible way, not bogging down the explanation with industry jargon. The newest practice on Wall Street (albeit not so new) that spells disaster for the 99% is “reverse mergers,” specifically, the hundreds of Chinese companies that have merged with defunct U.S. companies in order to legitimately be traded on the stock market and simultaneously forgo scrutinizing review. Needless to say, many of them fraudulently misrepresent their company assets and revenues in order to entice investors.
Rothstein hones in on one specific player in this large-scale practice: Dan David, a hedge fund manager who, like everyone else, was hit hard in the 2008 meltdown and turned to Chinese stocks to bounce back. David, however became suspicious of the number of companies with vast reported revenues and began shorting fraudulent companies’ stock and publicizing research – frequently gained from staking out the factories – debunking their claims. From the outset, David admits, “There are no good guys in this story, including me.” This confession is important to remember, even as The China Hustle, from a certain perspective, makes David out to be a hero, pitting him against Congress and American firms like Roth Capital and Rodman & Renshaw who stay blissfully unaware of the fraud to continue raking in profits, for the time being. Let there be no mistake, David and short sellers like him profit off of short selling, even as they try to burst the China bubble.
What Rothstein seeks to expose, though, is not just the rampant fraud involving Chinese companies but, via the short sellers-cum-fraud exposers, the fact that Congress has so far turned a blind eye. David becomes the figurehead for muckrakers of a sort who bring down fraudulent companies through short selling, as well as seeking harsher regulation within the U.S. stock market. So far, in a painful win for capitalism, justice through the market has been exponentially more successful than vying for official policy. This is all the more sobering when paired with footage of the current President vowing to cut more regulations. Just what we need.
Despite its dour subject matter, The China Hustle boasts a surprisingly playful tone. There are serious moments, to be sure, given that there are face-to-face interviews with major players and affected Mom-and-pop investors alike. The absurdity of the situation, however, creeps in to delightful effect. David’s stakeout footage of paltry factories – grainy and so damningly uneventful – ram home just how big the lies are (in the billions), as well as how ridiculous it is that a middling Chinese mining company could be responsible for massive losses in the U.S. Retired general Wesley Clark, Rodman & Renshaw’s former CEO, perhaps provides the greatest illustration of Wall Street privilege, skirting around responsibility for his firm’s actions by citing himself as, more or less, purely a figurehead and backing out of his interview on-camera, seemingly having suddenly realized just how bad he looks.
The China Hustle is in the unique position of not being released after this Chinese fraud has caused a total burst but during its ill-advised continued trading on the stock market. Ideally, it will spur action, as previous call-to-arms documentaries have. Otherwise, it will provide glaring evidence of willful ignorance when another crash inevitably occurs.
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