The movie, Inside Job, certainly investigates how variations in banking practices and the policy environment helped construct the financial crisis. In September of 2008, when Lehman Brothers and AIG declared bankruptcy, it set in motion a massive financial crisis. The national debt of the U.S. was doubled; it put 30 million people unemployed, and cost the world trillions of dollars. After the Great Depression, the U.S. went decades of economic growth, without a single crisis drudging them. The financial industry was tightly controlled. Most banks were established as local businesses and were banned from dealing with depositors’ savings. Investment banks, which dealer with bond and stock trading, were small, private alliances.
The financial crisis affected multiple countries besides the U.S. ranging from Iceland to Spain. Iceland had high stable living. The country had a complete infrastructure of modern society. Decent healthcare, no crime. In 2000, the government allowed multinational corporations to build rather large smelting plants, and take advantage of Iceland’s natural geothermal and other energy sources. In a few years, three banks in Iceland which hadn’t dealt business outside of country, borrowed more than 100 billion dollars, which was ten times of Iceland’s economy. End result was housing values doubled in no time. Come 2008 when Iceland’s banks disintegrated, in a matter of six months, unemployment tripled. Practically one-third of Iceland’s financial regulators ended up working for the banks. Banking has essentially changed over the past few decades.
Back in the 80’s, the financial industry skyrocketed. Investment banks went public, granting them substantial amounts of stockholder money. Everyone on Wall Street were getting paid excessively. Then in 1982, the Reagan administration deregulated savings and loan companies, allowing them to make risky investments with their people’s money. By the 1990’s, many savings and loan companies had failed. This catastrophe cost the American taxpayers at least 100 billion dollars, essentially wiping out many people’s life savings. The financial sector had developed into several massive firms, each of them so extensive, that their downfall could pressure the whole system, and the Clinton administration helped them grow substantially.
Well into the 21st century, reports were revealed that banks had been partaking in certain illegal activities. Investment banks had promoted Internet companies they know would crash. Stock analysts were being paid exorbitantly basing on how many businesses they could bring in. Since deregulation was implemented, some of the world’s biggest financial firms have been caught defrauding customers, laundering money, and falsifying their financial statements. JP Morgan was found bribing government officials. Riggs Bank was laundering money for former Chilean Dictator Augusto Pinochet. Credit Suisse was laundering money for Iran’s aerospace and nuclear programs in violation of U.S. Sanctions.
In the old system, when homeowners paid their mortgage every month on time, the money would go to their local lender. On account mortgages took decades to repay, lenders would be cautious. But when the new system was implemented, lenders actually sold the mortgages to investment banks. The investment banks merged thousands of loans and other mortgages ranging from car loans, credit-card debt, and student loans to create collateralized debt obligations or CDOs. The investment banks then sold the CDOs to investors. So, when homeowners paid their mortgages, the money would go to investors. The investment banks paid credit rating agencies to appraise the CDOs, and many of them were given a AAA rating, which is highest investment grade available.
As the money was rolling in constantly, businesspeople, regulators, and politicians didn’t really consider the threat of financial innovation on the stability of the financial system that seriously. Using derivatives, anything could be gambled by bankers. Whether it be the rise or fall of oil prices or the eventual bankruptcy of a company. The Commodity Futures Trading Commission issued a proposal to regulate derivatives. However, it got shot down quick by the Clinton administration, then by Congress. The big banks were now heavily reliant for earnings on the types of activities.
I would say some of the compelling scenes would be the former government and banking officials would explain how the banking institution took advantage of the industry. You would hear explanations from former advisors to past U.S. President to even the Prime Minister of Singapore. Even including the former Secretary of the Treasury, high level banking officials, and the former Vice Chairman of Lehman Brothers. There was even a Madam who ran a prostitution ring that serviced traders. It showed how from their own words how the investment banks had a lot of sway all round all the way from credit rating agencies to Office of the President of the United States. To see regulation initiatives that would be proposed would be quickly shut down on account it would inconvenience the big banks from making a substantial amount of money. Big banks were just flaunting their wealth and power.
The purpose of this movie, which begins in a mood of serene observations and grows bitter and more unbelieving as it goes on, is precisely punishing. The bulk of information and the ramification of the theme make “Inside Job” feel like a classroom lecture at times, but by the end Mr. Ferguson has called for the plaguing moral force of a pulpit-shaking sermon.
The film does relate to some topics on what was discussed this past semester. Most of the topics would reference to equal rights for all and to criticize those who took advantage of certain aspects of society.
I would highly recommend this movie to a friend. It really gives an in-depth look on the basis of what happened leading up to the Great Recession; how after the recession, it devastated a lot of people. Unemployment rising, people evicted from their homes. How the big banks took made their mark on the financial industry. Investment banks would try to minimize on the regulation protocols to take full advantage over so many.