“Inside home owners were given loans they could

“Inside Job” is an American
documentary film about a systemic corruption of the US. by financial-banking
industry and the adverse consequences of it. The movie points out that the main
theme responsible for the financial crisis of 2008 was the extensive
deregulation starting from 1980s. Through this deregulation the government
reduced the restrictions on financial industry in order to improve the ease of
doing business. In the 1990s derivatives
became popular in the industry: using derivatives bankers could gamble on
anything, which made the economy more unstable. Brooksley Born, a former public
official, tried to regulate the derivatives, however, was threatened by several
officials. In 2000, the regulation of derivatives was banned. In 2001, five
dominating investment banks (Goldman Sachs, Morgan Stanley, Lehman Brothers,
Merrill Lynch and Bear Stearns) tied mortgages with other loans and debts by
creating Collateralized Debt Obligations (CDOs), which they sold to investors
and gained huge profits. Investment banks preferred subprime loans, as they
carried high interest rates. Banks no longer cared if they would be paid by
their costumers, thus, many home owners were given loans they could never
repay. From 2001-2007, there was a huge boom in housing, during which housing
prices skyrocketed. The ratio of money borrowed by an investment bank over the
bank’s own assets (leverage ratio) reached high levels. During the Bubble
Investment banks borrowed more money to buy more loans and create more CDOs,
which made them even richer. Soon, the market for CDOs collapsed and the
investment banks (Bear Stearns, Lehman Brothers and Merrill Lynch) ran out of
cash and went bankrupt. As a result, the stock market fell, unemployment rose
and the recession accelerated. It is quite shocking how the rest of the world,
including Iceland, went into a global recession. So, a bank reform was essential in order to eliminate
the crisis that the ideas, the actions, and the greed of the politicians and
business leaders had caused. The crisis did not hurt them at all, because the top executives of the insolvent companies walked
away with their personal fortunes. As a matter of fact, people were severely
affected, so they had to bear all the consequences. Yet, these lobbyists and
executives continue to teach
at elite schools, run the same banks, and occupy the same position in the
Treasury or the Federal Reserve Board. This corrupted system is still managed
by people who pursue their own interests. Astonishingly, their greedy actions
can have an adverse impact on the whole system and create a crisis both within
the country and abroad.  

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