“Inside Job” is an Americandocumentary film about a systemic corruption of the US. by financial-bankingindustry and the adverse consequences of it. The movie points out that the maintheme responsible for the financial crisis of 2008 was the extensivederegulation starting from 1980s. Through this deregulation the governmentreduced the restrictions on financial industry in order to improve the ease ofdoing business. In the 1990s derivativesbecame popular in the industry: using derivatives bankers could gamble onanything, which made the economy more unstable. Brooksley Born, a former publicofficial, tried to regulate the derivatives, however, was threatened by severalofficials.
In 2000, the regulation of derivatives was banned. In 2001, fivedominating investment banks (Goldman Sachs, Morgan Stanley, Lehman Brothers,Merrill Lynch and Bear Stearns) tied mortgages with other loans and debts bycreating Collateralized Debt Obligations (CDOs), which they sold to investorsand gained huge profits. Investment banks preferred subprime loans, as theycarried high interest rates. Banks no longer cared if they would be paid bytheir costumers, thus, many home owners were given loans they could neverrepay. From 2001-2007, there was a huge boom in housing, during which housingprices skyrocketed. The ratio of money borrowed by an investment bank over thebank’s own assets (leverage ratio) reached high levels. During the BubbleInvestment banks borrowed more money to buy more loans and create more CDOs,which made them even richer.
Soon, the market for CDOs collapsed and theinvestment banks (Bear Stearns, Lehman Brothers and Merrill Lynch) ran out ofcash and went bankrupt. As a result, the stock market fell, unemployment roseand 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 eliminatethe crisis that the ideas, the actions, and the greed of the politicians andbusiness leaders had caused. The crisis did not hurt them at all, because the top executives of the insolvent companies walkedaway with their personal fortunes. As a matter of fact, people were severelyaffected, so they had to bear all the consequences.
Yet, these lobbyists andexecutives continue to teachat elite schools, run the same banks, and occupy the same position in theTreasury or the Federal Reserve Board. This corrupted system is still managedby people who pursue their own interests. Astonishingly, their greedy actionscan have an adverse impact on the whole system and create a crisis both withinthe country and abroad.