A Review on the Movie: Inside Job

Inside Job 1

Inside Job is about..The systemic corruption of the United States by the financial services industry and the consequences of that corruption.The sequence of events leading to and the aftermath of the global financial crisis.The repeated failure in sensing that such a crisis would arise despite so many warning sign arise.The failure to understand the need of regulation and controlling the rising number of Financial products during the period of the bubble.2 Inside JobInside Job PartsPart I: How We Got HerePart II: The Bubble (2001-2007)Part III: The CrisisPart IV: AccountabilityPart V: Where We Are Now3

Inside JobI : How we got hereStricter Regulations since 1940s till period of Ronald Reagan 1980s.Beginning of the deregulation Oil TankerSavings and Loan Crisis and The Internet Stock BubbleDoing away with Glass Stegal act with Gramm Leach Biley Act. Robert rubin then became Vicechairman of CitiGroupCitibank, Merryl Lynch, JPMorgan helped Enron Conceal FraudEmergence of Derivatives and new FPs and the pressure to not regulateThe dominance of few leaders in the US Financial Sector

4 Inside JobI : How we got hereThe securitization food chain.

Creation of the complex CDOs that included sub prime lending's.The dubious ratings given to the CDOs

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Inside JobII : The Bubble (2001-2007)Investment banks preferred subprime loans because of higher interest rates It then led to massive increase in predatory lendingBorrowers were needlessly placed in expensive subprime loans, and many loans were given to people who cannot replay them.Result - Biggest real estate boom in historySubprime lending $30 to $600 billion in 10 yrsSEC Lifted leverage limits for investment banksNeuroscientists proved that money stimulates the same part of brain tat stimulates thro cocaineBorrowers borrowed 99.4% of money in the house6 Inside JobII: The Bubble (2001-2007)Credit Default SwapsInvestors can buy CDS as a insurance to CDOEven speculators can buy CDSNo money to cover losses but issued bonusRaghuram Rajan alerted about the incentives for risk.7

Inside Job III: The Crisis2004 FBI warned epidemic mortgage fraud2005 Raghuram Rajan warned thro Has financial development made the world riskier ?Repeated warnings from IMF and many economists from time to time2008 - Home foreclosures skyrocketed2010 - Home Foreclosures reached 6 million$700 billion to bail out banks

Inside Job8IV : AccountabilityTop Executives were paid bonuses instead of being firedBankers complained Regulators did not do their job$5 Billion for lobbying & campaign contributionsAcademic Economists advocated for deregulationConflicts of interest as these economists were consultant to companies

9 Inside JobV : Where we are nowAverage Americans are less prosperous than their parentsObama came with lot of promises and actionResult WALL STREET GovernmentKey economists are the same people who built the structureFinance companies as a service company should serve others before serving themselves.As of mid 2010, no senior executive was criminally prosecuted.At enormous cost we avoided disaster and are recovering, but those who created this are still in power.

10 Inside JobA few lessons..Beware of complex financial instruments.Do not believe in Rating agencies Just Opinions.Ensure that warning signals are investigated on time and arent ignored.Before paying your employees huge bonuses, check if you could repay your customers if the company were to go bankrupt.Understand the implications that Conflicts of Interest could have.

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