It is seldom that Wall Street (if ever) provided us with such an intricate and out of the world financial engineering that movies and after movies could now be made to commensurate the 2008 financial catastrophe. No one fully understood the plots behind the many stories and the realities that all the very top people had been saying. What we all in the world understand is that we have become poorer as a whole and as a result of it (with the exception of some insiders). True or false? You decide!
Clearly, it is not my opinions that matter. I’m no big shot by any means. But I speak the hearts of many, I do hope. What do we work our @ss off if not for a better tomorrow, both for ourselves and our families. Yet, the future looks bleak, from my perspective. The world hasn’t gotten any better in coping with unforeseen circumstances nor has the government been proficient in bringing about changes for the better. Otherwise, there wouldn’t be so much instability and sufferings in the world, would there? Granted, some governments are doing better than others. And for many reasons, some citizens are doing better too. It is not justice that we seek but understanding. So, on this premise, watch this documentary to get a better grasp of how things are, I thought.
I do not seek to be popular and I do not seek to be wise. I seek to understand and in understanding acceptance. When it comes to reforms, it’s almost impossible if the problems lie in the systems as well as the (might I add, powerful) men behind the system. As deeply rooted as Wall Street is, even the President of a country has his hands full. Hence, after watching the documentary, one finally realizes the gravity of the situation that even those working in the industry may not have had. There are clearly no identifiable solutions to be had if the sector as a whole refused to reform. Just like whatever that’s happening in the Middle East, until the citizens themselves are ready, no change would be forthcoming. That’s the conclusion one can draw from this documentary.
Otherwise, if you enjoy history and knowing what actually had caused it all, the film begins with Iceland, a tiny country that practically gone bankrupt as a result of the fiasco.
Iceland, a country with spectacular sceneries, saw the beginning of boom time when I first visited in 2003. It was the most expensive country I had ever visited, with GDP per capita that’s even higher than Norway and many European countries back then. Within a short span of 6 years, the country has gone from boom to bust. House prices more than doubled. Icelanders (billionaires) go on shopping spree in UK, buying up many large retailers. How? By taking loans from their local banks.
KPMG, Iceland’s auditor, found nothing wrong with such doing. As with the credit rating agencies which accord it with AAA ratings! The banking sector got so big that 1/3 of financial regulators are actually working for the banks!
That marks the beginning and the tipping point by which the global meltdown was based on. The ones responsible for?
Credit rating agencies
The order of these 4 forces changes according to which perspective you’re looking from. Many “insiders” were interviewed and some got real mad by the end of the interviews. If you’re interested in hearing what they said and also what kind of conclusions the film has come to, you’d have to watch it yourself. I prefer to not say too much as many claimed to have cause the downfall are still very much in power. This is not a war I choose to fight. I did so when I quit the industry. This is a film that every Americans should watch though because it affects your future and reflected your past (whether you are ignorant or not is not so important as to whether you have a grasp of your reality and future).
Nothing has quite changed, unfortunately! Mistakes had not been corrected. Unemployment is still as high and prices are sky-rocketing... In Inside Job, narrated by Matt Damon, the 108 mins film attempts to answer questions by interviewing the "insiders".
Some notable interviewees (in order of appearances) are:
Barney Frank: Chairman, Financial Services Committee, US House of Representatives
David McCormick: Under Secretary of the Treasury (Bush Administration)
Scott Talbott: Chief Lobbyist, Financial Services Roudtable who sees nothing wrong with the high level of compensations in the financial services industry on the premise that the bankers had earned it!
Lee Hsien Loong: Prime Minister of Singapore claims that it’s hard to resist the temptation when one thinks that one can credit something out of nothing
Christine Lagarde, Finance Minister of France is concerned that many people wants to go back to the old way (which as we can clearly see, they are!)
Nouriel Roubini, Professor of NYU Business School
Glenn Hubbard, Chief Economist and Advisor to the Bush Administration, Dean of Columbia Business School
Eliot Spitzer, former Governor of NY claims that “the regulators didn’t do their jobs”.
Lehman Brothers bankruptcy and collapse of AIG triggered the global financial catastrophe. Global recession follows. More than tens of millions of jobs were lost as a result. 6 millions foreclosures in the United States housing market alone.
There are 4 parts to the film:
How We Got Here
Part 1 takes us back to the historical moments when the financial services were deregulated and the frauds prior. Some heavy-weights were introduced and from here you can deduced how the network was set up that eventually determined the system that was built which then caused what it did in 2008. To me, it is quite clear that to see changes, the system needs a good revamp. That, by the look of things, is not probable in the near future. UNLESS, another Armageddon. Deregulation is the keyword in this part.
Wall Street firms have been caught defrauding their customers and cooking their books. These are nothing new in the industry. Fines don’t stop them from engaging in illegal activities. I hope that's not news to you!
Derivative is another word you need to understand here. Investment banks make huge profits from this instrument which prompts them to keep it from regulated.
The film then goes on to explain the Securitization Food Chain and the parties involved, namely the home buyers, lenders, investment bank and investors. CDO (Collateralized Debt Obligation) is an instrument you may have heard before. If not, check out my review on The Crisis of Credit Visualised (I guarantee you'll enjoy it).
Remembered if you've read my last review (Capitalism: A love story) that short term profits are what the bankers are after. Therefore, investment banks preferred subprime as they carried a higher interest and hence bank’s profits which ultimately translates to huge bonuses for the executives and employees of the firms.
Those participating in this profit maximization are:
Part 2 explains when everyone can get a mortgage,property prices skyrocketed to a level never before. When that happens housing prices doubled from 1996 to 2006. Subprimeloans grew 20x from $30 billions to $600+ billions in a decade.
Who benefit? Well, not just the home owners, obviously. The most incredible of it all? Lehman's chairman Richard Fuld was taking home some $485 million worth of bonuses!
Banks leveraging shot through the roof, from 3:1 to some 33:1.
Credit Default Swap (a term you will learn) is the trigger that took the world down with it. You'll learn about AIG role's in it and the panic associated with the entire derivative. For simplicity sake, in this review, just know that AIG issued some 500 billion worth of credit default swaps (where most have clearly no idea how to unwind after the system froze up) and its chairman Joseph Cassano took home $315 million in 2007 as a result of it.
Raghuram G. Rajan, Chief Economist (2003-2007) of IMF noted that the incentives and company system encouraged risk taking in the industry.
Paulson, Greenspan and Summers declined to be interviewed for this film.
If you should decide to watch this film, listen closely to Kristin David's interview. You'd be appalled by what's truly going on in Wall Street. Also, Goldman Sach's role in betting against its clients in CDOs which they ultimately made a handsome return and was never prosecuted for.
Part 3 takes us to The Crisis where the commercial paper market collapsed which then led to the global system froze up. AIG's bail-out cost taxpayers some $150 billion while Goldman Sachs was paid $61 billion next day. Some have questioned where had those money gone? Remember the $700 billion was set aside by Congress? What happened to those people who faced foreclosures? Some 6 million in 2010 alone, according to the film.
Part 4 deals with Accountability or rather, the lack of it!
Richard Fuld plunged the world into crisis. When Lehman went bankrupt, the executives got to keep their coffers! While the rest of the world, especially Europe, had taken steps to contain the situation, US hasn't quite. What it had done was QE2 and as a result, the US$ has been plunging to all time low against major currencies.
Well, this is where the film ends. But, if you think that's the end of the story, well, stay tune! I'm pretty sure we have some new developments in the near future!
If you take Matt Damon's word for it (he's the narrator for the vastly overrated INSIDE JOB), then you'd quite possibly find your personal income regulated. That's right: the actor who makes about $10 million dollars per picture (plus some back-end residual income, no doubt) may think you're making too much money, and he'd rather have the government step in to make sure that you're not making more than your fair share. A guy who gets paid serious scratch for … more
12A - 120mins - Documentary/Crime - 18th February 2011 The financial crisis of 2008 hit everyone hard of that there is no doubt and Inside Job seeks to understand the causes of this from how the crisis came about to who was responsible and what is being done to try and bring those people to justice. The overawing feeling whilst watching this movie is one of disgust, frustration and anger at the people who instigated the downfall of so many companies and who led to the destruction … more
It's a documentary format kind of film and you'd have to be very interested in the 2008 financial meltdown to enjoy this film. Or, if you are working or had worked in the financial industry, then this will definitely interest you. The film may have addressed what went wrong, but it has not quite demonstrate how the financial world has changed since then. Those working for Goldman Sachs, Citigroup, Morgan Stanley, etc, etc, are still making huge bonuses after their irresponsible practices … more
You approve a bunch of subprime mortgages, package those loans together into a CDO, then pay to get your CDO a “AAA” rating. Then you sell that CDO to a retirement fund, and take out a policy with AIG… Ok, I lost you. Let me try again. You buy a bunch of dogmeat. Then you pay somebody to label it prime rib. So you sell it as prime rib, and make big bucks, because dogmeat is cheap, but prime rib is expensive. That’s bad enough. … more
From Academy Award® nominated filmmaker, Charles Ferguson (“No End In Sight”), comes INSIDE JOB, the first film to expose the shocking truth behind the economic crisis of 2008. The global financial meltdown, at a cost of over $20 trillion, resulted in millions of people losing their homes and jobs. Through extensive research and interviews with major financial insiders, politicians and journalists, INSIDE JOB traces the rise of a rogue industry and unveils the corrosive relationships which have corrupted politics, regulation and academia. Narrated by Academy Award® winner Matt Damon, INSIDE JOB was made on location in the United States, Iceland, England, France, Singapore, and China.