1)Inside Job opens with a case study of Iceland, a nation that was possessed by the cancer of free radical finance. 2)Iceland was stable – low crime, strong education, strong stability in social and financial systems. 3)Multinational corporations such as Alcoa were then allowed to come into Iceland and install their business thereby disrupting the integrity of the system. 4)Three of their largest banks were privatised and in only five years, they combined to borrow a sum equal more than 10 times Iceland’s total GDP. Reckless borrowing and lax lending became commonplace. 5)A businessman named Jon Asgeir Johannesson, former head of the major retail company Bagur, is noted for taking out a loan amounting to billions of dollars. Jon used this money to purchase investments such as other top retail businesses and consumer goods such as a $40m yacht and a fashionably designed private jet. 6)Beginning with the introduction of Alcoa into Iceland, whose aluminum plants were colonizing some of the richest portions of Iceland’s greenery and continuing with various provisions of deregulation such as bank privatisation and lax requirements for bank loans – some of which were massive – the dominion of finance was interfacing Iceland. Gylfi Zoega, Professor of Economics at the University of Iceland, comments on this financial possession by stating simply, “Finance took over, and uh, more or less wrecked the place.” 7)Credit rating agencies analyzed a vastly overleveraged and indebted Iceland and, reflecting a pattern throughout the global financial system, gave Iceland a satisfactory or spectacular rating. Sigridur Benediktsdottir, member of the special investigative committee of the Icelandic Parliament says regarding the three Icelandic banks that combined to borrow over ten times Iceland’s entire GDP, “In February 2007, the rating agency decided to upgrade the banks to the highest possible rating – triple A.” 8)In a word, due to the dominion of chaotic finance, Iceland was being drained of financial resources and other resources that are related to finance, such as the natural land, education, civil stability, personal quality of life, and trust in the system. Iceland began this journey into the dangerous power known as excess money, and has been struggling with incredible debts – material and immaterial – since the journey began. Perhaps the most important point about Iceland’s financial degeneration is that, analogous to a free radical escaping from order and wreaking havoc throughout the physical system, the excessive dominion of finance has spread as a cancer throughout the global financial system – which Gylfi Zoega, our Icelandic Professor of Economics, sums up by saying, “But this is a universal problem. In New York you have the same problem, right?”
2 - Summary - Inside Job - Part I: How We Got Here -
10)During the forty years of economic growth in the United States, investment banks were small. A prominent investment bank named Morgan Stanley, in 1972, had 110 employees and $12m in capital, and now, in 2009, has 50,000 employees and several billions in capital. 11)In the 1980s, the financial sector quantum leaped, because investment banks were going public, which brought them vast sums of stockholder capital in return. From 1978-2008, the average salary for workers outside of investment banking in the US increased from $40k to $50k – a 25 percent salary increase - and the average salary in investment banking increased from $40k to $100k – a 150 percent salary increase. (Source: Inside Job) -
Average Salary - Investment Banking v. Every Other Profession - the United States - 1978-2008 -
12)The Reagan administration of the United States in the early 1980s began a thirty-year period of financial deregulation. By then end of the 1980s, many workers in the financial sector were going to jail for fraud and many people were losing their life savings. Large investment banks began...