REVIEW OF THE MOVIE – INSIDE JOB
Rohan Rambhia | PGP-10-155
Inside Job is an exemplary recount of how administrator’s role when exploited to form risky administrative strategies by means of faulty processes lead to a crisis of the stature of the recession of 2008. It is a comprehensive documentary which narrates the history of the collapse, not only going into great, informative depth about the risk-based strategies that put the global economy on the line, but looks back to the rise of the financial industry. The biggest question which the documentary arouses is that knowing what happened, why are the miscreants not being punished? As the director, Charles Ferguson, himself stated while receiving the Oscar, “Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail, and that's wrong.”1 Lets us first look at the prelude (context) of this financial crisis:
REVIEW OF THE MOVIE – INSIDE JOB
The Clinton era (1990s) worked as a bridge between the Wall Street and the government. More and more Wall Street CEOs gained access to the government, taking up administrative positions like 2 • Robert Rubin On Wall Street: Chairman and COO of Goldman Sachs For the Government: Secretary of Treasury under Bill Clinton Laura Tyson On Wall Street: Board director of Stanley Morgan For the government: Chair of the US President's Council of Economic Advisers during the Clinton Administration. She also served as Director of the National Economic Council. during the Clinton Administration.
In 1980s - the era of President Ronald Regean – set the foundation for deregulation of various aspects of financial markets. The markets and financial services were deregulated, and the driving force for this liberalization was Alan Greenspan. The deregulation of Wall Street and the savings and loan industry led to less oversight (control and regulation), effectively leading to multiple cases of fraud, insider trading and bad loans/investments that led to massive losses.
After “The Great Depression” of 1929, there was strict regulation for about 40 years. The financial industry was regulated and hence well under control. This was the time when financial services resigned to a simple system of borrowers and lenders. Bankers and traders earned income that matched most working Americans.
On Wall Street: Paid keynote speaker at banks including Goldman and JP Morgan; keynote speaker at annual Alpha Hedge Bermuda Global Hedge Fund Summit; consultant to hedge funds including D.E Shaw.
Larry Summers For the government: Secretary of the Treasury from 1999 to 2001,
In the Bush era (2000s), regulation was further relaxed and more and more Wall Street professionals became a part of the Government. With this increased inclusion of Wall Street into the Government, there were more and more cases of heavy lobbying, fraud, inflated speculation and unethical practices.
Many specific laws were created to accommodate like financial biggies. The most prominent example was that related to Citi Corp’s merger with Travelers. The law prohibited a savings bank to merge with Investment bank. Instead of objecting this merger this deal was given an exemption from the law for a year and in the meantime ‘GrammLeach-Bliley’ Act was passed which validated the merger giving rise to Citi Group.
During this period most of the regulatory safeguards were revoked, allowing for huge Wall Street mergers and new laws favoring the financial services industry. The derivatives industry got created, which Wall Street government-administrators refused to regulate. An attempt was made to bring under regulation only to be opposed by the major investment banks supported by the Wall Street professionals turned administrators. This era also saw Bankers and traders making huge commissions off “junk deals” that lead to the Dot-com...