The winner of Oscar Awards for the Best Documentary in 2010, ‘Inside Job’ presents an inclusive analysis of the 2008 global financial crisis which made millions of people lose their homes and jobs in the worst slump after the Great Depression. This financial crisis was at a cost of $ 20 trillion and almost led to a global financial crumple. Through extensive interviews with key academics, politicians, journalists, and financial insiders and exhaustive research, this film gives a trace of a rogue industry that has corrupted regulation, academia and politics .
One sector that should be blamed for the financial crisis is the private sector mainly the financial sector. This sector muddled in conflicts of interest which impacted negatively on the credit rating agencies and academics that obtain funding as consultants but failed to disclose this piece of information in their writing. These conflicts of interest also played a significant role in exacerbating and obscuring the financial crisis . The private sector exerted pressure on the political system to evade regulation. One conflict presented is the revolving door prevalence, whereby financial regulators are hired in the financial sector after leaving the government and make a fortune .
The film puts forward that the high risks which started with lending that was subprime were passed on to other investors who falsely had the thought that the investments were very safe. The lenders were, therefore, forced to sign up mortgages without considering risk or favoring high interest rates on loans. This was mainly because the risk was disguised after packaging the mortgages together . The film presents that the final products often had AAA ratings which were equal to bonds of U.S. government . These products were then used by investors for instance retirement funds despite being required to restrict themselves to investments that are very safe .
The government should be blamed for the financial crisis as well. This is due to the political movement towards deregulation, failed regulation, excess regulation, and progress of complex trading, For instance, derivative market allowed massive increases in risk taking. This circumvented the older regulations which were intended to regulate systemic risk. This financial crisis was triggered by too much regulation that was focused on increasing the home ownership rates for those with low income. A government policy; Community Reinvestment Act, exerted pressure on private banks to make HUD inexpensive housing goals and risky loans for government sponsored enterprises. These enterprises purchased risky loans, resulting in a broad break-down in the lending underwriting standards. Apparently, the government housing policies are squarely blamed for the excessive instances of high-risk mortgages . The government implemented other laws which limited the banking industry regulation. The Glass-Stengel Act allowed investment and depository banks to amalgamate while the Commodity Futures Modernization Act limited the financial derivatives regulation.
Had the U.S. government not chosen this housing policy, fostering the escalation of a bubble of exceptional size and a similarly exceptional number of high risk and weak residential mortgages, the massive financial crisis that hit Wall Street in 2008 would have been prevented . If the government had not permitted the private sector to choose their ideal regulators, in what ended up as a race to the supervisor that was weakest, the crisis would have been avoided.
Bibliography
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IMDb. (2010, February 10). Inside Job. Retrieved February 10, 2010, from IMDbPro: http://www.imdb.com/title/tt1645089/synopsis?ref_=tt_stry_pl
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Whalen, C. (2013, September 17). Congress, Wall Street will cause the next financial crisis. Retrieved September 17, 2013, from Housingwire: http://www.housingwire.com/articles/26876-congress-wall-street-will-cause-the-next-financial-crisis
