Documentary on new financial rules
Inside job documentary was first released in October 2008 in the US, directed by Charles Ferguson and narrated by Matt Damon. The director Charles tries to carry out interviews across from the United States of America to China and Iceland, and other global financial heavyweights in an attempt to gather information on the global economic meltdown that affected the globe in 2008. The effects of this meltdown ere immeasurable loss of jobs and overall plunge into deep crises of the US economy. In the documentary, a narration by Matt Damon gives a step by step unfolding of events that led to this crisis, clearly pointing out key players who either play political or financial roles in the scheme. His work was clearing the gray areas for investors who may feel it secure to go by the ratings of investment issued the government and risk in an attempt to safeguard defaulters’ interest instead of the public. It also points to the contributions of leaders’ contributions towards expanding financial mafias at the expense of taking measures to protect people and eliminate poverty.
A case of study is also presented in Iceland. The country is painted as doing very well with the established medical system where cancer fund wa availed. The crime rate was low, education free, established social schemes, and proper financial arrangements. The documentary exposes how a multinational named Alcoa was allowed to come and develop its operations in the country, and this ended up interrupting the integrity of the transactions. Fast forward, some of their huge banks got privatized in five years, and they immediately went on a borrowing spree. Reckless borrowing took over the habits of lending. A case in hand is the investor Jon Asgeir who was heading the Bagur Company carelessly borrowing ten billion dollars. Of course, due to lack of regularization, he spent this money on non-income generating activities. He, therefore, continued to exploit the already weakened and porous financial system in the country with tax evasions and underhand dealings. With time, due to the dominance of corrupt business practices, Iceland drained her financial resources, land, stability in education and society, quality of life, and trust in the system. The struggle with huge debts and basic material inputs kicked in. These points are packaged by the producer of this documentary to depict a system that degenerates from a viable economy to a free and a lawless economy that escapes from the order and sinks into financial disorder, even eating into its physical capacity. Interestingly, a professor of economics in the country, Gylfi, buries his head in the sand by terming the financial mess in the state as a global crisis. He says even New York experiences the same turbulence.
At first, there is an examination of how Iceland was affected through high deregulation and banks privatized in the year 2000. It is clear that from the documentary after Lehman Brothers were declared bankrupt and upon the collapse of AIG, there was a global recession in Iceland and the rest of the world. In 2005, the IMF chief economist Raghuram Rajan warned of the growing risk of the financial position of the world economies giving remedial measures. To his surprise, the US secretary to the Treasury treated these interventions with a pinch of salt labeling the economist a Luddite. However, when the recession hit hard between 2007 and 2008, Rajan was a crucial contributor to the current documentary where he was interviewed.
From the documentary, five sections depict a clear picture of the situation evolved. There was a period of deregulation of the financial sector in the US in the 1980s after a period of regulation of 40 years between 1941 and 1981. Towards the end of 1980, the crisis of loans and savings came up at the cost of taxpayers. This would then lead to the metamorphosis of the financial to huge but limited firms. By 2000, there were indications of bad things to come after the bursting of the internet stock bubble occasioned by the promotion of internet companies that would full knowledge of investment banks. Investors lost $5 trillion. This condition was further fuelled by the dominance of derivatives, and efforts to stabilize the situation were met with great opposition from commodity future modernization with the support of a bunch of top officials. Now, there was dominance in five banks, two financial conglomerates, insurance companies, rating agencies forcing banks to sell mortgages to investors. The result of this was predatory lending, where owners of homes could not repay their loans. Banks investing were borrowing to trade more debts while maintaining a high-profit margin. For every one dollar investment was tripled by the investing bank. This was possible because the rules allowed firms to earn profits before investing and worry about clearing their debts upon enjoying their profits. Attractive incentives were in place, which put firms and the whole world economy at risk of collapsing. While incentives were good for business, they were never meant to be spent on luxuries like private jets and holidays. Betting by banks even after being advised against further sank these economies. Interestingly most of the modeled economies behaved in a similar manner poi crime.nting to an organized international economic
A period of the housing boom is seen to set in, which came in high levels of defaults. What would later come was uncontrolled betting against some firms while others misled investors. The detailed coverage majors on the fraud of securities perpetuated by crucial financial institutions in the United States, leading to the financial mess across the world. It points to how 99% of the population kept on losing at the expense of 1% gaining. Banks suffered unpaid loans from real estate funding. In 2207, it is clear from the documentary that the recession had set in. The federal government was taking over some of the banks that were almost collapsing. This spelled the death of the commercial paper market after Lehman was forced to bankruptcy by Henry and Timothy. The government started to take back institutions while at the same time bailing the ones that were on the verge of collapse. While America tried to cushion its economy, it is documented that the world’s economy continued to collapse without mass unemployment and layoffs. American employment shot to 10% by December 2008.
The high ranking managers in the firms that were facing insolvency were safe with their harvest intact. Things were so bad such that there was handpicking of the board of directors, which was aimed at ensuring the executive was awarded direct bonuses immediately the government bailed them out. In other words, there was a lack of accountability. Big banks grew in control and in anti-reform campaigns. Consulting firms were still supporting deregulation amid those challenges due to vested interests since they were getting fat pays from a consultation.
Injection of fresh blood, Obama was not any better as his financial reforms were termed as weak. The system did not have clear terms of engagement by the government and the interested groups. Despite changing the treasury secretary and bringing a fresh set of advisors and imposing strict bank compensation regulations, there was a lot of resistance.
Throughout, Matt narrates how few elements, who were mainly politicians and financial players, choreographed the plunge of the world economy. The other financial hotspots in the documentary include; France, England, and Singapore. As the drama unfolds, he can demonstrate the deep-seated conflict of interest, which is not well scripted. This conflict of interest went to as far as academicians failing to disclose their information to the firms they were consulting, further fuelling the meltdown. The pressure is a theme that plays out clearly. The origin of this pressure is from the financial class to the political process, not bringing in regulation. Further conflict openly plays when a financial player leaves the government but can find their way back and get away with a lot of money.
The film can contend that there was an actual transfer of debts from one investor to another unsuspecting investor who had been falsely made to believe the investment was safe for them. Mortgages were packaged in a manner their cumulating would not raise eyebrows since the risk would remain disguised. It is in the movie that the ratings of bonds would always emerge very close to the rates offered by the government. These products were a secret package to be used as retirement package benefits for the investors. A point that is more worrying was the abnormally high pay in the financial sector, coupled with its sudden high growth recently even extending to the rest of the economy. The scheme was so deep such that even for failing banks, the documentary shows that executives were making a kill in the midst of the crisis up to immediately after. This was kept under wraps, an indication that already the ratio between risk and benefit balance had long been broken.
In the academic world, Ferguson points out that Harvard University played a role in the crisis. This happened in conjunction with the outgone head of economics and advisers of President Ronald Reagan. A lot of the professors in the University and head of economic faculties drew a lot of incomes from consultancy services or from engagements in speaking. Hubbard, together with the chairman of the department of the faculty of economics, John Campbell, denied any form of conflict of interest pitting the academia and the financial sector because of the benefits they enjoyed from the latter.
The documentary ends by observing that despite the efforts to cultivate new financial rules, the status quo has remained. The same the surviving banks have grown more prominent, and the incentives continue to stay the same with top executives remaining roaming freely as no one has been prosecuted for their role in this racket. The narrator says that the people responsible for the crash of their own companies and plunge of the world economy are free with their gains intact.