Inside Job Movie Review Essay

Earth provides enough to satisfy every mans needs, but not every mans greed, verbalise Mahatma Gandhi and this is somewhat the crux of this movie. Inside Job is directed by Charles Ferguson, and it highlights the reasons and the consequences of the global fiscal crisis of 2008. This movie is basic anyy related to recession that was caused by the inefficiency of the industry and the admonishing banking practices. The director has conducted several interviews and has exposed some hidden realities.The movie clearly shows that this crisis was not accidental, and that in that location were many people, including regulators, politicians, businessmen, who were actively involved in this destruction. These people and blown-up financial institutions k unfermented what they were doing was not right, but everyones focus was on self- amuses as, at the end of the day, its all about making money. This documentary is divided into vanadium parts. These include how we got here, the bubble, the c risis, accountability, and where we are now.Being a student, I would focus on the first three parts in my review. According to this movie, a few financial institutions have a direct link with the crisis. These include investment banks, insurance companies, rating agencies, etc. Main investment banks were Goldman Sachs, Morgan Stanley, Lehman Brothers, Merrill Lynch, and Bear Stearns. The important insurance companies include AIG, MBIA, and AMBAC. Moodys, Standards & Poors, and Fitch were the rating agencies. Other financial institutions that played an important role were Citigroup, and JP Morgan.The main paradox started when the deregulation period began which lead to thrift & loan crisis, ultimately resulting in a few big firms who all together disturbed the whole financial placement. The housing industry was at its prime when this all started. The standard of living, environment, the overall economy and everything else in well-established and developed countries was running sm ooth but this financial crisis destabilized even these nations. Deregulation began and many banks were privatized and given freehand, which impact the economy.As a result, in countries like Iceland, small banks operating locally borrowed excessive amounts of money, that were even more than Icelands entire economy. First deregulation was related to savings & loans, allowing risky investments that ultimately failed and cost people their savings. This deregulation continued with changing administrations and the large firms kept on growing. A few mergers took place that promoted the invention of investing consumers savings in risky investments. Next, there was a massive increase in internet stocks creating a bulky bubble.Along with this, corruption in Wall Street was increasing and money laundering was becoming common. Money laundering is basically hiding the illegal means of earning money. With new technology and high-tech businesses, use of derivatives was increasing which made ma rkets unstable. These were traded in unregulated markets that are in OTC (Over the Counter) markets. The regulators and other concerned parties did not take the threats of these financial innovations seriously. A new concept of Securitization Food Chain had emerged which linked loans and investors all over the world.The old phenomenon only involved mortgages between the home buyers and the lenders. But in new system lenders further sell the mortgages to investment banks. These banks combine different mortgages to create derivatives and then these derivatives are converted into Collateralized Debt Obligations and sold to investors. These CDOs are bought as they have high interest rates and they are just a piece of paper. So if the home buyer defaults, the bank that currently holds CDO will face a loss. Another problem was Sub-prime mortgages. Everyone was given a loan without considering its repayment that whether the individual is capable of repaying or not.The focus was on commiss ion and profits. The more CDOs they sell the more profit or bonus they receive. As there was no regulatory intermediary so no one cared that this practice was wrong and dejection be dangerous. Every person asking for loan was treated equally and was given the loan. So basically these were the riskiest loans and investments made. Along with this the rating agencies were paid heavy amounts by investment banks in ordering to get the CDOs highly rated and this was the main problem actually. Everyone was satisfied that it is highly rated so it is safe.Other banks kept on purchasing these CDOs due to this reason. All this lead to gigantic mortgages all around and therefore housing prices increased dramatically creating a bubble. According to experts this was not real money it was just being created by the system. supplement ratios were increasing. It is the ratio of banks borrowed money and its own money. As borrowings were far more than their own money that is why leverage ratios wer e high and asset make was decreasing dramatically. AIG, an insurance company was selling huge amounts of derivatives for CDO owners.It was an insurance policy that if CDO goes wrong AIG will pay the loss to the investors. AIG did this because it was so sure that nothing can go wrong as almost all CDOs are rated AAA and along with this it will get premium from the investors. But AIGs anticipation was wrong, when all CDOs went bad it faced losses. AIG also involved speculators which resulted in even large losses. People were unable to pay back their loans and therefore the whole system collapsed and so did AIG. Many banks went bankrupted and the entire financial system failed.The main reason was that more and more profits were being earned, at first, with very less risk. All this could neer have happened if the rating agencies were honest and transparent. Several warnings were given but no actions were taken. Securitization food chain had imploded and lenders could no longer sell th eir loans to investment banks. Markets for CDOs collapsed leaving banks with huge loans. Banks and many other large firms were facing bankruptcy and investment industry was sinking fast. Some banks were acquired by other large and stable banks.As there was a financial crisis so taxes were increased. On the other hand, unemployment increased dramatically as recession accelerated globally. Chinese manufacturers saw huge decrease in sales and over ten million people lose their jobs in China. The poorer had to pay the most. Companies went for downsizing, standards of living decreased and poverty increased. This is how the problems arose and lead to a global financial crisis of 2000s. A group of companies that should have been working in peoples interest filled their own pockets instead and consequently lead the world to disasters.