Inside Job: A reminder of what happened in the 2007/08 Financial Crisis


Annoy Ken Griffin - Share This

Inside Job is a 2010 American documentary film, directed by Charles Ferguson, about the late 2000s financial crisis. Here at KenGriffinLies, we thought it was a good idea to link to it so you could be reminded of the total fuckery that went on back then… and remind you that literally NOTHING has changed…. with the exception of more fuckery and more inflation.

About The Film

Inside Job is a 2010 American documentary film, directed by Charles Ferguson, about the late-2000s financial crisis.

Ferguson says the film is about “the systemic corruption of the United States by the financial services industry and the consequences of that systemic corruption”, amongst them conflicts of interest of academic research which led to improved disclosure standards by the American Economic Association.

the film explores how changes in the policy environment and banking practices helped create the financial crisis.

Inside Job was acclaimed by film critics, who praised its pacing, research and exposition of complex material. It screened at the 2010 Cannes Film Festival in May and won the 2010 Academy Award for Best Documentary Feature.

Synopsis of Inside Job

The documentary is split into five parts. It begins by examining how Iceland was highly deregulated in 2000 and the privatization of its banks. When Lehman Brothers went bankrupt and AIG collapsed, the world went into a global recession. At the Federal Reserve annual Jackson Hole conference in 2005, Raghuram Rajan, then the chief economist of IMF, warned about the growing risks in the financial system and proposed policies that would reduce such risks. Former U.S. Treasury Secretary Lawrence Summers called the warnings “misguided” and Rajan himself a “luddite”. However, following the financial crisis of 2007–2008, Rajan’s views were seen as prescient and he was extensively interviewed for this movie.

Part I: How We Got Here

The American financial industry was regulated from 1941 to 1981, followed by a long period of deregulation. At the end of the 1980s, a savings and loan crisis cost taxpayers about $124 billion. In the late 1990s, the financial sector had consolidated into a few giant firms.

In March 2000, the Internet Stock Bubble burst because investment banks promoted Internet companies that they knew would fail, resulting in $5 trillion in investor losses. In the 1990s, derivatives became popular in the industry and added instability. Efforts to regulate derivatives were thwarted by the Commodity Futures Modernization Act of 2000, backed by several key officials. In the 2000s, the industry was dominated by five investment banks (Goldman Sachs, Morgan Stanley, Lehman Brothers, Merrill Lynch, and Bear Stearns), two financial conglomerates (Citigroup, JPMorgan Chase), three securitized insurance companies (AIG, MBIA, AMBAC) and the three rating agencies (Moody’s, Standard & Poor’s, Fitch). Investment banks bundled mortgages with other loans and debts into collateralized debt obligations (CDOs), which they sold to investors. Rating agencies gave many CDOs AAA ratings. Subprime loans led to predatory lending. Many home owners were given loans they could never repay.

Part II: The Bubble (2001–2007)

During the housing boom, the ratio of money borrowed by an investment bank versus the bank’s own assets reached unprecedented levels. The credit default swap (CDS), was akin to an insurance policy. Speculators could buy CDSs to bet against CDOs they did not own. Numerous CDOs were backed by subprime mortgages. Goldman-Sachs sold more than $3 billion worth of CDOs in the first half of 2006. Goldman also bet against the low-value CDOs, telling investors they were high-quality. The three biggest ratings agencies contributed to the problem. AAA-rated instruments rocketed from a mere handful in 2000 to over 4,000 in 2006.

Part III: The Crisis

The market for CDOs collapsed and investment banks were left with hundreds of billions of dollars in loans, CDOs, and real estate they could not unload. The Great Recession began in November 2007, and in March 2008, Bear Stearns ran out of cash. In September, the federal government took over Fannie Mae and Freddie Mac, which had been on the brink of collapse. Two days later, Lehman Brothers collapsed. These entities all had AA or AAA ratings within days of being bailed out. Merrill Lynch, on the edge of collapse, was acquired by Bank of America. 

Henry Paulson and Timothy Geithner decided that Lehman must go into bankruptcy, which resulted in a collapse of the commercial paper market. On September 17, the insolvent AIG was taken over by the government. The next day, Paulson and Fed chairman Ben Bernanke asked Congress for $700 billion to bail out the banks. The global financial system became paralyzed. On October 3, 2008, President George W. Bush signed the Troubled Asset Relief Program, but global stock markets continued to fall. Layoffs and foreclosures continued with unemployment rising to 10% in the U.S.A. and the EU. By December 2008, GM and Chrysler also faced bankruptcy. Foreclosures in the U.S. reached unprecedented levels.

Part IV: Accountability

Top executives of the insolvent companies walked away with their personal fortunes intact. The executives had hand-picked their boards of directors, which handed out billions in bonuses after the government bailout. The major banks grew in power and doubled anti-reform efforts. Academic economists had for decades advocated for deregulation and helped shape U.S. policy. They still opposed reform after the 2008 crisis.

Some of the consulting firms involved were the Analysis Group, Charles River Associates, Compass Lexecon, and the Law and Economics Consulting Group (LECG). Many of these economists had conflicts of interest, collecting sums as consultants to companies and other groups involved in the financial crisis.

Part V: Where We Are Now

Tens of thousands of U.S. factory workers were laid off. The incoming Obama administration’s financial reforms were weak, and there was no significant proposed regulation of the practices of ratings agencies, lobbyists, and executive compensation. Geithner became Treasury Secretary. Martin Feldstein, Laura Tyson and Lawrence Summers were all top economic advisers to Obama. Bernanke was reappointed Fed Chair. European nations imposed strict regulations on bank compensation, but the U.S. resisted them.


Annoy Ken Griffin - Share This