Inside Job

Inside Job is about..

The systemic corruption of the United States by
the financial services industry and the
consequences of that corruption.
The sequence of events leading to and the
aftermath of the global financial crisis.
The repeated failure in sensing that such a crisis
would arise despite so many warning sign arise.
The failure to understand the need of regulation
and controlling the rising number of Financial
products during the period of the bubble.

Inside Job

Inside Job Parts

Part
Part
Part
Part
Part

I: How We Got Here

II: The Bubble (2001-2007)
III: The Crisis
IV: Accountability
V: Where We Are Now

Inside Job

I : How we got here

Stricter Regulations since 1940s till period of Ronald
Reagan 1980s.
Beginning of the deregulation Oil Tanker
Savings and Loan Crisis and The Internet Stock Bubble
Doing away with Glass Stegal act with Gramm Leach
Biley Act. Robert rubin then became Vicechairman of
CitiGroup
Citibank, Merryl Lynch, JPMorgan helped Enron Conceal
Fraud
Emergence of Derivatives and new FPs and the
pressure to not regulate
The dominance of few leaders in the US Financial Sector

Inside Job

I : How we got here

The securitization food chain.

Creation of the complex CDOs that included sub

prime lending's.
The dubious ratings given to the CDOs

Inside Job

II : The Bubble (2001-2007)

Investment banks preferred subprime loans because of
higher interest rates
It then led to massive increase in predatory lending
Borrowers were needlessly placed in expensive
subprime loans, and many loans were given to people
who cannot replay them.
Result - Biggest real estate boom in history
Subprime lending $30 to $600 billion in 10 yrs
SEC Lifted leverage limits for investment banks
Neuroscientists proved that money stimulates the
same part of brain tat stimulates thro cocaine
Borrowers borrowed 99.4% of money in the house
Inside Job

II: The Bubble (2001-2007)

Credit Default Swaps
Investors can buy CDS as a insurance to CDO
Even speculators can buy CDS
No money to cover losses but issued bonus
Raghuram Rajan alerted about the incentives for
risk.

Inside Job

III: The Crisis

2004 FBI warned epidemic mortgage fraud
2005 Raghuram Rajan warned thro Has
financial development made the world riskier ?
Repeated warnings from IMF and many
economists from time to time
2008 - Home foreclosures skyrocketed
2010 - Home Foreclosures reached 6 million
$700 billion to bail out banks

Inside Job

IV : Accountability
Top Executives were paid bonuses instead of
being fired
Bankers complained Regulators did not do their
job
$5 Billion for lobbying & campaign contributions
Academic Economists advocated for deregulation
Conflicts of interest as these economists were
consultant to companies

Inside Job

V : Where we are now

Average Americans are less prosperous than their
parents
Obama came with lot of promises and action
Result WALL STREET Government
Key economists are the same people who built the
structure
Finance companies as a service company should serve
others before serving themselves.
As of mid 2010, no senior executive was criminally
prosecuted.
At enormous cost we avoided disaster and are
recovering, but those who created this are still in power.
Inside Job

10

A few lessons..
Beware of complex financial instruments.
Do not believe in Rating agencies Just
Opinions.
Ensure that warning signals are investigated on
time and arent ignored.
Before paying your employees huge bonuses,
check if you could repay your customers if the
company were to go bankrupt.
Understand the implications that Conflicts of
Interest could have.

Inside Job

11

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