Inside Job
What caused the global economic crisis, and what could have been done (by governments or the private sector) to prevent this? Also, give your personal thoughts on this issue.
My personal thoughts on this issue:
After watching all five parts of the movie, I think the global economic crisis key factor was caused by deregulation which began since Reagan administration, because it contributed to the real estate bubble and allowed greedy and overpaid banks to go on unreasonable leverage. Regulatory bodies allowed privatization of the banks, dropped the regulations that limiting the investments of the banks and amounts they could borrow. The banks, Wall Street traders and investors and mortgage lenders failed to look at what they bought and ignored risk management. When the going is good, they pocket more than their fair share. The banks borrowed more than several times of their value. Derivatives allowed the lender to repackage the loan and sell to investment banks, which in turn repackage and sell them to investors without considering if the customer ever pays the loan back, since they have their money. Banks and greedy lending groups were showered with incentives to give loans to anyone for exorbitant interest rates, and since nobody cared if the loans were repaid, the commission alone was all that mattered. The massive amount of liquidity in the system and the hunger for mortgages resulted them to repackaged the loans into collateralized debt obligations (CDOs), with numerous of them backed by subprime mortgages, then sold to investors. Besides, the ratings agencies such as Standard & Poors were paid to give them all AAA ratings, which caused many buyers to believe in what they were buying. However, long after the damage is done, the rating agencies acted too late to downgrade these papers. People cautioned that this would lead to catastrophe, but those that warned inside of the government were pushed aside by former Fed chairman Alan Greenspan, Ben Bernanke
My personal thoughts on this issue:
After watching all five parts of the movie, I think the global economic crisis key factor was caused by deregulation which began since Reagan administration, because it contributed to the real estate bubble and allowed greedy and overpaid banks to go on unreasonable leverage. Regulatory bodies allowed privatization of the banks, dropped the regulations that limiting the investments of the banks and amounts they could borrow. The banks, Wall Street traders and investors and mortgage lenders failed to look at what they bought and ignored risk management. When the going is good, they pocket more than their fair share. The banks borrowed more than several times of their value. Derivatives allowed the lender to repackage the loan and sell to investment banks, which in turn repackage and sell them to investors without considering if the customer ever pays the loan back, since they have their money. Banks and greedy lending groups were showered with incentives to give loans to anyone for exorbitant interest rates, and since nobody cared if the loans were repaid, the commission alone was all that mattered. The massive amount of liquidity in the system and the hunger for mortgages resulted them to repackaged the loans into collateralized debt obligations (CDOs), with numerous of them backed by subprime mortgages, then sold to investors. Besides, the ratings agencies such as Standard & Poors were paid to give them all AAA ratings, which caused many buyers to believe in what they were buying. However, long after the damage is done, the rating agencies acted too late to downgrade these papers. People cautioned that this would lead to catastrophe, but those that warned inside of the government were pushed aside by former Fed chairman Alan Greenspan, Ben Bernanke