inside job

Inside Job: Exposing Unethical Practices on Wall Street The documentary Inside Job, directed by Charles Ferguson, explains the financial crisis of the late 2000s that culminated with the Wall Street collapse in 2008. Beginning with a background of the American financial industry, the film tells the story of how banking practices caused the eventual global recession. Up until the 1980’s, the US financial system was highly regulated, at which point began a long period of “deregulation”. One of the more significant results of this deregulation was the Gramm-Leach-Bliley Act of 1999, also known as the “Citigroup Relief Act”, which allowed the merger between Citicorp and Travelers to occur. The US policy of deregulation cleared the way for even more increasingly risky and unethical behavior on Wall Street, such as the addition of derivatives designed by financial engineers, which allowed financial bankers to “gamble on anything.” When a proposal was issued to regulate these derivates, Clinton’s administration quickly shut it down. Perhaps the most startling practice on Wall Street is the creation of CDOs – “collateralized debt obligations” and the false ratings they were given. First, home buyers took out loans. Lenders then sold these mortgages to investment banks. Investment banks combined these mortgages with other loans and debts (such as car loans, student loans, and credit card debt) into CDOs and sold them to investors. As a result homeowners ended up owing investors. The problem was that many of these homeowners couldn’t actually afford to pay back these loans because they never had any money to begin with. Lenders were loaning up to 99% of the price of the home to some people because even if the person receiving the loan couldn’t pay it back, the lenders were making money by selling mortgages and then would never have to deal with it again. Even worse, investment banks like Goldman-Sachs began selling CDOs that they knew were no good while telling