A BRIEF ANALYSIS OF THE DOCUMENTARY MOVIE

“INSIDE JOB”

Submitted To:

Dr. Umer Iftikhar Malik

([email protected])

Haseeb Ahmed

([email protected])
Introduction

US Financial crises in 2008 hit all economies of the world and this documentary "Inside
Job" is a detailed analysis of said crisis which cost over $20 trillion. Millions of people lost their
jobs and homes. Through extensive research and interviews of major journalists, politicians,
academics, and financial insiders, the film tries to find out the root-causes of this financial crises,
the corruption in the financial and political system of US, impact of this corruption on global
economies.
In September 2008, the bankruptcy of the USA investment banks Lehman Brothers and
the collapse of the world’s largest insurance company, AIG triggered a global financial crisis.
Share prices collapse. The result was a global recession which cost the world tens of trillions of
dollars rendered 30 million people unemployed and doubled national debt of the US.
With the destruction of equity and housing and the destruction of income, 50 million
people globally could end up below the poverty line again. This is just a hugely expensively
crisis. This crisis was not an accident it was caused by an out of control industry. Since the
1980s the rise of the US financial sector has led to a series of increasingly severe financial crises.
Each crises has caused more damage while the industry had made more and more money.
The subject of Inside Job is the global financial crisis of 2008. It features research and
extensive interviews with financiers, politicians, journalists, and academics. The film follows a
narrative that is split into five parts.
The documentary has been divided into five parts which are:

1. How We Got There

How We Got There

The Part one of the documentary explain that how this Financial took place.
The film focuses on changes in the financial industry in the decade leading up to the
crisis, the political movement toward deregulation, and how the development of complex trading
such as the derivatives market allowed for large increases in risk taking that circumvented older
regulations that were intended to control systemic risk. USA financial crisis in 2008 hit all the
economies of the world and this documentary inside job ‘is an depth evaluation of the stated
disaster which value over $20 trillion, millions of people become unemployed and lost their all
savings. The financial crisis of 2008 proved that banks could not regulate themselves, and
without government oversight like Dodd-Frank, they could create another global crisis.in
describing the crisis as it unfolded, the film also looks at conflicts of interest in the financial
sector, many of which it suggests are not properly disclosed.
The financial crisis was primarily caused by deregulation in the financial industry. That
permitted banks to engage in hedge fund trading with derivatives. Banks then demanded more
mortgages to support the profitable sale of these derivatives. ... That created the financial crisis
that led to the Great Recession. In September 2008, the company was on the brink of collapse.
The epicenter of the crisis was at an office in London, where a division of the company called
AIG Financial Products (AIGFP) nearly caused the downfall of a pillar of American capitalism.
The AIGFP division sold insurance against investment losses. The part one describes that how
this financial crisis came about from where it initially began. 1999 Citicorp and Travelers
merged together to form Citigroup, this merger violated the Glass-Steagal act, which prohibit
making risky investment with customer deposits. In the same year the congress passed Gramm-
Leach-Bliley-Act, this act was passed to facilitate the said merger, but on the basis of this new
act many other mergers took place, which later became the cause of Financial Crisis.
The imported cause of financial crisis turned into deregulation in 1980’s of financial
institution which consist of banks, insurance companies, and credit rating agencies and so on.
And also financial institutes commenced gambling in their personal approaches to get most
personal benefits. And it explain that due regulation the three most important banks of ice land
is created bubble in economy that burst in 2008.in 1982 the Regan’s administration allowed
banking sector to making volatile investment with the saving deposit of people. And this also the
reason of crisis.

The Bubble (2001-2007)

The financial bubble was created from 2001 -2007, and every single person get house
mortgage, whether they had enough money or not. The financial bubble was created from 2001-
2007, everyone could get house mortgage loan, even if they cannot afford to pay it back, as a
result the house price sky rocketed. In this period of bubble the US Govt and Security and
Exchange Commission of US did not monitored the banks closely. And bank also heavily
borrowed in this period, the ratio of loan versus actual deposit was 33 to 01. Another ticking
tomb was credit default swap, these were derivative issued by AIG, Security Insurance Company
to the investor who purchased CDO, in otherworld the company insured CDO, due to this
investor felt more secure, however the AIG also issued these derivatives to those who did not
own CDO.

Those financial institutions which were selling CDO were also betting against them
because they knew that they will be unable to pay them back. So the CDOs were actually a fraud
to the real investors and these CDO were shown as safe investment, whereas in actual, they were
very risky. The rating agencies like Moody’s, Standard & Poor and Fitch made billions of profits
by rating these CDO as ‘AAA’ rating.

The Crisis

Various warning were given by economist, journalist through their articles and reports in
the bubble period. In 2008, mortgage loan holders failed to payback their loan to lenders, as a
result the Securitization Food Chain imploded. The default on the part of mortgage borrowers
were already clear, because loans were issued even to those house holders who could not afford
to pay the loan back. From the mid of 2008, major Financial Institution started to collapsed and
bankrupt. The major bankruptcy was of Lehman Brothers in September, 2008 and this
bankruptcy caused major disruption in the global financial markets. On September, 17 2008, the
AIG was taken over and bailed out by the Government;$14 billion were only paid to Goldman
Sachs out $160 billion total paid by AIG through Government bailed out. On October 14, 2008,
the President Bush signed $ 1400 billion bailed out package, but the market continued to fall.
This crisis did not only hit US but it hit major economies of the world.

Accountability

Top five executives of Lehman Brothers made millions of dollars between 2001 to2007
(Bubble period). In march of 2008, the AIG’s Financial Product Division lost 11 Billions US
dollars, instead of being fired, Joseph Cassano, the head of AIGFP was kept on as a consultant
for a millions dollars a month. Many economists’ academics and professors were in favor of
deregulation and they were appointed as advisors in economic affairs of the country and many
were elected as directors of major financial institution and they made lots of money and they are
also supposed to be held accountable for this financial crisis
Within the derivatives market, the film contends that the high risks that began with
subprime lending were transferred from investors to other investors who, due to questionable
rating practices, falsely believed that the investments were safe. Thus, lenders were pushed to
sign up mortgages without regard to risk, or even favoring higher interest rate loans, since, once
these mortgages were packaged together, the risk was disguised. According to the film, the
resulting products would often have AAA ratings, equal to U.S. government bonds. The products
could then be used even by investors such as retirement funds who are required to limit
themselves to the safest investments. Another point is the high pay in the financial industry, and
how it has grown in recent decades out of proportion to the rest of the economy. Even at the
banks that failed, the film shows how bank executives were making hundreds of millions of
dollars in the period immediately up to the crisis, all of which was kept, again suggesting that the
risk/benefit balance has been broken.

Where Are We Now

The American economy is now weak as compared to what it was before the financial
crisis, the competitor like China is flourishing. Unemployment and inflation has increase in US
now. The construction industry is falling, however I.T industry in US is still strongest
worldwide. But getting job in IT industry require high qualification and getting good
qualification is very expensive now in US. The difference between rich and poor is higher in
United State than in any other company. The Brak Obama in 2008 election campaign promised
changed and assured the regulation of financial industry so such financial crisis could not take
place again. But after taking over office, the obama administration did not bring any reforms in
financial industry as promised and even it did not charge in firm or bank executive who earned
millions of dollar during the bubble.
The main cause of financial crisis was deregulation and to give financial industry a full freedom,
as a result, they acted in their own interest and made millions of dollars at the cost of taxpayers
and general public investment. So It is recommended that strong actions are need to be taken
against those who are responsible for this crisis, but it is unfortunate to see that those people and
institutions are still in power. The Government need to bring reforms in financial industry

Causes, Effects and Conclusion

It allowed banks to engage in trading profitable derivatives that they sold to investors.
These mortgage-backed securities needed home loans as collateral. The derivatives created an
insatiable demand for more and more mortgages. Hedge funds and other financial institutions
around the world owned the mortgage-backed securities, but they were also in mutual funds,
corporate assets, and pension funds. The banks had chopped up the original mortgages and resold
them in tranches, making the derivatives impossible to price.
Stodgy pension funds bought these risky assets because they thought an insurance product called
credit default swaps protected them. A traditional insurance company known as the American
Insurance Group (AIG) sold these swaps, and when the derivatives lost value, AIG didn't have
enough cash flow to honor all the swaps.
More signs of the financial crisis appeared in 2007. Banks panicked when they realized
they would have to absorb the losses, and they stopped lending to each other. They didn't want
other banks giving them worthless mortgages as collateral. As a result, interbank borrowing
costs, called Libor, rose.The Federal Reserve began pumping liquidity into the banking system
via the Term Auction Facility, but that wasn't enough.
The 2008 financial crisis timeline began in March 2008, when investors sold off their
shares of investment bank Bear Stearns because it had too many of the toxic assets. Bear
approached JP Morgan Chase to bail it out. The Fed had to sweeten the deal with a $30 billion
guarantee, and by 2012, the Fed had received full payment for its loan.
Instead, the situation on Wall Street deteriorated throughout the summer of
2008.Congress authorized the Treasury Secretary to take over mortgage companies Fannie Mae
and Freddie Mac, which cost it $187 billion at the time. Since then, the Treasury has made
enough profit to pay off the cost.

On September 16, 2008, the Fed loaned $85 billion to AIG as a bailout. In October and
November, the Fed and Treasury restructured the bailout, bringing the total amount to $182
billion. But by 2012, the government made a $22.7 billion profit when the Treasury sold its last
AIG shares. The value of the company had risen that much in four years.
On September 17, 2008, the crisis created a run on money market funds. Companies park
excess cash there to earn interest on it overnight, and banks then use those funds to make short-
term loans. During the run, companies moved a record $172 billion out of their money market
accounts into even safer Treasury bonds. If these accounts had gone bankrupt, business activities
and the economy would have ground to a halt. That crisis called for massive government
intervention.
Three days later, Treasury Secretary Henry Paulson and Fed Chair Ben Bernanke
submitted a $700 billion bailout package to Congress. Their fast response helped stopped the run,
but Republicans blocked the bill for two weeks because they didn't want to bail out banks. They
only approved the bill after global stock markets almost collapsed.
The film ends by contending that despite recent financial regulations, the underlying
system has not changed; rather the remaining banks are only bigger, while all the incentives
remain the same, and not a single top executive has been prosecuted for their role in the global
financial meltdown.

References

https://www.academia.edu/9650218/ANALYSIS_OF_THE_DOCUMENTARY_MOVIE_INS
DE_JOB_Basic_Information_about_Documentary

https://www.theguardian.com/film/2011/feb/17/inside-job-financial-crisis-bankers-verdicts

https://www.rogerebert.com/reviews/inside-job-2010

https://www.sonyclassics.com/insidejob/_pdf/insidejob_presskit.pdf

https://www.developmenteducationreview.com/issue/issue-13/inside-job

https://ethify.org/content/inside-job-documentary-2010

https://www.imdb.com/title/tt1645089/plotsummary