Global Financial Crisis 2008: are we leading to it again? Documentary Review, “Inside Job.”

Osama Shaukat

This documentary named ‘Inside Job’ is a nine-year-old documentary which is based on the Global Financial Crises 2008. The financial crises took place in the USA and then it got spread all over the world to some extent. It caused a loss of almost $20 Trillion in the global economy. This economic disaster led to the loss of millions of jobs and people even lost their houses at the time of this crisis. We can say that after the Great Depression, this is the biggest financial crisis that has ever happened.  Director Charles Ferguson went on for making this documentary and he took interviews from many of known Lawyers, Journalists, Economists, Bankers, and other officials to know exactly what has happened that led to the crisis. The documentary is further divided into 5 parts for a better understanding.

PART 1

HOW WE GOT THERE?

As the name of the first part states, how we got there? The reason behind this financial crisis and what had led the economic bubble to burst. There are several aspects of this financial crisis but one of the main causes explained here is the deregulation of the financial institutions. These include insurance companies, banks, Rating companies, and other financing institutions.  Soon after this deregulation, the companies started to try and make big profits through some dangerous means and especially for individual and personal benefits. The bubble is created by the banks in Iceland, mainly three banks (Kaupping, Glitnir, and Iselandsbanki) which finally got burst in 2008. In 1982 the Regan’s Administration enabled the banking industry to make unstable ventures with the sparing store of open and by utilizing the surrender of decade various home loan offices bombed this expense on citizens $124 billion. The money related lobbyist and market analysts caught political machine. By past due 1990’s the Financial Institutions united into hardly any enormous organizations, therefore the monetary device changed into corresponded with the choice of these huge enterprises.

1999 Citicorp and Travellers merged to shape Citigroup, this merger damaged the Glass-Steagal Act, which stops the company from investing their deposits in unstable businesses. In the equivalent year the congress gave Gramm-Leach-Bliley-Act, this act was outperformed to encourage the expressed merger, however, on the possibility of this new demonstration, numerous different mergers came upon, which last have become the leading factor behind Financial Crisis.

Before the Financial emergency of 2008, there was a fast time frame money related fiasco in 2001, which changed into bubble made by utilizing Financial Institutions in Internet Companies, which the last burst in 2003, anyway US Govt. Didn’t took exercise from this fiasco and didn’t directed these foundations, as a final product the world was defied with the Global Financial Crisis in 2008. After the deregulation, numerous organizations were associated with cheats, similar to illegal tax avoidance, influence, cooking books, indicating financial performance which was incorrect, etc.

In the mid-1990s, the banker and economists with the assistance of improvement in innovation made money-related products, Derivatives was the primary advancement. The Derivative units are speculation or making a bet on stock charges, money related destruction of companies, premium costs, etc. In 2000, derivatives had been driven unregulated according to the law, as a final product, the unregulated derivatives just boomed the entire market after 2001.

After 2001 the money related foundations have been extra compelling, beneficial and productive The Financial segment was driven by 5 Investment banks (Goldman Sachs, Morgan Stanley, Lehman Brother, Merril Lynch, Bear Stearns), 2 monetary Conglomerates (Citi Group and JP Morgan) and 3 Security Insurance Companies (AIG, MBIA, AMBAC). The money related establishments came about into ‘Securitization Chain of Food.’ The mortgage loan credit taken by moneylenders from home purchasers was additionally offered to Investment banks that turned out with a new item called CDO (Collateralized Debt Obligation). The rating offices were paid by these different investment banks for offering rates to CDO and these CDOs were given the most elevated rating for example AAA which were not valid and because of which the investors put resources into CDO.

PART 2

THE BUBBLE

The monetary air pocket (bubble) was made from 2001-2007, and everyone could get a home mortgage, regardless of whether they had enough cash or not. Thus, the house costs expanded high. US Government and Security Exchange Commission overlooked the checking of banks intently during the time frame of the financial bubble. Furthermore, the bank also intensely borrowed in this time, the proportion of mortgage loan versus the original deposit transformed into 33: 01.

Credit Default sap was another serious issue. The derivatives were given to the investors who purchased CDO and they were given by AIG and SEC. To be progressively more straightforward, business protected CDO, because of this financial specialist felt all the more consistent, anyway the AIG additionally gave those derivatives to individuals who did never again possess CDO.

Those money related foundations which had been selling CDO were likewise having a bet towards them because of the reality they realized that they will be not able compensation back. So the CDO’s had been extortion to the genuine purchasers/financial specialists and those CDOs have been appeared as a secure venture, while in genuine, they were entirely flimsy. The rating organizations like Moody’s, Standard and Poors, and Fitch made billions of pay by giving a bogus rating to these CDOs as ‘AAA’.

PART 3

THE CRISIS

Different warnings had been given by market analysts, columnist using their articles and reports during the financial bubble period. In 2008, the holders of mortgage loans couldn’t recompense their home loan to moneylenders; accordingly, the Securitization Food Chain got busted. There was no default to credit borrowers since advances were given even to those householders who didn’t have the cash to repay the advance.  By the mid of 2008, the essential Financial foundations started to crumple and got bankrupt. Overwhelming interruption inside the worldwide money related markets was purchased by the bankruptcy of the Lehman Brothers in 2008. On September 17, 2008, the AIG was acquired and a large number of dollars were paid by the government to rescue AIG.

On October 14, 2008, President Bush marked $ 1400 billion for a deal to the bailout, anyway the market proceeded to fall. This catastrophe did no longer just hit the US yet besides hit other significant economies of the world. The default in the installment of home loan mortgage constrained individuals to place their homes on the sale and live in covers for a brief premise.

PART 4

ACCOUNTABILITY

The responsibility of key people has been discussed in this part. At the point when the administration helped the venture banks, not all that much. The banks got greater so they get progressively an imposing business model on the financial framework of the nation. In the narrative, individuals got to be asked about this strange type of behavior. It shows that the economists who were against deregulation which was the issue in any case, where still against deregulation after the financial bubble. This has an explanation, the exceptionally top (1%) off the different investment banks, insurance agencies, and rating organizations could leave the managers an account with all their belongings. This implies at the time that the organizations nearly crumbled, the extremely top of the organizations got a great deal of cash. This isn’t just a selfish thing, but a corrupt also. They changed the entire political framework to fit the financial framework they had as a top priority. Obama was the first who saw this and said it for all to hear in his crusade that he would transform it. But since he picks the extremely same individuals as pastors of the nation, the framework wouldn’t be changed.

The key people (CEO’s and leaders) pulled back from the circumstance that caused this emergency. The top five officials of Lehman Brothers made a huge number of dollars between 2001 to2007 (Bubble period). In the walk of 2008, the AIG’s Financial Product Division lost 11 Billion US dollars, rather than being terminated, Joseph Cassano, the head of AIGFP was kept on as an expert for a million dollars every month. Numerous business analysts’ scholastics and teachers were agreeable to deregulation and they were selected as consultants in monetary issues of the nation and many were chosen as executives of the major budgetary organization and they profited and they are additionally expected to be considered responsible for this monetary crisis.

PART 5

WHERE ARE WE NOW?

The last part shows that right now, nothing has truly changed and that we need to hang tight for another air pocket or downturn. The banks that are tainted have gotten more power. They reveal to us that we need them. There are still barely any guidelines on rating agencies, venture banks, and insurance agencies so the hazard will even now be high. Europe attempted to direct the framework since they would not like to come in another downturn. However, America would not like it. The primary motivation behind why they don’t do it is because similar individuals who caused this chaos are still in control.  The American economy is presently powerless when contrasted with what it was before the crisis, the contender like China is thriving. Joblessness and swelling have an increment in the US now. The development business is falling; anyway, the I.T industry in the US is as yet strongest around the world. In any case, the landing position in the IT industry requires high capability, and getting great capability is over the top expensive now in the US. The distinction between rich and poor is higher in the United State than in some other organization. Obama in 2008 political race guaranteed changed and guaranteed the guideline of money related industry so much a financial crisis couldn’t occur once more. Be that as it may, in the wake of assuming control over the office, the Obama organization didn’t get any changes in the financial industry as guaranteed and even it didn’t charge infirm or bank official who earned a huge number of the dollar during the financial bubble.

CONCLUSION

The thing that has caused the financial crisis was deregulation and the extra freedom given to the monetary firms who used that freedom for their benefits and the economy overall suffered a lot. The common people have suffered and went through a really difficult time because of this fraud.  It is important to make possible changes in the dealings of financial institutions to make it more transparent as the one who suffers is an ordinary man and living a simple life. But what is unfortunate that still the market and the whole financial hub are under the control of the same people and the same families who were behind this crisis.

Keep visiting gofrixty for more reviews and analysis.