Inside Job Documentary Film Essay

The Inside Job characterization ( objective dash) draws parall(a)el views to the referenced school text Impact on Accounting of this course coupled with the associated research execute during the past weeks with respect to understanding the cause of the monetary crisis.The objective plastic depiction zeros in on the contributive factors of the fiscal crisis such as locomote delight rates, securitization of berth mortgages and address default option swaps (derivatives). some early(a) stunning contributory factors expressed in the documentary film were voraciousness in entree to the deregulating and an unsupervised financial industry by the national g everywherenment.Snyder (2011) inform that, There have been several de mandates in the financial and housing markets over the past 30 years. Some of these include The Depository Institutions Deregulation and pecuniary Control venture, the Federal Home Loan Bank Board establishing adaptable mortgages, the 1982 Garn- St Germain Depository Institutions suffice establishing a secondary mortgage market, the repeal of the Glass-Stegall Act allowing commercial and investment avers to merge, and the 2004 SECs deregulation of investment banks, allowing investment banks to increase their leverage ratio from 121 to 301. (pages 1-16)After researching the cause of the financial crisis, though calculateingly insignificant to some, one of the fastening screws that assisted in the great fall with respect to the financial industry was falling interest rates. During the early 2000s the United States sparing began to slow atomic reactor and in an run to rejuvenate this downward condition the Federal Reserve introduced a stimulation project to cut interest rates to induce customer spending. Investors took favor of this stimulus exercise as the return on mortgage sanction securities was attractive and as a result there was a climb and desire to purchase such securities.Consequently, lending mental homes became very excited as the demand for mortgage back securities increased and thus the quest began to spell out more mortgages. Hence, the qualifying standards for loan approvals were done absent with allowing a potential home owner getting approval with zero-down. The introduction of no payment down increased the likelihood of fractureure to pay by borrowers and this default risk thereof was disregarded.An otherwise supporting aspect of the documentary film with respect to the cause of the financial crisis was securitization. Historically during the safe age, a home mortgage was a loan contract between the borrower and financial institution which was supported by tangible property used as col by and bywardal. such loans would be held until the dependable loan responsibleness has been satisfied in the commodious term. Conversely to the days of old, financial institutions sought new innovative meaning to generate income and came up with securitization of home mortgages.In t his sense, during the 1990s, home mortgages were not held to maturity date but instead the high risk home mortgages were, bundled, repackaged and resold creating mortgage backed securities whereby income is received when homeowners satisfied their home mortgage obligation. Despondently, when borrowers defaulted on their home mortgages, investors suffered dear as losses were agnize, consequently, financial institutions collapsed and unemployment rose above its usual fair(a) rate.Other research has concluded that derivatives in like manner played a school principal role in the financial crisis. Derivatives are financial contracts between both parties of which the value can derived with not affiliation to the good or service. For example, a buyer can purchase an option agreement to buy a good or service in the future at an concur price within a specified time frame.Within the granted period the buyer may exercise the right to purchase or chose not to upon weighing the benefits of the option contract with the current market conditions. matchless type of derivatives that aided in the financial crisis was credit default swaps (CDS) which allowed investors to accede in naked CDS purchases without having legal ownership of the insured property. CDS is an innovative and general derivative which is similar to an insurance contract that permits investors to transfer risk to other parties who are more qualified and willing to bear it, thus do itvery attractive risk mitigation tool.CDS became extremely popular and undergo an unprecedented demand up to the latter part of 2007. However, since the derivatives market was not mystifyd companies such as AIG which sold one thousand thousands of swaps without collateral or reserves to satisfy potential losses. According to Hobbs (2011), at the end of 2007 AIG credit debt obligation totaled $562 billion which was shockingly ironic that an insurance company would fail to hedge such substantial risk.Charles Fergusons award winning documentary film Inside Job narrated by Matt Damon surveyed the deregulation of the financial industry and explored how the lack of good ethical banking practices assisted in creating the financial crisis.This jaw dropping documentary in its fearless interviews and prying set greed and deregulation by the Federal government as formula causes of the financial crisis. At the twilight of 1981 the Ronal Regan administration made the deregulation of the financial industry top priority and the highest order of business in an bm to restore economic prosperity. Froese (2011) stated that, The campaign trend of deregulation was followed through with(predicate) by the Bill Clinton and George Bush administration team. (p. 59-75). According to Maxwell (2011), The documentary film sets out to prove the idea by first pointing to the 1980s, when deregulation of the financial industry in the US allowed banks and loan companies to begin winning bear-sizedger risks with depositors bullion. (p.16)The documentary film exposed the recycling of top bank administrators being integrated into key government positions even after having full companionship of misconduct and unethical behavior driven by greed. The greed for lavish lifestyle such as having six airplanes, helicopters, yachts, beachfront homes and penthouses was evident in the documentary film.Apparently, the more money top bankers earned the more they seem to want. The root of this greed was driven by huge pay and stringy bonuses. According to Ferguson (2010), Richard Fuld the chief executive officer of Lehman Brothers actually was hardly ever seen on the duty floor as he went out of his way to avoid trace with other employees even to the extent of extent of installing a personalized elevator that took him to his office undetected.These chief top guns even went to the extent to rip off the government of taxes by understating theirincome. Sterngold (2011) handleed that, Oliver Budde, a spring lawyer for the financial services firm Lehman Brothers, has charged that the bankrupt companys former Chief Executive Officer (CEO) Richard S. Fuld lied to Congress when stating the amount of his lucre and other compensation from 2000-2007. Budde, whose duties included preparing Lehmans financial statements on executive salaries, says that Fuld understated the amount of his earnings by hundreds of millions of dollars. (p, 56-59).Under the Regan administration CEO of the treasury, ML Donald deregulated the Savings and Loans which created a platform for unsafe investments by allowing hundreds of financially dead institutions to continue to operate while making more spoilt loans. Within 10 years hundreds of Savings and Loans companies became insolvent which resulted in 124 billion dollars of tax payers money. Greenspan supported Charles Keatings business plans verifying that they were sound, proficient and without risk.It was later discovered that Keating who owned one of the Saving s and Loans companies in California, used investors money to support his personal company and eventually went to prison as a result. While on the other hand, Greenspan was promoted appointed as president of the Federal Reserve by Ronald Ragan and was reappointed by Clinton and Bush administration to police the big bucks. It was also alleged that Greenspan received a kickback of 40,000 for validating Keatings report Keating afloat in the industry.Deregulation continued under the Clinton administration coition overturned the Glass-Steagall Act by passing the Gramm-Leach Bliley Act which facilitated the Citigroup merger. Further, despite the cries to regulate the derivatives industry, Alan Greenspan in addition to other congressmen brought about the Commodity Futures Modernization Act banning all regulation in the derivatives market.Other new theories that develop from the documentary film were economic experts, credit rating agencies and top executives have all contributed to the fi nancial crisis. It was unthinkable that reputable economists failed miserably to disclose any interlocking of interest regarding their economic research report concerning economic trend. According to Ferguson (2010), economist Frederic Mishkin stated in his economic research report thatIcelands economy had already adjusted to financial liberalization and that while prudential regulation and supervision was quite strong, however, the banking industry in Iceland exploded shortly after the report.Frederic was paid $124,000 by the Iceland government to write the report even though the report proved to be very wrong. Another economist, Robert Glenn Hubbard former dubiousness of President Bush council of economic advisors, when asked whether there is and conflict of interest of economists he avoided the header and stated that just about economist are not blotto people. The documentary exposed him for having an annual salary of $150,000 as a dining table member of Met Life and that h e formally served on the board of Capmark fiscal Corporation, a mortgage institution that went bankrupt during the bubble.The documentary film brought the curtains down on credit rating agencies as it provided undeniable evidence of their interest in the financial crisis . The three credit agencies namely, Standard & Poor, Moodys, and foulmart misrepresented the credit rating of companies such as Lehman Brother, Merrill Lynch, AIG and Bear Sterns as they were all given credit rating of AA and above just weeks prior to becoming bankrupt.Questions were put to the governor of the Federal Reserve, Frederic Mishkin whether he was aware of pure credit ratings and as in the past he danced around the question without providing clear answer. In 2008 Frederic Mishkin resigned in the height of the economic crisis and said that this coward die hard was owed to him reviewing some university book. Investors depend heavily on security rating for decisiveness making. Clearly if a security has b een classified as AAA and AA ratings, they look to be as safe as government bonds.Instead, investors were deceived into investing in insolvent companies as a result of the ratings provided thereof.Continuing, top executives were also interweave in the fabric of the financial crisis whereby top Chief Executive Officers walked away with top dollars. It is said that follow the money to solve the crime. The documentary film listed top guns such as Lehman Brothers CEO, Richard Fuld who reaped in 485 million, AIGs CEO went lucky with earnings of 315 million and Merrill Lynch raked in 161 million of severance bonus.Other culprits named wereBear Sterns CEO and especially Goldman Sachs top executives. Apparently, these top executives had much knowledge of their falling companies and cooked the books so that investors would view otherwise. What come out of the documentary film was that executives were rewarded for selling subprime mortgage investments as if it was top priority.Below are e xhibits A and B and key players in the financial crisisExhibit A major Players identifies in Week 2Exhibit BMajor Players in Inside Job Film1. Homeowners2. Financial / lending institutions3. palisade way4. Federal Government5. Securities Exchange Commission1. Homeowners2. Financial / lending institutions3. Wall Street4. Federal Government5. Securities Exchange Commission6. Economist7. character reference Rating Agencies8. Top ExecutivesThe new players pulled from the documentary film are economists, credit agencies and top banking executives. Economists were apparently paid handsomely to produce favorable reports of which most did not disclose their connected conflict of interest. Credit rating agencies also provided falsified rating to dying institutions and as a result investors were misinformed and consequently realized losses which could have been prevented. Lastly top banking officials were recycled throughout the government and other top ranking banks.They were driven by gre ed andreceived compensation of up to 485 million dollars. Bringing it all together, I strongly believe that they were all in it together with the object to rape the economy of its cash in hand and so they did successfully without being prosecuted.APA Format ReferencesGlobal Economic Crisis imagination Center (2010). Global economic crisis Impact on accounting. Mason, OH South-Western Cengage LearningSnyder, T. (2011). How did deregulation and financial innovations impact housing, wealth, and output?. Journal Of Finance & Accountancy,Hobbs, J. (2011). Financial Derivatives, the distraction of Risk and the Case of AIG. CPCU Ejournal, 1-8.Ferguson, C. (Director) & Marrs, A. (Producer). (2010) Inside Job Motion Picture. United States Sony Picture ClassicsFroese, R. (2011). THE LIMITS OF wrong JOB CRISIS, IDEOLOGY, AND THE BURDEN OF CAPITALISM. Studies In Political Economy A socialistic Review, (88), 59-75.Sterngold, J. (2010). Who Cares About Another $200 Million?. Bloomberg Business week, (4177), 56-59.Maxwell, C. (2011). Inside the crash. Director (00123242), 65(4), 16.