FILM REVIEW:

INSIDE JOB
(2010) 6.53

Presented by: Ms. Jasmin Gamboa

INSIDE JOB (2010)

A Documentary Film that was Directed by

Mr. Charles Ferguson

Narrated by Matt Damon

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INSIDE JOB OUTLINE

PART 1: PART 2:
HOW WE GOT HERE THE BUBBLE

PART 3: PART 4:
THE CRISIS ACCOUNTABILITY

PART 5:
WHERE WE ARE NOW

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PART 1: HOW WE GOT HERE
The American financial industry was regulated from 1941 to
1981, followed by a long period of deregulation. At the end of the
1980s, a savings and loan crisis cost taxpayers approximately $124
billion. In the late 1990s, the financial sector had consolidated into a
few giant firms. In March 2000, the Internet Stock Bubble burst because
investment banks promoted Internet companies they knew would fail,
resulting in $5 trillion in investor losses. In the 1990s, derivatives
became popular in the industry and added instability. Efforts to regulate
derivatives were thwarted by the Commodity Futures Modernization
Act of 2000, backed by several key officials. In the 2000s, the industry
was dominated by five investment banks (Goldman Sachs, Morgan
Stanley, Lehman Brothers, Merrill Lynch, and Bear Stearns), two
financial conglomerates (Citigroup, JPMorgan Chase), three securitized
insurance companies (AIG, MBIA, AMBAC) and the three rating
agencies (Moody's, Standard & Poor's, Fitch).

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 5 INVESTMENT BANKS THAT DOMINATED
THE INDUSTRY IN THE 2000
1. GOLDMAN SACHS 2. MORGAN STANLEY 3. LEHMAN BROTHERS

4. MERRILL LYNCH 5. BEAR STEARNS

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 2 FINANCIAL CONGLOMERATES THAT
DOMINATED THE INDUSTRY IN THE 2000
1. CITIGROUP

2. JP MORGAN CHASE

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 3 SECURITIZED INSURANCE COMPANIES THAT
DOMINATED THE INDUSTRY IN THE 2000

1. MBIA 2. AMBAC 3. AIG

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 3 RATING AGENCIES THAT DOMINATED
THE INDUSTRY IN THE 2000
1. MOODY’S

3. STANDAR & POOR’S

2. FITCH

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PART 1: HOW WE GOT HERE

Investment banks bundled mortgages with other loans and

debts into collateralized debt obligations (CDOs), which they sold to
investors. Rating agencies gave many CDOs AAA ratings. Subprime
loans led to predatory lending. Many homeowners were given loans
they could never repay.

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PART 2: THE BUBBLE
During the housing boom, the ratio of money borrowed by
investment banks versus the banks' own assets reached unprecedented
levels. Speculators could buy credit default swaps (cdss), which were
akin to an insurance policy, to bet against cdos they did not own.
Numerous cdos were backed by subprime mortgages. Goldman-sachs
sold more than $3 billion worth of cdos in the first half of 2006.
Goldman also bet against the low-value cdos, telling investors they
were high-quality. The three biggest ratings agencies contributed to the
problem, with aaa-rated instruments rocketing from a mere handful in
2000 to over 4,000 in 2006. There were some warnings about the
growing risks in the financial system, including from raghuram rajan,
then the chief economist of the IMF, who, at the federal reserve's 2005
jackson hole conference, identified some risks and proposed policies to
address them, though former U.S. Treasury secretary lawrence summers
called his warnings "misguided" and rajan himself a "luddite".

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RISING COST OF HOUSE FROM 1970-2007
U.S. HOUSING PRICES

200%

180%

160%

140%

120%
194%
100%
140% 140%
80%

60%

40%

20%

0%
1970's BOOM 1980's BOOM 2007 HOME PRICES

U.S. HOUSING PRICES

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 COUNTRYWIDE CORPORATE PROFITS
(IN BILLIONS)

$3 B

$2 B

$1 B

$0 B
2000 2001 2002 2003 2004 2005 2006

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 WALL STREET BONUSES
(IN BILLIONS)

$35 B

$30 B

$25 B

$20 B

$15 B

$10 B

$5 B

$0 B
2002 2003 2004 2005 2006 2007

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LARGEST UNDERWRITER

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CREDIT DEFAULT SWAP (CDS)

INVESTOR AIG
S

CDO

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CREDIT DEFAULT SWAP (CDS)

INVESTOR AIG
S

CDO

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 CREDIT DEFAULT SWAP (CDS)
SPECULATOR
S
SPECULATOR
SPECULATOR
S
INVESTOR S
AIG SPECULATOR
S
S

CDO

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 CREDIT DEFAULT SWAP (CDS)
SPECULATOR
S
SPECULATOR
SPECULATOR
S
INVESTOR S
AIG SPECULATOR
S
S

CDO
BONUSES
$3.5 BILLION

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 CREDIT DEFAULT SWAP (CDS)
SPECULATOR
S
SPECULATOR
SPECULATOR
S
INVESTOR S
AIG SPECULATOR
S
S

CDO

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PART 3: THE CRISIS
The market for CDOs collapsed and investment banks were left
with hundreds of billions of dollars in loans, CDOs, and real estate they
could not unload. The great recession began in November 2007, and in
March 2008, Bear Stearns ran out of cash. In September, the Federal
Government took over Fannie Mae and Freddie Mac, which had been on the
brink of collapse. Two days later, Lehman Brothers collapsed. These entities
all had AA or AAA ratings within days of being bailed out. Merrill lynch, on
the edge of collapse, was acquired by Bank of America. Henry Paulson and
Timothy Geithner decided that Lehman must go into bankruptcy, which
resulted in a collapse of the commercial paper market. On September 17, the
insolvent AIG was taken over by the government. The next day, Paulson and
Fed Chairman, Ben Bernanke asked congress for $700 billion to bail out the
banks. The global financial system became paralyzed. On October 3, 2008,
President George w. Bush signed the troubled asset relief program, but
global stock markets continued to fall. Layoffs and foreclosures continued
with unemployment rising to 10% in the us and the European union.
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22
23
24
25
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 U.S. FORECLOSURES

1,000,000

800,000

600,000

400,000

200,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2007 2008 2009

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PART 4: ACCOUNTABILITY
Top executives of the insolvent companies walked away with
their personal fortunes intact and avoided prosecution. the executives had
hand-picked their boards of directors, which handed out billions in bonuses
after the government bailout. The major banks grew in power and doubled
anti-reform efforts. Many academic economists who had advocated for
deregulation for decades and helped shape U.S. Policy still opposed reform
after the 2008 crisis. Firms involved were the analysis group, Charles river
associates, compass Lexecon, and the law and economics consulting group
(LECG). Many of these economists were paid consultants to companies and
other groups involved in the financial crisis, conflicts of interest that were
often not disclosed in their research papers.
PART 5: WHERE WE ARE NOW

Tens of thousands of U.S. Factory workers were laid off. The

incoming Obama administration's financial reforms were weak, and there
was no significant proposed regulation of the practices of ratings agencies,
lobbyists, or executive compensation. Geithner became treasury secretary.
Martin Feldstein, Laura Tyson, and Lawrence summers were all top
economic advisers to Obama. Bernanke was reappointed chair of the federal
reserve. European nations imposed strict regulations on bank compensation,
but the U.S. resisted them.
HARVARD ENDOWMENT GROWTH
(IN BILLIONS)
$45 B

$40 B

$35 B
$30 B

$25 B

$20 B

$15 B

$10 B

$5 B

$0 B
1990 1993 1996 1999 2002 2005 2008
UNIVERSITY OF CALIFORNIA TUITION
(ADJUSTED FOR INFLATION)
$12,000

$10,000

$8,000

$6,000

$4,000

$2,000

$0
1977 1985 1993 2001 2009
 HOURS WORKED PER YEAR
COUNTRYWIDE CORPORATE PROFITS
(IN BILLIONS)

1,900

1,850

1,800

1,750

1,700

1,650
1979 1989 1995 2000 2006

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PERSONS WHO ARE INVOLVED AND
INTERVIEWED IN THE MOVIE
PERSONS WHO ARE INVOLVED AND INTERVIEWED IN THE MOVIE

NAME PROFESSION
1 Gylfi Zoega Professor of Economics, University of Iceland

2 Andri Snær Magnason Writer & Filmmaker

3 Sigridur Benediktsdottir Special Investigative Committee, Icelandic Parliament

4 Paul Volcker Former Federal Reserve Chairman

5 Dominique Strauss-Kahn Managing Director, International Monetary Fund

6 PERSONS WHO ARE INVOLVED AND INTERVIEWED

George Soros IN THE
Chairman, Soros Fund MOVIE
Management

7 Barney Frank Chairman, Financial Services Committee

8 David McCormick Under Secretary of the Treasury, Bush Administration

9 Scott Talbott Chief Lobbyist, Financial Services Roundtable

10 Andrew Sheng Chief Adviser, China Banking Regulatory Commission

11 Lee Hsien Loong Prime Minister, Singapore (as Hsien Loong Lee)
PERSONS WHO ARE INVOLVED AND INTERVIEWED IN THE MOVIE

12 Christine Lagarde Finance Minister, France

13 Gillian Tett U.S. Managing Editor, The Financial Times
14 Nouriel Roubini Professor, NYU Business School
15 R. Glenn Hubbard Chief Economic Adviser, Bush Administration
16 Eliot Spitzer Former Governor, New York
17 Samuel Hayes Professor Emeritus of Investment Banking, Harvard Business School
18 Charles Morris Author, The Two Trillion Dollar Meltdown
PERSONS WHO ARE INVOLVED AND INTERVIEWED IN THE MOVIE
19 Robert Gnaizda Former Director, Greenlining Institute
20 Willem Buiter Chief Economist, Citigroup
21 Andrew Lo Professor & Director, MIT Laboratory for Financial Engineering
22 Michael Greenberger Former Deputy Director, Commodity Futures Trading Commission
23 Satyajit Das Derivatives Consultant
24 Frank Partnoy Professor of Law & Finance, University of California San Diego
PERSONS WHO ARE INVOLVED AND INTERVIEWED IN THE MOVIE

25 Eric Halperin Director, Center for Responsible Learning

26 Martin Wolf Chief Economics Commentator, The Financial Times
27 Kenneth Rogoff Professor of Economics, Harvard (as Prof. Ken Rogoff)
28 Daniel Alpert Managing Director, Westwood Capital
29 Raghuram Rajan Chief Economist, International Monetary Fund
30 Lawrence McDonald Former Vice President, Lehman Brothers
31 Harvey Miller Lehman's Bankruptcy Lawyer
32 Jeffrey Lane Vice Chairman, Lehman
PERSONS WHO ARE INVOLVED AND INTERVIEWED IN THEBrothers
MOVIE
33 Jonathan Alpert Therapist
34 Kristin Davis Manhattan Madam
35 Allan Sloan Senior Editor, Fortune Magazine
36 William Ackman Hedge Fund Manager (as Bill Ackman)
37 Jerome Fons Former Managing Director, Moody's Rating Agency
38 Frederic Mishkin Governor, Federal Reserve
39 Simon Johnson Professor, MIT
REFERENCES:

• https://www.imdb.com/title/tt1645089/fullcr
edits?ref_=tt_cl_sm

• https://en.wikipedia.org/wiki/Inside_Job_(20
10_film)

• https://www.youtube.com/watch?v=T2IaJwk
qgPk&t=2253s
 THANK YOU
FOR LISTENING!