Inside Job Documentary Film Essay

The Inside Job word picture ( nonsubjective record) draws parallel views to the referenced text edition Impact on Accounting of this course coupled with the associated interrogation executed during the away weeks with respect to rationality the cause of the fiscal crisis.The documentary film zeros in on the contributory factors of the fiscal crisis such as falling interest rates, securitization of space mortgages and credit remissness swaps (derivatives). Other stunning contributory factors expressed in the documentary film were greed in addition to the deregulation and an unsupervised financial labor by the Federal presidential term.Snyder (2011) newspapered that, There have been several deregulations in the financial and housing markets over the sometime(prenominal) 30 years. Some of these include The Depository Institutions Deregulation and M anetary Control answer, the Federal Home contribute Bank Board establishing adjustable mortgages, the 1982 Garn-St Germain De pository Institutions Act establishing a secondary mortgage market, the repeal of the Glass-Stegall Act allowing commercial and investment banks 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 seemingly insignificant to some, one of the fastening screws that aided in the great fall with respect to the financial industry was falling interest rates. During the early 2000s the linked States economy began to slow down and in an effort to rejuvenate this downward condition the Federal arrest introduced a stimulation project to cut interest rates to induce customer spending. Investors took advantage of this excitant exercise as the return on mortgage backed securities was attractive and as a conclusion on that point was a boost and desire to purchase such securities.Consequently, lendinginstitutions became very excited as t he demand for mortgage backed securities increased and thus the quest began to write more mortgages. Hence, the qualifying standards for add approvals were done away with allowing a prospective home owner getting approval with zero-down. The introduction of no payment down increased the likelihood of failure to pay by borrowers and this default risk thence was disregarded.Another supporting aspect of the documentary film with respect to the cause of the financial crisis was securitization. Historically during the beneficial age, a home mortgage was a loan contract between the borrower and financial institution which was support by tangible property used as collateral. Such loans would be held until the full loan pledge has been satisfied in the long term. Conversely to the days of old, financial institutions sought new innovative promoter to generate income and came up with securitization of home mortgages.In this sense, during the 1990s, home mortgages were not held to maturity but instead the spunky risk home mortgages were, bundled, repackaged and resell creating mortgage backed securities whereby income is received when homeowners satisfied their home mortgage indebtedness. Despondently, when borrowers defaulted on their home mortgages, investors suffered dearly as losses were realised, consequently, financial institutions collapsed and unemployment rose above its usual average rate.Other research has concluded that derivatives also played a psyche role in the financial crisis. Derivatives are financial contracts between two parties of which the value can derived with not affiliation to the good or service. For example, a buyer can purchase an survival of the fittest agreement to buy a good or service in the future at an agreed price within a specified time frame.Within the presumptuousness 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. One type of derivatives that aided in the financial crisis was credit default swaps (CDS) which allowed investors to participate in naked CDS purchases without having legal ownership of the insured property. CDS is an innovative and prevalent derivative which is resembling to an insurance contract that permits investors to transfer risk to other parties who are more qualified and willing to domiciliate it, thus making itvery attractive risk mitigation tool.CDS became extremely popular and experienced an peculiar demand up to the latter part of 2007. However, since the derivatives market was not regulated companies such as AIG which sold jillions of swaps without collateral or reserves to satisfy potential losses. fit 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 literal 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 falling documentary in its fearless interviews and prying identified greed and deregulation by the Federal government as principle causes of the financial crisis. At the twilight of 1981 the Ronal Regan administration made the deregulation of the financial industry pourboire priority and the highest order of business in an effort to restore economic prosperity. Froese (2011) stated that, The candidacy trend of deregulation was followed through 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 taking bigger risks with depositors money. (p.16)The documentary film exposed the recycling of extend bank executives being integrated into key government positions even after having full knowledge of fuck up and unethical behavior goaded by greed. The greed for lavish lifestyle such as having sixsome airplanes, helicopters, yachts, beachfront homes and penthouses was evident in the documentary film.Apparently, the more money aggrandisement bankers earned the more they seem to want. The reservoir of this greed was driven by huge compensation and hefty bonuses. According to Ferguson (2010), Richard Fuld the CEO of Lehman Brothers actually was exactly ever seen on the trading floor as he went out of his way to avoid finish up with other employees even to the extent of extent of installing a personal elevator that took him to his office undetected.These chief top guns even went to the extent to cheat the government of taxes by understating theirincome. Sterngold (2011) reported that, Oliver Budde, a former attorney for the financial services firm Lehman Brothers, has charged that the bankrupt companys former Chief executive director Officer (CEO) Richard S. Fuld lied to Congress when stating the amount of his salary 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 payment 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 spot making more risky loans. Within 10 years hundreds of Savings and Loans companies became in sournt 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 Savings and Loans companies in California, used investors money to support his perso nal 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 formalize Keatings report Keating afloat in the industry.Deregulation continued under the Clinton administration congress worried 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 well-nigh the Commodity Futures Modernization Act banning all regulation in the derivatives market.Other new theories that actual from the documentary film were economists, credit rating agencies and top executives have all contributed to the financial crisis. It was unthinkable that honourable economists failed miserably to d isclose any conflict 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 change integrity 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 head of President Bush council of economic advisors, when asked whether there is and conflict of interest of economists he avoided the question and stated that most economist are not sloshed people. The documentary exposed him for having an annual salary of $150,000 as a board member of Met Life and that he formally served on the board of Capmark Financial 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 involvement in the financial crisis . The three credit agencies namely, Standard & Poor, Moodys, and Fitch 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 fitting bankrupt.Questions were put to the governor of the Federal Reserve, Frederic Mishkin whether he was aware of excellent 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 expire was owed to him reviewing some university book. Investors depend heavily on security rating for decision making. Clearly if a security has been classified as AAA and AA ratings, they appear to be as safe as government bonds.Instead, inve stors were deceived into drop in insolvent companies as a result of the ratings provided thereof.Continuing, top executives were also woven in the textile 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 smiling 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 believe 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 exhibits A and B and key players in the financial crisisExhibit A study Players identifies in Week 2Ex hibit BMajor Players in Inside Job Film1. Homeowners2. Financial / lending institutions3. Wall Street4. Federal government5. Securities Exchange armorial bearing1. Homeowners2. Financial / lending institutions3. Wall Street4. Federal Government5. Securities Exchange Commission6. Economist7. Credit 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 greed andreceived compensation of up to 485 million dollars. Bringing it all together, I potently believe that they were all in it together with the object to rape the economy of its finances and so they did successfully without being prosecuted.APA Format ReferencesGlobal Economic Crisis Resource 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 Mismanagement of guess 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 INSIDE JOB CRISIS, IDEOLOGY, AND THE BURDEN OF CAPITALISM. Studies In semipolitical Economy A Socialist Review, (88), 59-75.Sterngold, J. (2010). Who Cares About Another $200 Million?. Bloomberg Businessweek, (4177), 56-59.Maxwell, C. (2011). Inside the crash. Director (00123242), 65(4), 16.