Inside Job

In 2008 a big financial crisis hit all over the world. It also cost tens of millions of people their jobs, savings and homes. “Inside Job” the documentary tells how it happened. For a small experimental observation of deregulation, Island is given as an example. A bubble was created because of an unregulated economy and then it collapsed.

In U.S deregulation gained momentum in 1970s. Banks, Credit Rating Agencies, Insurance Companies had a chance to earn the maximum.  Beginning in the 1990s Deregulation and innovation in technologies create derivatives which mean lots of complex financial products. They made the market unstable.  Using these products bankers could gamble on anything like weathercast. It became a big unregulated market and was a big threat for the economy.  CDO (Collateralized Debt Obligations) is one of them.

After the year 2001 banks let people get in debt. They loan anyone without observing their credit score cards. Most known example is the mortgage loan which provided people to buy house. People bought houses with extraordinary high prices and couldn’t pay their debt back. Price of the houses also increased. A financial bubble was created till 2007.  When the banks couldn’t find money to loan, they planned to sell derivatives like CDO. CDO is a kind of security where they sell the credits of debtors. In this system people who buy houses, cars or etc. pay their debts to other people who bought those securities. Banks and investment companies sold out them while Credit Rating Agencies rates CDOs as AAA. Top managers and employees of the financial companies are caught being fraud but deregulation give them opportunity to walk away. Government also insisted not to regulate those derivatives. Insurance companies were also in this fraud.

As a result, deregulation let the fraud in banks, Credit Rating Agencies, Insurance Companies and we also could say government allow this. Banks distributed lots of money to people who couldn’t pay back. They found another way called derivatives to collect the money from other people. It created a bubble. Prices raised a lot.

...