Ammar Ubaid Section B 19P01908

Summary Inside Job

The documentary starts with case study of Iceland that how a country that had low crime, good
education and strong stability has come under economic crises. Three of the banks were
privatized and in five years’ time they combine borrowed more than ten times the total GDP of
Iceland. The lax borrowing requirement became a problem and started to wreak the place
because of this Iceland came under immense debt. This was not something new happening as
back in 1980s the financial sector privatized. Many companies invested in Tech Company and
the dot com bubble burst many individuals lost their saving and financial institutions stated to
merge together to form monopolies.

Eliot Spitzer conducted an investigation into the internet crisis that revealed that banks were
betting at those stocks that they knew were likely to fail as they got commission based on the
amount of business that they brought in. The investment banks were fined a total of $1.4b as
punishment.

New financial instruments such as derivate were developed. Deregulation of financial

institution. Cheap credit and lax lending gave rise to the housing bubble. Collateralized debt
obligation were often given a triple A rating were as in reality they were risky. Home owners
who had been given subprime mortgages found them self-paying more on the mortgage than
what their house was worth. A lot of people were not able to pay the mortgage and the supply
of houses in the market exceeds demand which forces the property prices to fall then a
Dominos effect take place because CDOs were given a rating more than their real value they
default and insurance companies that have backed those CDO’s such as (AIG) found them self
in a tricky situation where they were not able to give those unusually large payouts. This causes
the banks and lenders to shut down.
Ammar Ubaid Section B 19P01908

In the early part when the crises did not take place Investment banks, lenders and Insurance
companies were earning massive sums of money. CEO of Lehman Brothers received nearly
$500m in bonuses. Investment banks were borrowing money so that they could trade more
debt and earn more money. Goldman Sachs started to bet against AIG to gain more profits and
making AIG to declare bankruptcy. Bear Stears runs out of cash and is acquired by J.P Morgan
for only $2 a share. Lehman Brother suffered record losses and their stocks took a dive. Were as
Fannie Mae and Freddie Mac were bailed out by the US government. The US government issues
a bail out of $700 b to bail out investment firms. The government did this because the
economy was facing a credit crunch and people are reluctant to spend money, so a bail out was
given to revive the economy. It was pointed out in the documentary that the same Wall Street
people who were responsible for the financial crises are now economics advisors in the new
government. There is a huge wealth gap between the poor and the rich and the tax policies are
also favoring the wealthy as estate tax has been removed.

When the Iceland bank collapsed unemployment tripled in less than 6 months. A lot of people
lost their job. Andre Sheng says “Why should a financial engineer be played four times more
than a real engineer? A real engineer builds bridge, a financial engineer builds dreams. And
those dreams turn out to be nightmares- other people pay for them”. This crises was not an
accident