Inside Job

Yeah, I think we'll go back to doing what our grandparents did -- not mattress stashing, but actually live within our means and not on credit. And, that goes for the financial world as well!! Nothing wrong with making an honest buck, or a million or billion of them; making it dishonesty, tho, should never go unpunished. Especially when the affect is devastating -- locally and globally!!

Although, anymore, when I hear the word "Devastating" it reminds me of Kid Rock -- now that's my kind of devastation!!

Yes, for sure K8, some food for thought. Let's all watch the documentary, Inside Job, before we go vote!!

It's painfully obvious that there is a need for some regulation (or the enforcement of regulatory laws already in place) and, paraphrasing the filmmaker, sending 75 former investment bankers to prison might send a pretty loud message and help deter such behavior in the future. And, K8 since you asked ; ) I also think:

1. The President's financial advisors shouldn't be CEOs from Wall Street. It's sad but true, today "it's a Wall Street government." Let's start the real "change" there. Which means not to appoint, Tim Geithner (the guy who negotiated the terms of the AIG bonus payout while serving as the President of the Federal Bank of NY) to NOW be the Secretary of the US Treasury?!! Hello!! ??

2. The incentive structure, absolutely, needs to be changed.

3. The rating agencies and they way they operate needs to be reworked.

4. As the film points out, the academic world of economics is also in bed, so-to-speak, with the financial world -- a conflict of interest exists. Universities and professionals in academia not only have influence and get paid, very well, to sit on various financial boards, they also get paid to write, not surprisingly, favorable papers. As a private economist, Greenspan was "hired" and wrote a favorable study regarding Charles Keating's banking practices; who eventually was imprisoned for his part in the Savings and Loans corruption that took place shortly after deregulation began in the late 80s. See: Keating Five (Senators) accused of corruption relating to Keating's political contributions. Thousands of S & L executives went to prison. Why is that not the case for these financial crooks of today? Instead the greedy bastard enjoy "their" supercalifragilisticexpialidocious looted bonuses and not some time in prison!

Jade, you mention the word rant earlier? A rant, what's that?!! ; )) Funny -- "Ayn Rand" and "a rant" sound similar!

We did have, for over four decades, no financial crisis because laws and regulations were put into place to make sure that what caused the Great Depression didn't happen again. In the midst of the economic hardships of the 80s (Reaganomics) deregulation was put back into practice and continued through each administration, up to the current; including borrowing up to 33 times the amount of what the company has (honestly ; ) on their accounting books. A so-called 33 to 1 margin ratio.

So, the extremely risky behaviors of the financial market was supported by both political parties. The amount of deregulation that occurred is what surprises me -- there were good reasons for the laws to have been put into place knowing what caused the Great Depression because, of course, hindsight is 20/20 after all. I first point the finger to the chairman of the Central Bank, Federal Reserve Chairman, Alan Greenspan; he had the tools to use and should have (by law, as explained below) but HE decided, AND was allowed, to not use them -- grrr!!

One government agency, led by Brooksley Born, did try to intervene and she was shut down by the investment banks (of course) and congress during Clinton's administration. She was right, but that's just one example of the opportunities to stop (or put appropriate measures into place) the dangerous behaviors of the investment banks. And, Obama, really could have done something (and said he would during his campaign) and either didn't realize that he was/is surrounded, in the White House, by the very people that help cause the problem in the first place?!!! Grrr some more!!

But, the lying to customers about the securities they sold to them, that they themselves knew were of poor quality (yet had high ratings from the rating agencies -- more b.s. and a point of contention -- is, no question, fraud. However, betting against the failure of a stock is, surprisingly, not illegal -- yet! Drugs and prostitution is, sadly, a mute point. Surprise -- not!!

Yeah, RSMS, maybe it should be The Citizens of the United States vs. . . .

And yeah Jade, WOW -- YIKES!! Might have to agree with the statement that "Rand was a psychological and moral mess!!"

I didn't use the screen name "Soap Box" for no reason!! ; ))

Charles Ferguson, the filmmaker, did an amazing thing -- he made a top-notch movie about a complicated subject matter that the average person can understand. He says, "It's not that complicated, the details are complicated because it's a complicated industry, but the underlining principles are really very simple. What happened was a bank robbery, and it was a bank robbery committed not by somebody walking into a bank with a gun, but committed by the president of the bank."

I have to agree with the critiques of the movie: "Scarier than anything Wes Craven and John Carpenter have ever made . . . " and after watching it, you'll be "boiling with rage".

Actually, RSMS, Levin wasn't calling the securities crap, he was paraphrasing emails sent between the sales team at Goldman Sachs who sold 600 millions dollars worth of Timberwolf securities; which they knew were no good, but sold them to their customers as "safe" investments, and this is how they did it.

AIG, the largest insurance company in the world, also provides financial service. AIG sold credit protection in the form of credit default swaps (CDS) on collateralized debt obligations (CDOs). CDS are like insurance policies, obliging the seller of CDS to compensate the buyer in the event of a default. The difference between a traditional insurance policy and a CDS is that anyone can purchase one, even those that don't own the instrument. In other words, speculators, i.e. Goldman, can bet against CDOs they don't own and get paid when they fail.

In fact, Goldman bought 22 billion dollars of CDS from AIG; so much that Goldman realized that AIG might go bankrupt, so they spent 150 million dollars insuring themselves against AIG's potential collapse. Then GS started actively betting against the CDOs while, at the same time, telling their customers that they were high quality investments.They started selling CDOs specifically designed so that the more money their customers lost, the more money GS made.

Since CDS were unregulated (and that's really the culprit of the meltdown, zero regulation in all areas of the financial sector) AIG didn't have to put aside any money to cover potential losses; instead AIG paid it's employees huge bonuses as soon as contracts were signed. People were rewarded for taking massive risks to generate short term revenue and profits and, therefore, bonuses. If a broker can make an extra 2 million or 10 million dollars a year in bonuses by putting their company at risk, and someone else pays the bill, they're going to do it. It's a total distorted system of compensation.