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Inside Job: How Bankers Caused The Financial Crisis

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Myhttp://www.guardian.co.uk/film/2011/feb/17/inside-job-financial-crisis-bankers-verdicts

The derivatives trader

"The film's first half-hour was absolutely dead-on. The explanation of what happened was a chilling re-run of all the events that led up to the financial crisis. It also showed very accurately the denial by everybody inside or outside the industry that such a crisis was even occurring – even up to the last minute before Lehman's bankruptcy.

I have an issue with some of the elements pursued in the rest of the film. One was the vilification of individual people. Chuck Prince, the CEO of Citigroup at the time of the crisis, may have been overpaid – but I don't think he was particularly at fault. At worst he perhaps should have known more about what was going on, but really he's just the nice old geezer at the top who shakes people's hands at cocktail parties. There may be people lower down who knowingly did criminal things, but that is a different matter.

A weak point was the anti-free market and conspiratorial tone of the film. Yes, deregulation did go too far – particularly with the repeal of the Glass-Steagall Act of 1933, which might have prevented banks gambling with depositors' money. But to imply that all deregulation in the last 20 years was a conspiracy perpetrated by an academic elite of economists in the pay of the banks is paranoid and absurd.

An oversight by the film was to ignore how risk managers at many banks knowingly failed to voice their fears about the way their companies operated. A risk manager once told me that to raise an issue that undermined the bank's multi-billion-dollar profits would have been to "sign his own death warrant". This inability to challenge trading desks generating billions in phantom profits was endemic.

......

The bank director

"This was a well-researched film that clearly explained the complexities of the crisis and the greed of bankers. It laid the blame squarely where it belongs – at the feet of bankers, of ratings agencies, of regulators – and it interviewed a lot of heavyweight people, such as Dominique Strauss-Kahn, Eliot Spitzer, Raghuram Rajan and Glenn Hubbard.

It will doubtless make many people – especially those who lost their jobs and savings – angry at not only what the banks did, but that many of the people responsible are still in their jobs, and that no one's gone to prison. It beggars belief that ordinary taxpayers are facing higher taxes and spending cuts, while bankers walked away scot-free. The film shows that people who had bought a house they couldn't afford are now living in a tent, whereas bankers have still got their jobs. Consumers enjoyed buying houses that ultimately they couldn't afford, but mortgages were shoved down their throats without any care on the part of the bankers. In the old days, the bank would say: "We don't think you can afford that mortgage, so we won't lend you money." The film showed how this kind of advice was thrown out of the window.

Unfortunately, it's clear that for many investment banks business continues pretty much as normal and that another crisis is only a matter of time. Sure, there's greater scrutiny of bonuses – but many bankers think they were not responsible personally for the crisis and they're worth every penny they're paid. Clearly they're not.

.........

The investment banker

"Inside Job ignored the enormous level of consumption by ordinary people that drove debt levels so high. The film suggested it was the bankers and the politicians who were driving the collapse – and fair enough, there was some mis-selling of mortgages. But it wasn't just mortgages: it was bank debt, credit-card debt, car loans. Blame the banker for providing the credit, but the consumer must also take some of the rap. If you talk to a sole trader, they'll tell you that when times are good, put some money away for when times are bad. But the consumers just spent and spent, and assumed the good times would go on for ever.

Another angle missed by the film was the role of accounting firms. There is a huge amount of blame to be attributed to them. It was their responsibility to monitor the accounts of banks, and when they signed off a bank's results, they were stating their confidence in the bank's ability to trade solvently. The film ignored the failure of accountants to say anything. It talked about regulators and ratings agencies. But the accountancy firms are just as big as some of the larger banks and not to analyse their role in the crisis was a huge omission.

Some interesting comments, not copied it all.

However the last comment is quite interesting, consumers clearly shoulder some of the blame and that they just spent and spent and spent and assumed the good times would go on forever. What the investment banker fails to grasp is that this was the political propaganda line to the people being pumped out 24/7. The best example is from Brown claiming he'd abolished boom / bust. I'm sure if we looked we can find loads of examples from both sides of the Atlantic where the people where told this was a new "golden age" created by the great and the good where stability had been created and the new found wealth would continue. Complete crap but the vast majority lack the necessary critical ability to realise this as most would rather believe the positive spin that everything was stable in that environment why not buy a slightly more expensive car/house on credit, sure you might over stretch yourself for a few years but you've got a stable job, you might get a promotion and ultimately you can afford the dream.

However consumers did BORROW the money, they didn't have it in the first place someone else gave it to the them and that someone else got a big fat bonus for dumping as much debt as they possible could on them.

One person has lost their job, the other is still in it and getting a bonus.

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UK Plc who gorged on the consequences of the failure of regulators, banksters and the credit system and has not yet paid the price.

1. House prices remain above 5 X income

2. Sterling is the strongest currency vs. a basket of majors

3. rents are extremely high

4. Repossession rates are low

5. Unemployment remains relatively low (vs. EZ and US)

6. FTSE unaffected

7. Bonds among the highest rated globally.

So far, so very good. But then again, such a statement could equally come from the lips of a gentleman half-way down in his jump from the top of the Empire State buildng.

Things are just beginning to turn down and it may we have to wait until the 3rd Q to start to see the brown shoots.

Edited by Realistbear

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I don't think you can blame the consumer for borrowing too much.

The reason banks are allowed to loan us money is that they are assumed to be taking a risk and therefore will rationally decide who to lend money to.

Once they could take that risk off their books they lent to anyone without a question as to whether it could be repaid.

Therefore the entire element of risk assesment was removed.

If the person who borrowed the money can't pay it back it means the loan was not properly assessed and the fault is with the lender not the borrower (unless they willfully provided false information in which case they should be punished)

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An oversight by the film was to ignore how risk managers at many banks knowingly failed to voice their fears about the way their companies operated. A risk manager once told me that to raise an issue that undermined the bank's multi-billion-dollar profits would have been to "sign his own death warrant". This inability to challenge trading desks generating billions in phantom profits was endemic.

I have some experience of being in that position. It was a major cause of the crisis and has been a problem for the last 30 years, that essentially you only get anywhere in banking and academia more so if you stick to the rather saccharine economic orthodoxy.

That's another reason why we are not going to recover from this and there will be yet more waves of crisis.

I notice the vacuous Flanders at the BBC continues to peddle the line that it was a somewhat innocent academic failure, but she would because her beloved neoliberal elite are up to their necks in complicit plunder.

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I have some experience of being in that position. It was a major cause of the crisis and has been a problem for the last 30 years, that essentially you only get anywhere in banking and academia more so if you stick to the rather saccharine economic orthodoxy.

That's another reason why we are not going to recover from this and there will be yet more waves of crisis.

I notice the vacuous Flanders at the BBC continues to peddle the line that it was a somewhat innocent academic failure, but she would because her beloved neoliberal elite are up to their necks in complicit plunder.

I agree with your comments on Flanders view point and there were a lot of other reasons but she is right to bring to the public attention that feted economists took big amounts of money to write so called research that said all is fine in Iceland, etc and did not have to disclose that they were paid. This is wrong and should be addressed.

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I notice the vacuous Flanders at the BBC continues to peddle the line that it was a somewhat innocent academic failure

iirc there is some truth in this. Some clever idiot came up with a new algorithm to minimise risk. However, it was only meant to work with existing levels of risk, and the bloody fools used it to increase the amount of risk being taken... sigh...

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Myhttp://www.guardian.co.uk/film/2011/feb/17/inside-job-financial-crisis-bankers-verdicts

Some interesting comments, not copied it all.

However the last comment is quite interesting, consumers clearly shoulder some of the blame and that they just spent and spent and spent and assumed the good times would go on forever. What the investment banker fails to grasp is that this was the political propaganda line to the people being pumped out 24/7. The best example is from Brown claiming he'd abolished boom / bust. I'm sure if we looked we can find loads of examples from both sides of the Atlantic where the people where told this was a new "golden age" created by the great and the good where stability had been created and the new found wealth would continue. Complete crap but the vast majority lack the necessary critical ability to realise this as most would rather believe the positive spin that everything was stable in that environment why not buy a slightly more expensive car/house on credit, sure you might over stretch yourself for a few years but you've got a stable job, you might get a promotion and ultimately you can afford the dream.

However consumers did BORROW the money, they didn't have it in the first place someone else gave it to the them and that someone else got a big fat bonus for dumping as much debt as they possible could on them.

One person has lost their job, the other is still in it and getting a bonus.

Very interesting article. Thanks for posting it IRRO.

I think the article listed most culprits. And I think your comments are related with the article's main missed culprit: the media/press.

The people depend on the press to know what is going on. This is essential in democracies. The press is even said to be the "4th power"! But only a few technical papers were warning against the bubble, like Martin Wolf in the FT, and some articles in The Economist. But the main media didn't translate these warnings for the general public.

I think Flanders and other economics / business / finance journalists in the mainstream media failed to warn the people.

The BBC was actually showing lots of property shows, making things even worse!

EDIT: Just remembered another culprit: the opposition. The Conservatives went along with the credit bubble. Only cable warned against it. (Not sure about the Democrats in America, when Bush was in power.)

Edited by Tired of Waiting

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"Inside Job ignored the enormous level of consumption by ordinary people that drove debt levels so high. The film suggested it was the bankers and the politicians who were driving the collapse – and fair enough, there was some mis-selling of mortgages. But it wasn't just mortgages: it was bank debt, credit-card debt, car loans. Blame the banker for providing the credit, but the consumer must also take some of the rap. If you talk to a sole trader, they'll tell you that when times are good, put some money away for when times are bad. But the consumers just spent and spent, and assumed the good times would go on for ever.

This bit....

it was bank debt, credit-card debt, car loans.

All of which, as part of the approval process, carry capacity checks and investigations into applicants ability to repay the debt. Checks which the banks had a responsibility to enforce and decline credit applications if unaffordable.

I call LIAR OVERDRAFTS, LIAR CARDS and

LIAR HIRE PURCHASE

Edited by Reck B

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Does the film let the central bankers off the hook then? Sure, a lot of bankers and a lot of consumers acted in a greedy and irresponsible way, but if it wasn't for low interest rates that behaviour would have been contained.

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Does the film let the central bankers off the hook then? Sure, a lot of bankers and a lot of consumers acted in a greedy and irresponsible way, but if it wasn't for low interest rates that behaviour would have been contained.

+ 1

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Here's a radical idea for the numbskulls in charge.

Lower the costs associated with just living somewhere - rent/council tax/mortgage servicing and people will be able to live their lifes spending their own, earned, present day, positive money, instead of borrowing, at interest from their own futures through banks.

If this happened, there would be no financial crisis.

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+1 for the comments made by the bank director, am surprised to see him/her be so honest and level headed.

Of course we don't have to get angry at the banks, we can protest. I'm going out tomorrow and will be handing out leaflets against the banks practices. You can read more here.

I don't think you can blame the consumer for borrowing too much.

Yeah you can. People have to take responsibility for their own actions just like the banks do.

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Here's a radical idea for the numbskulls in charge.

Lower the costs associated with just living somewhere - rent/council tax/mortgage servicing and people will be able to live their lifes spending their own, earned, present day, positive money, instead of borrowing, at interest from their own futures through banks.

If this happened, there would be no financial crisis.

Agreed.

When I first went out to Australia in 2000 you could get a great house for around £100k with a big plot of land in a decent location. This meant people could pretty much do what they liked with their lives and enjoy themselves.

When I went back in 2009 the same house would cost you £300k (even allowing for the worse exchange rate) and people were working extra hours to keep up with the mortgage payments.

Selling eachother increasingly expensive houses is insanity and should be regulated against.

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Yeah you can. People have to take responsibility for their own actions just like the banks do.

Generally I'd agree with you - and I don't excuse these people of responsibility for their personal stupidity - but the reason we allow banks the huge commercial advantage of issuing credit in return for interest is that we believe they'll allocate it more efficiently then "government" ever could.

Given they obviously don't we should be looking to withdraw the right to do so from banks.

Blaming idiots for borrowing £10k off a bank and spending it on some Sex and the City lifestyle gets us away from the fact that banks created the problem by moving away from their fundamental role.

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I agree with your comments on Flanders view point and there were a lot of other reasons but she is right to bring to the public attention that feted economists took big amounts of money to write so called research that said all is fine in Iceland, etc and did not have to disclose that they were paid. This is wrong and should be addressed.

Indeed. If they didn't write supportively in return for the money wouldn't it undermine their very foundational ideas about the free market - people act in their own self-interest, not in the interest of telling the truth,

Peter.

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Here's a radical idea for the numbskulls in charge.

Lower the costs associated with just living somewhere - rent/council tax/mortgage servicing and people will be able to live their lifes spending their own, earned, present day, positive money, instead of borrowing, at interest from their own futures through banks.

If this happened, there would be no financial crisis.

Think of the beneficial effects on the economy. More spent in retail sector, more saved, more into pensions/investment (thus into job creation) etc.

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Think of the beneficial effects on the economy. More spent in retail sector, more saved, more into pensions/investment (thus into job creation) etc.

Exactly.

More money left with the productive people, and less money to the "rentier-classes".

Besides, see my sig., below:

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I don't know what the purpose of the "Inside Job" movies is, but it seems quite clear that the movie itself is a bankster inside job too, i.e. it has been made by them for whatever reasons known only to them, see this piece of research about the director:

http://www.imdb.com/.../nest/169871144

My curiosity was piqued when a friend told me of the upcoming Wall Street documentary exposé 'Inside Job'. It's got some pretty good reviews, and perhaps it will pack enough punch to educate the general public about the theft of taxpayer money that constituted the euphemistically termed 'bailout'. Online reviews have praised the film,"A wake-up call of macroeconomic proportions", "Economics explained beautifully" – certainly sounds worth a watch.

Admittedly though, you have to be quite naive to think that a genuine expose of Wall Street could even see the light of day in Hollywood, considering the corporate nature of media ownership. After a short Internet search, things begin to fall into place.

'Inside Job' is directed by Charles H. Ferguson. His past works include a film called 'No End in Sight – The American Occupation of Iraq' – a piece critical of the Bush administration's management of the war in Iraq. So far, so good. Sort of.

The alarming thing about Ferguson is his lifelong membership of the Council on Foreign Relations. See CFR's private membership roster (http://www.cfr.org/a...r.html?letter=F) and Ferguson's Wikipedia page (http://en.wikipedia....les_H._Ferguson).

CFR is a think tank which, in a nutshell, exists to shape the US international agenda in favour of its corporate members. CFR's corporate roster is here (http://www.cfr.org/a...ate/roster.html), and it makes for some startling reading.

The founding member corporations of CFR are as follows:

Bank of America Merrill Lynch

Chevron Corporation

Exxon Mobil Corporation

Goldman Sachs Group, Inc.

Hess Corporation

McKinsey & Company, Inc.

The Nasdaq OMX Group

(I've added the emphases for obvious reasons).

How can a 'lifelong member' of this global banking and Big Oil corporate cabal make such an exposé? Well, Ferguson's membership of CFR does not constitute a conflict of interest as one might surmise. Instead, it illustrates his real motives; his film is not an exposé, it is a distraction.

The focus of Ferguson's 2007 piece, 'No End in Sight – The American Occupation of Iraq', is the US government's post-invasion decision-making failures. Insufficient troop levels, looting in Baghdad, and corruption in the Iraqi government form the backbone of the film. Clearly, the film distracts audiences from what really matters: the decision to go to war in the first place, absent of evidence, and the relentless propaganda campaign from the media that aimed to legitimise the illegal war.

Let's take a look at some of Ferguson's other fellow CFR (corporate) members:

Boeing

DynCorp International

KBR

Raytheon Company

Lockheed Martin Corporation

Shell Oil Company

General Electric Company

JPMorgan Chase & Company

Kohlberg Kravis Roberts & Co.

Morgan Stanley

Rockefeller Group International, Inc.

The Blackstone Group L.P.

Rothschild North America, Inc.

Many of these companies have profited to the tune of trillions of dollars from the destruction and reconstruction of Iraq and Afghanistan. Some even played integral parts in calling for the wars.Two of these corporations, DynCorp and KBR, are even in the 'top ten' list of companies (http://articles.moneycentral.msn.com/Investing/CompanyFocus/WhosProfitingFromTheIraqWar.aspx?page=2) profiting from the illegal invasion and occupation of Iraq.

As with 'No End In Sight', 'Inside Job' will not reveal the truth or bring the real culprits to light. Ferguson's agenda is clear; he is a mouthpiece for his corporate CFR bedfellows. This type of pseudo-exposé aims to distract audiences from the significant truths by focusing on secondary matters. The viewer will be led around by the nose like a blinkered horse, while Ferguson's war criminal pals can continue bombing and looting to their black hearts' content. Inside Job? I couldn't think of a better name.

=====================

CFR's private membership includes neo-con warmongers such as: DickCheney, Paul Wolfowitz, Elliott Abrams, Vin Weber, John R. Bolton,General Colin L. Powell, Condoleezza Rice, Robert Zoellick, GeneralDavid H. Petraeus, Robert M. Gates, Zbigniew Brzezinski, Timothy F.Geithner, Paul Volcker, and Henry M. Paulson Jr.

=====================

Edited by wise_eagle

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Here's a radical idea for the numbskulls in charge.

Lower the costs associated with just living somewhere - rent/council tax/mortgage servicing and people will be able to live their lifes spending their own, earned, present day, positive money, instead of borrowing, at interest from their own futures through banks.

If this happened, there would be no financial crisis.

Think of the beneficial effects on the economy. More spent in retail sector, more saved, more into pensions/investment (thus into job creation) etc.

Couldn't agree more. Everyone benefits except the "vampire squids" who need us all to feed off of.

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I don't know what the purpose of the "Inside Job" movies is, but it seems quite clear that the movie itself is a bankster inside job too, i.e. it has been made by them for whatever reasons known only to them, see this piece of research about the director:

http://www.imdb.com/.../nest/169871144

A very interesting list.

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I don't know what the purpose of the "Inside Job" movies is, but it seems quite clear that the movie itself is a bankster inside job too, i.e. it has been made by them for whatever reasons known only to them, see this piece of research about the director:

http://www.imdb.com/.../nest/169871144

From what I've seen it doesn't go into the core systemic fundamentals of the situation and the alternatives - well it wouldn't would it.

It doesn't explain why we have the current system that so favours bankers.

An explanation for the problems was called for as so many lives have been (and will be) blighted but it stops at the bank companies/employees (by employees I mean directors and their ilk) and blames the bank companies/employees and perhaps that's its purpose. Anything else is put into the financial/political incompetence category.

It's saying the system's ok if it weren't for some dodgy and greedy banks but there's an opinion, for example, that the basic system of debt as money etc should be changed and that isn't aired at all.

Edited by billybong

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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