The film Inside Job was extremely informative to me since it broke down a very complex system and the ideology behind it to terms that connected with the course that I could comprehend. The film also explained all the events that lead up to the 2008 Wall Street disaster and all the various roles at fault that contributed to this financial crisis. Though the film focuses on the deregulation being the culprit behind the economic meltdown, others factors such as corporate greed.
One of the major factors to the 2008 financial crisis that Inside Job explains is sub-prime mortgages. Borrowers had borrowed on average 99% of the value of the house and because they had no money in the house they could walk away from the mortgage should anything go wrong. Yet thousands of these houses were rated AAA by the three major rating agencies. In the new system, home buyer paid their local lender who then sold the mortgages to investment banks who combined thousands or mortgages and loans and created derivatives which were in turn sold to investors. The investors paid rating agencies to rate these CDO’s, many of which were given AAA. Since lenders weren’t concerned whether borrowers could pay back these risky loans the investment banks didn’t care either as long as they sold as many CDO’s as possible. To make matters worse the rating agencies have zero liability on their faulty ratings. Deregulation permits these companies to take risky deals without considering repercussions.