Inside Job (2010 Full Documentary Movie)

The 2008 global economic crisis cost millions their livelihoods. The documentary starts by highlighting Iceland, a stable democracy with low unemployment and debt until 2000. Intense deregulation led to disastrous consequences, first for the environment with major aluminum factories and then for the economy. The privatization of Iceland's three largest banks led to a massive borrowing spree, with banks accumulating $120 billion in debt, 10 times the size of Iceland's economy, leading to a financial bubble and widespread personal enrichment for bankers and their associates. American accounting firms and rating agencies falsely declared Icelandic banks stable, even giving them AAA ratings. When these banks failed in late 2008, unemployment tripled, devastating the nation. Government regulators had failed to protect citizens, often being outmatched or even co-opted by the financial industry, with a third of Icelandic financial regulators eventually going to work for the banks.

After the Great Depression, the US experienced 40 years of economic growth without a financial crisis due to strict regulation, where banks were local and prohibited from speculating with customer savings. Investment banks were small, private partnerships where owners closely monitored their money. In the 1980s, the financial sector exploded. Investment banks went public, enriching shareholders and leading to significant pay disparities between bankers and other workers. The Reagan administration, supported by Wall Street, initiated 30 years of financial deregulation, starting with the deregulation of savings and loan associations in 1982, which led to a crisis costing taxpayers billions. Alan Greenspan, despite supporting Keating, a figure imprisoned for financial fraud, was appointed Federal Reserve Chairman and continued deregulation under the Clinton and Bush administrations. By the late 1990s, the financial sector consolidated into massive firms 'too big to fail', exemplified by the illegal merger of Citicorp and Travelers to form Citigroup, which violated the Glass-Steagall Act but was later legalized under pressure from figures like Larry Summers and Robert Rubin. Regulators failed to act, driven by the desire for monopolistic power and an implicit guarantee of government bailouts. Financial institutions were repeatedly caught engaging in criminal activities like money laundering and fraud, yet penalties were often mere fines without criminal charges.

In the early 1990s, deregulation and technological advancements led to an explosion of complex financial products called derivatives, which economists and bankers initially claimed would stabilize markets but instead made them more volatile. These instruments allowed betting on virtually anything, from oil prices to company bankruptcies. By the late 1990s, the unregulated derivatives market was worth $50 trillion. Brooksley Born, head of the Commodity Futures Trading Commission, attempted to regulate these products in 1998 but was fiercely opposed by figures like Larry Summers, Alan Greenspan, and Robert Rubin, who argued against regulation. Their opposition was successful, and in 2000, legislation was passed that exempted derivatives from regulation. By 2001, the American financial sector was more concentrated and powerful than ever, dominated by five investment banks, two conglomerates, three insurers, and three rating agencies. This led to a securitized food chain where mortgages and other loans were bundled into complex derivatives called Collateralized Debt Obligations (CDOs) and sold to investors worldwide. Lenders no longer cared about borrowers' ability to pay, leading to a surge in risky subprime loans. Despite the inherent dangers, rating agencies (paid by investment banks) awarded many CDOs AAA ratings. This unchecked system fed a massive housing bubble, significantly increasing home prices, driven by predatory lending practices that incentivized brokers to sell lucrative subprime loans. Wall Street bankers and executives accumulated immense wealth through bonuses tied to these profits, which were often based on fictitious earnings that would quickly evaporate once defaults began.

Despite having the authority to regulate the mortgage sector, Federal Reserve Chairman Alan Greenspan refused, dismissing warnings about risky loans. His successor, Ben Bernanke, also failed to act on repeated warnings from consumer advocates, economists, and the FBI about a growing epidemic of mortgage fraud. Between 2000 and 2003, mortgage lending quadrupled, and investment banks heavily leveraged themselves to buy more loans and create more CDOs. The Securities and Exchange Commission (SEC), under pressure from Goldman Sachs's director, Henry Paulson, eased leverage limits in 2004, allowing banks to become dangerously over-indebted with leverage ratios of 33:1. This meant a mere 3% drop in asset value would render them insolvent. AIG, the world's largest insurer, compounded the risk by selling massive amounts of unregulated credit default swaps (CDSs), effectively insurance policies on CDOs, without setting aside capital to cover potential losses. This encouraged massive risk-taking, rewarded with huge bonuses for employees like Joseph Cassano, who personally made $315 million. Despite internal warnings and an alert from IMF Economic Counselor Raghuram Rajan in 2005 about the unstable incentive structures, financial leaders dismissed these concerns. Goldman Sachs, aware of the toxic nature of these CDOs, not only sold them but also actively bet against them, using CDSs to profit from the impending collapse, even as they marketed them as high-quality investments to clients. Other firms like Morgan Stanley, Merrill Lynch, JP Morgan, and Lehman Brothers engaged in similar practices.

By 2008, mortgage foreclosures skyrocketed, and the securitized food chain imploded. Lending institutions could no longer sell loans to investment banks, leading to dozens of bankruptcies. The Bush administration and the Federal Reserve were slow to react, underestimating the severity of the crisis. In March 2008, Bear Stearns faced liquidity issues and was acquired by JP Morgan Chase with federal backing. Despite denials from Hank Paulson, then Treasury Secretary, the situation rapidly deteriorated. On September 7, 2008, Paulson announced the acquisition of Fannie Mae and Freddie Mac. Just two days later, Lehman Brothers reported massive losses and its shares plummeted. Paulson refused to provide a government guarantee to facilitate Lehman's acquisition by Barclays, leading to its bankruptcy on September 15, 2008. The decision to let Lehman fail, made by Paulson and Bernanke without consulting other nations, had catastrophic worldwide repercussions. The collapse sparked a global financial freeze, with the money market fund industry losing billions and the commercial paper market seizing up, hindering businesses' ability to cover operational costs. Simultaneously, AIG, on the hook for $13 billion to CDS holders, also faced imminent collapse. On September 17, AIG was taken over by the government, costing taxpayers over $150 billion. The following day, Paulson and Bernanke requested $700 billion from Congress to bail out banks, warning of catastrophic financial collapse. The bailout, signed into law on October 4, 2008, did not stop the global economic downturn, as unemployment soared and a worldwide recession took hold, impacting millions in China and Singapore.

The individuals who steered their firms into collapse and triggered the global crisis often left with their fortunes intact. Top executives at Lehman Brothers, for example, made over a billion dollars between 2000 and 2007, retaining their wealth even as the firm folded. Similarly, Countrywide CEO Angelo Mozilo earned $470 million, selling stock before the company's collapse. Merrill Lynch CEO Stan O'Neal received $161 million in compensation upon his resignation after leading his firm to ruin. Joseph Cassano of AIGFP, responsible for massive losses, was retained as a consultant at $1 million per month. These executives faced little accountability, as boards of directors often failed in their oversight roles. Despite admitting excessive greed and calling for more regulation, financial leaders quickly changed their tune once the immediate threat subsided. Post-crisis, major US banks emerged larger and more powerful. The financial industry intensified its lobbying efforts, spending billions to oppose reform. This unchecked influence extended to academia, where many prominent economists, often financially tied to the industry, promoted deregulation and downplayed risks. Figures like Martin Feldstein (AIG board member), Glenn Hubbard (Columbia Business School dean, Bush economic advisor, and industry consultant), Laura Tyson (Morgan Stanley board member and Clinton economic advisor), and Larry Summers (Harvard president, Clinton Treasury Secretary, and consultant to hedge funds) amassed personal wealth while advocating policies that contributed to the crisis. Frederic Mishkin, a Federal Reserve Governor, even produced a flawed report praising Iceland's financial stability, paid for by the Icelandic Chamber of Commerce, concealing the financial conflict of interest. These academics' significant outside earnings and lack of disclosure on financial conflicts raised serious questions about the integrity of economic advice and research.

By early 2010, six million mortgage foreclosures in the US had devastating ripple effects, with an estimated nine million more expected. The crisis exacerbated long-standing issues of inequality in the US, where the median American experienced declining economic prosperity and educational access while the wealthiest 1% benefited from tax cuts and accumulated vast wealth. This pushed middle-class families into deeper debt. Despite Barack Obama's promises to reform the financial sector, his administration's financial reforms implemented in mid-2010 were weak, lacking significant changes in critical areas like rating agencies, lobbying, and executive compensation. Obama's appointments, including Treasury Secretary Timothy Geithner (former NY Federal Reserve President who facilitated the AIG bailout benefiting Goldman Sachs), William C. Dudley (former Goldman Sachs Chief Economist and new NY Federal Reserve President), and other former industry insiders, demonstrated a continuity of power from Wall Street into government. The Obama administration resisted strong regulation of bank compensation, even when foreign leaders urged it. By mid-2010, no financial executives had been criminally charged or imprisoned, and the administration made no attempts to recover bonuses paid during the bubble. Meanwhile, financial firms like Morgan Stanley and Goldman Sachs continued to pay out billions in bonuses, while unemployment remained high. The film concludes by asserting that the financial system, once stable, turned its back on society, corrupted the political system, and plunged the world into crisis. Despite warnings, the institutions and individuals responsible remain powerful, hindering meaningful reform.