Trust me I'm a Banker
Maybe the heading should be "Bankster" instead of Banker? Reminding people of how the last financial crisis occurred and how little has actually changed seems like something worth doing now. Especially as we appear to be heading to repeat it again soon, possibly very soon.
For those that haven't seen it, a brief overview:
The film is about corruption of the financial system, particularly in the United States. The corruption was done by the financial services industry itself. The film then looks at the consequences of that corruption I.e. Crash.
The film is broken into five parts, the film explores how changes in the policy environment and banking practices helped create the financial crisis. The five parts are as follows:
Part I: How We Got Here
Keeping in mind that the financial industry was regulated from 1941 to 1981, a very prosperous time, but we can't leave the control to the government. After all they are not financial experts, so the industry was deregulated. After deregulation, it took almost ten years before the first "oops" a savings and loan crisis. Then after we got over that, about another ten years and we had the dot com bubble burst. This bubble burst because investment banks promoted Internet companies that they knew would fail, naughty boys, or oops again.
As investments sold by various financial institutions became more sophisticated/complex they also bundled mortgages with other loans and debts into a new product for investors to buy, called "collateralized debt obligations" (CDOs). Rating agencies whom I suspect didn't fully understand them gave many CDOs AAA ratings, the banks said they were good after all. In order to keep the supply of these new products coming many home owners were given loans they could never repay once the "honeymoon" period of the loan was over. No loss for us we can just sell their house.Part II: The Bubble (2001–2007)
During the housing boom, the amounts borrowed by an investment bank compared to their assets reached levels never before seen. A new product was also created, the credit default swap (CDS). This was supposed to be similar to an insurance policy against the CDOs. Now "investors" (gamblers might be a better term) could buy CDSs to bet against CDOs they didn't even own. So somebody defaults on their loan, I get paid, interesting concept.Part III: The Crisis
The market for CDOs collapsed, too many defaults, something wasn't quite right, oops. This left investment banks with loans that weren't being paid and properties they couldn't sell. Down we go, in November 2007, and in March 2008, Bear Stearns ran out of cash, oops again. A very short time later Congress was asked for $700 billion to bail out the banks as they were too big to fail. This still wasn't enough, October 2008, George W. Bush signed a relief program. However, stocks still keep falling, more fun times ahead for the general population.Part IV: Accountability or Lack thereof
Top executives of the insolvent companies walked away with their personal fortunes intact and no jail time, funny how that happens. These same poeple also had hand-picked their boards of directors, nice when your friends are in charge and hand out billions in bonuses, after the government bailout, all because of such an amazing job that was done. So, crash the system, keep all your money and get bonuses because you bluffed the government and got lots of money. The banksters of course grew in power, fought all reform efforts, can't have anyone telling us what to do.Part V: Where We Are Now
Thousands of U.S. workers were laid off. The new president coming in didn't have any real financial reforms, and there was no significant changes being proposed. The banks have essentially won.
If you haven't seen this movie, you really, really should.