Inside Job

In this insightful film on our financial crisis, narrated by Matt Damon, several factors went into our historic collapse.  It initiated in the housing market where people were investing in homes that were much bigger than what they can truly afford.  The mortgages labeled on these houses however were managed through a process that led to groups of investors on Wall Street.  Prices looked manageable to the common homeowner because prices were worked down their price ranges by the banks and investment banks involved, like Goldman Sachs, Morgan Stanley, Lehman Brothers, Merrill Lynch, and Bear Stearns.  These investment banks bundled mortgages with other loans and debts into collateralized debt obligations (CDOs) which were sold to investors.  The CDOs are given rates, with AAA being the best, and most of them were passed on with that high rating, saying that these were good investments for the investment groups interested.  Many homeowners realized after settling on a mortgage that they ended up in mortgage loans that they could never repay in full.  Speculators within the investment banks could bet against their own CDOs they were selling to the investors if they had suspicion of the investment panning out.  Goldman Sachs sold more than $3 billion CDOs in early 2006, and they betted against the low-valued CDOs telling investors they were of high quality.  The three largest rating agencies did not speculate and contributed to the financial letdown.  Soon after the market for CDOs collapsed and the investment banks involved were left with hundreds of billions of dollars in loans, CDOs and real estate they could not discharge.  Expenses were distributed in other activity that executives of these banks like to disclose, were leaked to general knowledge. The banks went under fire, and in some cases, these men came out with their earnings, but then resigning from their positions.  The biggest mechanism utilized here was fraud and the manipulation of the public mind.  These banks and executives gave faulty information towards the investors and homeowners on the investments and CDOs made, even when they were not good deals.  The perception that resonated with the banks towards the public was a nice, rich, comforting feel.  We are all suckers to association today, and since prices seemed good, us American citizens got suckered into deals that couldn’t come through.  Lies were documented as homeowners tried financing their families saw mortgages were nearly unmanageable with their livelihood.  So perception played a huge role in this financial crisis as the general public was blinded controversial activity done by these shifty and power-hungry executives.  Today perception is still widely acknowledged as an investment factor as we continue to investigate our current financial decisions, and as we deal with our national deficit, going forward.