Inside Job - Part 3 - Finance Essay Example
Inside Job is about the causes of the global financial crisis of 2008 - Inside Job introduction. It is the effect of a series of causes beginning in the 1970s. These causes most obviously includes – the deregulation that allowed excessive and reckless actions in finance, fraud, conflicts of interest, and sabotage. The result of these actions was a massive decline of financial stability for the global masses and a correspondingly massive incline of financial gain for a minority of heads in high finance and government.
It was shown in the movie that deregulation started in the Reagan Administration which allowed the financial sector to have more freedom and less discipline, which provided more opportunity for profit and risk. A new method of mortgage lending was developed in the financial system that allowed for excessive betting without immediate risk and incentives to sabotage the system for personal profit. The result is an incredible, foreclosures and bankruptcies. That ends to loss of people homes and jobs.
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And this financial crisis was spreading around the globe including in Iceland, those results to global recession- the economic decline in GDP for two consecutive years. Dishonesty. In Principle 6: Efficient Capital Market- Positive Image in the market must be insured. However, it was shown in the movie that many of the leaders in the financial sector (receive big amount of corporate bonuses) were brought to congress but they did not accept the responsibility or did not show much concern for their actions. And some of these leaders are now working in the new administration.
Principle 7: The Agency Problem. Top executives of the bankrupt companies walked away with their personal fortunes intact. The executives had hand-picked their boards of directors, which handed out billions in bonuses. The major banks grew in power and doubled anti-reform efforts. Economists advocated for deregulation and helped shape U. S. policy. Many of these economists had conflicts of interest, collecting sums as consultants to companies. Principle 10 in the Principles of Financial Management states that the Ethical Behavior is doing the Right Thing and Ethical Dilemmas are everywhere in finance.
I believe that in an organization its start on the top. A true leader understands the importance of building a strong organization and is constantly in search of powerful guidance. Sadly, in the movie ‘inside job’ is a perfect example of sabotage. They chose satisfaction and destroy somebody’s hard work and achievements. Many people lost their homes and some of them stayed only in a tent. A lot of them loss their job and parents could not sustain the needs of their children. “Poor leadership will suffocate an organization; strong leadership will allow an entity to explode with possibilities. The top financial heads are rising from the top of the pyramid into the lofty airs above the pyramid, while the majority is sinking into the ground. What’s more, the financial and government players that combined to lead the global financial crisis – are still in power. Principle 9: All Risk is not Equal. The investors should not put all their money in one basket. They should think wisely where to invest and always monitor what is the current situation of the company because risk is diversified.