One of the things I learnt in the movie is that the events leading to the 2008 financial crisis could have been choreographed to benefit a few wealthy individuals at the expense of the middle class and poor members of the public. Precisely, the events were comparable to a Ponzi scheme. The fact that members of the Wall Street opposed regulation of the financial market and lobbied politicians to amend laws to suit them is surprising and suggests that they knew what they were doing, as well as the consequences. There are several instances in the movie that are surprising and support the argument that the financial crisis might have been created by the Wall Street business moguls, who worked closely with influential politicians to defraud unsuspecting members of the public.
Firstly, financial institutions were allowed to invest their depositors’ funds even in risky ventures. Conventional wisdom dictates that depositors’ money be protected and in most cases, financial institutions, such as banks are insured. In the event that something happens, such as robbery or fire outbreak, they can easily repay their depositors. However, by allowing banks and other financial institutions to use customers’ deposits to invest in risky ventures, many people were at risk. For instance, many people had spent almost the entire of their lifetimes saving with their banks. Suppose banks incurred losses the way they did, many people risked going bankrupt and even living below the poverty line. Their only mistake was trusting financial institutions to keep their money.
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Secondly, the low interest rates on borrowing were kept for far too long. Banks borrowed too much than they could hold, sums that they had never and perhaps would never receive in deposit. That meant that banks relaxed on their lending terms, and made loans more available. It is incorrect to suggest that Alan Greenspan, who was the head of the United States Federal Reserve from 1987 to 2006 did not understand the economic effects of the low interest rates and the huge borrowing. It definitely meant that there would be too much money in the economy, a scenario that would lead to inflation. Evidently, there was a rise in the prices of houses.
As if by coincidence, many people on the Wall Street had invested in real estate. The soaring prices worked to their advantage, especially in the first years. When members of the public, especially the middle class, borrowed from the financial institutions that were already too willing to lend the money, one of their priorities was to buy homes. It is surprising how banks and other financial institutions ignored market forces to lend to people with poor credit histories. Conventionally, it reaches a point where supply exceeds demand, leading to reduction in the price of commodities. In this case, there had been a housing boom, where demand for housing had been very high. Most of the Wall Street business people seemingly invested early in the real estate industry and waited for the prices to rise. To push for the purchase of the houses, they lobbied to have regulation laws amended to allow people to borrow and buy the houses. Before the competitors came in, they had already sold their houses. These competitors, who bought the mortgages, were unable to repay their loans because the prices of the houses had already dropped.
It is also perplexing that most people on Wall Street were not send to jail. Many of them became very wealthy as depicted by their luxurious lifestyles. They bought private jets, luxurious cruise ships, and spent their time having fun. Greenspan, who was the head of the United States Federal Reserve witnessed the events, opposed any regulation of the financial market, and has never been investigated. Presidents Ronald Reagan, Bill Clinton and George Bush surprisingly appointed some of the members of the Wall Street to the government. Although many economists argue that the crisis was caused solely by market forces, it appears many people ranging from politicians and businessmen colluded to exacerbate it. It is also surprising that most members of the Wall Street have never reported incurring massive losses or going bankrupt as a result of the financial crisis.
The particular groups of people that should be blamed for causing the financial crisis are politicians/lawyers. The politicians include both the presidents and the senators. The three presidents, Reagan, Clinton, and Bush appointed some of the wealthy Wall Street business people into influential financial dockets, and it is likely that they were pushing for the interests of their Wall Street colleagues. Secondly, some of the senators might have been compromised by the wealthy individuals to deregulate the financial markets to work to their advantage. Therefore, the senators and other politicians might not have been rational in making their decisions, bearing in mind that some of them were wealthy individuals and close allies to Wall Street business moguls. In regard to the lawyers, their comments about the ratings given by various agencies on how risky the financial institutions’ investments were show that the lawyers had been compromised. The lawyers argued that the ratings were only opinions and did not mean that the financial institutions could rely on them. Such statements make one wonder why the agencies were consulted in the first place. Before providing the ratings, it means that they were expected to conduct conclusive research. Therefore, the lawyers were seemingly used to cover up the whole scheme.
