The Financial And Political Systems Have Always Played

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The financial and political systems have always played a major role in stabilizing the society and ensuring a smooth transition between public policies and economic activities. Over the past decades, we’ve witnessed the global crisis of 2008, which costs “tens of millions of people their savings, their jobs, and their homes”. Interestingly, the root of the problem comes from the corruption of the financial industry and how the political figures respond to the crisis. This response paper corresponds to the documentary Inside Job, the movie that examined carefully the crisis of 2008. The major key points that we will analyze are: the main issue that the documentary is addressing; causes and implications of the 2008 crisis; roles of the key…show more content…
Each crisis has caused more damage, while the industry has made more and more money. More ironically, the people who should be responsible for the failures of the firms of often get away without being prosecuted. In this section, we will examine closely the causes of the 2008 crisis outlined by Inside Job. Firstly, the documentary suggests the financial deregulation under the Reagan administration. In 1982, the Reagan administration deregulated savings and loan companies, allowing them to make risky investments with their depositors ' money. By the end of the decade, hundreds of savings and loan companies had failed. This crisis cost taxpayers 124 billion dollars, and cost many people their life savings. The second one is unregulated derivatives. Using derivatives, bankers could gamble on virtually anything. This allowed AIG to write $3 trillion in derivatives (credit default swaps) while reserving precisely zero dollars against future claims. The third one is the problem with the credit rating system and investment securities. A new system was invented, with complex derivatives, called collateralized debt obligations, or CDOs. Lenders didn 't care anymore about whether a borrower could repay, so they started making riskier loans. The investment banks didn 't care, either; the more CDOs they sold, the higher their profits. And the rating agencies, which were paid by the investment banks, had no liability if
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