I. BOOK AND SUBJECT PRESENTATION

The subject of the book Inside Job is the global financial crisis of 2008. It features research and extensive interviews with financial, politicians, journalists, and academics.

The book focuses on changes in the financial industry in the decade leading up to the crisis, the political movement toward deregulation, and how the development of complex trading such as the derivatives market allowed for large increases in risk taking that circumvented older regulations. In describing the crisis as it unfolded, the book also shows conflicts of interest in the financial sector (although sometimes it’s not clear but suggested). Charles Ferguson suggests that these conflicts of interest affected credit rating agencies as well as academics who receive funding as consultants but don’t disclose this information in their academic writing, and that these conflicts played a role in obscuring and exacerbating the crisis.

A major topic is the pressure from the financial industry on the political process to avoid regulation, and the ways that it is exerted. One conflict discussed is the prevalence of the revolving door, whereby financial regulators can be hired within the financial sector upon leaving government and make millions.

Within the derivative market, the book contends that the high risks that began with subprime lending were transferred from investors to other investors who, due to questionable rating practices, falsely believed that the investments were safe. Thus, lenders were pushed to sign up mortgages without regard to risk, or even favouring higher interest rate loans, since, once these mortgages were packaged together, the risk was disguised. According to the film, the resulting products would often have AAA ratings, equal to U.S. government bonds. Even investors such as retirement funds who are required to limit themselves to the safest investments could then use the products.

Another point is the high pay in the financial industry, and how it has grown in recent decades relative to the rest of the economy. Even at the banks that failed, the book explains how bank executives were making hundreds of millions of dollars in the period immediately up to the crisis.

One topic that few others have addressed is the role of academia in the crisis. Ferguson notes, for example, that Harvard University economist, and former head of the Council of Economic Advisers under President Ronald Reagan, Martin Feldstein, was a director of the insurance company AIG and former board member of the investment bank J.P. Morgan & Co.

Ferguson also notes that many of the leading professors and leading faculty members of the economics and business school establishments often derive large proportions of their incomes from either engaging as consultants, or speaking engagements. For example, current dean of the Columbia Business School, Glenn Hubbard received a large percentage of his annual income from either acting as a consultant or through speaking engagements. Hubbard was also affiliated with KKR and Blackrock Financial. Hubbard as well as current chair of Harvard’s department of economics, John Y. Campbell, denies the existence of any conflict of interest between academia and the banking sector.

The book ends by contending that despite recent financial regulations, the underlying system has not changed; rather the remaining banks are only bigger, while all the incentives remain the same, and not a single top executive has been prosecuted for their role in the global financial meltdown.

In fact, in this book, Charles Ferguson, explains his vision of the crisis and analyses it. He denounces the Wall Street’s system (like the Ponzi’s Pyramid like he said) and the financial system as a whole. The author explains with testimonies and its analyses that the financial crisis was predictable and that it can be avoided if the American politicians and the financial men are making a regulation of financial market.