Charles Ferguson's film shines in its attacks on fast money and corporate greed. Bankers invented an infinite virtual economy through the creation of derivatives, which in 2007 were worth more than three times the global economy. He shows the extravagant lifestyles which led bankers further from reality. He showed the tens of private jets owned by senior execs, the mansions in the Hamptons, the penthouses in NYC, the private elevators used so that the execs wouldn't have to interact with any normal people, and the rampant use of prostitutes and cocaine. This type of living developed a mentality that didn't care about consequences because for the elite, there were none. The compensation schemes for investment bankers also contributed to the collapse. They placed short term performance over long term feasibility, and were compensated in the form of absurd bonuses. In the year after the collapse, bonuses totaling $135 billion were given to the top positions at the 25 largest banks. Because of this mindset, bankers took advantage when the 2004 SEC changed leverage rules for the five largest wall street banks. Leverage ratios went from 12:1 to 40:1 in some cases. The film contends that many of these bankers knew that it the system would fail, and evidence was given by the banks taking out credit default swaps on the packages it was pushing on its customers. While Ferguson contends that this is because of greed, a Forbes article suggests that many fund managers were incompetent. They didn't do due diligence with their investment in CDOs, and the ratings agencies rated toxic assets with AAA ratings. There were some whistle blowers, but they were not listened to. This is because the people involved were one of four things: involved in cognitive dissonance, innumerate, political manipulators, or paid hacks. The last of these categories was touched on in the film in the form of college professors who are paid massive consulting fees and many of whom sit on boards of major financial institutions. When asked if they saw any conflicts of interest with teaching and receiving benefits, the interviewed teachers responded no to Ferguson's exasperation.
Inside Job does fairly well in dissecting the relationship between government and wall street. It is accurate through his inclusion of factors as far back as the Reagan administration which contributed to the collapse. It was then that de-regulation of the financial industry began. The film includes reference to the Glass-Steagall legislation, whose 1998 repeal resulted in a reclassification of banks, such that investment banks could were under the lesser regulatory constraints imposed on non-investment banks. This allowed FDIC insured banks to be more risky with their investments. Increasingly, banks took these risks as low interest rates after the dot-com bust resulted in low to negative yields from municipal or treasury bonds. Banks instead turned to high yield mortgage backed securities. One point that the film did not cover was that from 2006 to 2007, Ben Bernanke inverted the treasury yield curve, keeping short term interest rates above long term treasury bonds. According to Forbes, he should have known that this action would result in a recession. He then dumped $1.7 trillion of quantitative easing into the market. The combination of these two actions resulted in what economists call "stagflation". According to the Barrons article "Misdirected Outrage", it also doesn't place enough of the blame on politicians and GSEs. Raghuram Rajan, the former chief economist at the IMF, is quoted as saying "The banking sector did not decide out of the goodness of its heart to extend mortgages to poor people. Politicians did that, and they would have taken great umbrage if the regulator stood in the way of more housing credit." Although the film showed tape of Rep. Barney Frank denouncing securitization, he was a longtime backer of GSEs like Fannie Mae and Freddie Mac who took part in securitization.
