Who’s to Blame?


For quite some time, I have been interested in the housing financial crisis that took place in the late 2000’s. However, only until today do I fully understand what actually occurred in the years prior that lead to such a disaster. The documentary Inside Job sheds light onto the various people that could have been responsible for the housing crisis, however, it is curious that only one top banker was actually indicted. If we look back at the savings-and-load financial crisis in the 1980’s there were 839 convictions, but this crisis only yielded one! What does that say about this case? Was no one really at fault here and did no one actually know what was going on? Inside Job makes it seems as though almost every entity involved in the bubble should have had some idea of the implications of their actions. I wonder if this is actually true. Where and when can we hold people accountable for such a problem that ended up affecting the entire world.

I first look to the Banks on Wall Street. Originally it was their decision to create the mortages, Collateralised Debt Obligations, and default credit swaps, however at first these all seemed like fine and safe ideas. The turning point was when sub-prime mortgages came about. Where did this idea originate and why didn’t people with vast financial knowledge ever question the potential implications of adding high risk to such a large market? Obviously, people saw the opportunity to make a lot of money and no one thought the housing market would ever decrease in value. So who should we blame? The banks of Wall Street? The mortgage brokers who started giving out sub-prime loans? The financial rating agencies who ranked sub-prime loans as low risk investments? This is a very interesting question because it is difficult to pin it all one one entity, mostly because all were heavily involved and should have been more responsible.

My last question is, what have we learned from this? Most of the CEO’s of the investment banks during the financial crisis are still heavily involved in Wall Street, the Federal Reserve still does not regulate investment banking activity, and the poor still suffer from the recession while Wall Street was bailed out and back on its feet within a year after the crisis. I would hope that in the future we will be able to forsee financial crisis’ like the housing bubble but people are often times blinded by the amount of money that they are making in situations like this. The Wall Street culture needs to be changed towards something that is less driven by money and more responsible. The amount of power that these investment banks have and the influence that they have on the world is substantial. I would hope that we have the most ethical and morally sound people within this sector, but due to the vast amounts of money that they receive, I doubt that many of them are.

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One thought on “Who’s to Blame?

  1. Frank, your insights and takeaways are aligned with everyone else’s who have watched the movie. Making people think that was was the idea of the film to begin with. What is interesting, is that even after this film came out to highlight the inefficiencies of our system, there has been no change. It is one thing where after the events occurred only one person went to jail, but even after The Inside Job was released, which points to specific people who should be blamed, no further action has been taken. I am just as alarmed by this as you are and it really makes you question where our priorities are. Do the people up top really want to alleviate these issues, or is there some added benefit to letting them run their course?

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