Inside Job Movie Review
What is the thesis of the film?
Financial Deregulation of Derivatives Market, Conflicts of Interest in Investment Banks and Credit Rating Agencies, and Perverse Incentives in Executive Compensation Structures lead to the collapse of the global economy in 2008.
What are the pros and cons of financial deregulation?
Pros: companies may have access to new revenue streams (e.g. underwriting CDO’s) or increase the volume of existing ones (e.g. granting more housing credits).
Cons: deregulation doesn’t eliminate conflicts of interest, perverse incentives nor strengthens due diligence process. A combination of these in an unregulated market may lead to another bubble burst (correction of prices), especially due to the lack of due diligence, which is what regulators are for (oversight).
How do you think a deregulation of financial institutions in less developed countries would go, considering the issues of government corruption, government capacity, and property rights enforcement?
Badly – aside what was stated in Cons. above:
Government corruption yields belittling and ignoring claims and slow investigation processes. Government capacity may yield excessive deregulation or poor regulation on complex issues, such as derivatives valuation and due diligence on underlying assets. Property rights enforcement is poor, so underwriters (investment banks), investors and their respective counterparty could spend years on investigations and litigation claiming for what they allege are their property rights.
Works Cited
Inside Job. Dir. Charles H. Ferguson. Sony Pictures, 2010. Film. Inside Job. Documentary Lovers. Web. 14 May 2017.
