Barker, if you're going just on what the movie showed us of Iceland, then you don't really have a point. The film didn't explain what happened there at all, in my opinion, just attempted to connect some dots but without making its point. In fact, I was left wondering what on earth happened? It didn't make the slightest sense, so I'm unconvinced that the film's implied causation was any more true than the fact that its omitting all of the factors causing the collapse here means that nothing else was at fault. Here's my list of factors which should be added to the fault list. These are not listed in importance.
1. Community Reinvestment Act (see http://en.wikipedia.org/wiki/Community_Reinvestment_Act) This was a Jimmy Carter baby. It was used by different presidents to pressure banks into making risky loans. Its stated purpose was to prevent redlining. Typical government boondoggle: a noble intention followed by unintended devastating consequences.
2. Mark-to-Market Accounting Practice - dating only to the 1990s: http://en.wikipedia.org/wiki/Mark-to-market_accounting Gives inaccurate evaluations when there is no business activity happening. It exaggerated greatly the drop in housing prices, forcing banks to scramble around to obtain more assets, precipitating a panic.
3. A CORRUPT media. All of this trauma could have been avoided, had the press actually been the watchdogs they always call themselves, instead of the pep boosters for Democrats it has been for the past 30 years or so. They themselves could have forced Fannie & Freddie to be investigated, could have called for the resignation of various corrupt individuals, instead of spreading lies about Republican budget proposals, as they are now. They could have reported the appointment of Geithner as the outrage it was, had they not felt obligated to root for Team Obama regardless. The mainstream media has been giving cover to Democrats for years. They are a huge source of corruption. As a result, they have little credibility. Any time Democrats doing anything wrong, we're told it doesn't matter as long as they "get the job done". Instead, they should force Democrats to clean their own house, insist that regulations are followed, insist that ratings are fair, insist that academia not become the huge brothel that it is, etc. Also, instead of razzing conservatives or Republicans, they should come forward and praise those on the right who are calling for transparency and high ethical conduct. But then again....I'm dreaming! The media have created a world with a double standard of ethics, one for liberals, and a different one for conservatives. They SHOULD be helping each of us keep our party honest.
4. Campaign Finances - there should be no limit on what individuals give to political campaigns, but they should be transparent, and trackable. What should NOT be allowed is any donation NOT from an individual. That means, no PACs, no corporate donations, no donations from supposed non-profits such as the National Education Association, SEIU, Labor Unions, Planned Parenthood, etc. Instead, we have limited our own freedom of political speech in favor of large interest groups. And, despite the fact that no contributions are permitted from abroad, somehow, when Democrat candidates receive $ from outside the U.S., no one actually holds them accountable. Why is this? There is NO reason for any corporate entity to make political contributions. I challenge anyone to tell me why this does not simply blur the lines of influence and create a market for lobbying. Find me ONE Democrat who would agree to this, and I'll eat my hat.
5. Fannie & Freddie - they have played a huge role in the housing debacle. Why are they still around? What has Franklin Raines been given a pass here? Why have we allowed representatives like Barney Frank to continue to promote the safety and necessity of these institutions? Why is there no accountability here? Why should taxpayers be asked to prop up Fannie & Freddie?
6. Lazy and foolish Homebuyers - Having been in the mortgage origination business for several years, during the boom, and afterwards after the blow-up, I've had some first-hand contact with this. For the most part my clients were all very careful and sensible consumers, with low debt loads, great credit and interested mainly in 30 year fixed mortgages. My bad experiences came from people who want something for nothing, regardless of their creditworthiness, from builders who somehow avoid RESPA regulations and steer customers to their own friends' mortgage banks, and from subprime customers. As a licensed mortgage broker, there were plenty of safeguards in place to give customers full disclosure upfront. And I'm sick of having mortgage brokers take the hit for the banking industry, which operates under different regulations than we do, regulations which are much less stringent than ours. Government regulation of my industry has operated to steer customers to the big banks, and away from small private mortgage brokers. Why? The mortgage brokers were essentially small businesses, with very insignificant PACs or lobbying power, as opposed to the Bank of Americas, the Countrywides, the Wells Fargos, etc.
My experience was that if you operate very above-board, treat customers the way you would like to be treated, quote everything upfront, disclose all costs and profits, stick closely to your Good Faith Estimate, the honorable customer will work with you, since they understand you have to make a profit and appreciate the honesty about the amount. However.....I think many people aren't willing to pay for this level of honesty, and they fall over and over again for the notion that you can get something for nothing. That means they give their business to any quick-buck scam artist who is happy to promise them the something for nothing. If these people wind up out of their homes, I don't have a lot of sympathy. I can't tell you how many people with credit scores of 500, zero cash to put down, were out complaining about having to pay 7 or 8% interest rates on a 40 year mortgage mortgage while shopping for a home costing $500,000, 600,000, etc. Are we hearing about this? No, we don't, because the Left loves the narrative where the poor schlub is a "victim", instead of a perpetrator. I expect these are the same people who refuse to accept the government having to cut down any of its expenditures, despite the insufficient revenue.
7. Current corporation laws. Inside Job hinted at problems with the structure of corporations somehow producing incentives for inappropriate risk-taking with no actual risk to individuals. Since I have long suspected that corporate law actually needs some revision, I would welcome a much more involved and detailed exposition of just how current law fosters the short-term thinking, the inappropriate compensation of executives without any connection to rewards for excellence. Obviously, accountability is missing in current legal structure. I'd love to discuss this with an attorney who actually is knowledgeable about corporation laws. (However, not while his/her meter is running!) A long time ago, I remember hearing a Japanese executive criticizing corporate reporting requirements in the U.S., chiefly with respect to the requirement for quarterly reporting. His opinion was that we foster an approach to business which focusses excessively on short-term results rather than long-term success, we tend to set low goals so that they can be seen as having been accomplished for the shareholders, etc. And by the way, isn't the whole purpose of "incorporation" an attempt to remove risk from the individual?
The movie seems to dwell on the immense fortunes being paid to Wall Street executives. I'd just like to point out that the problem is not that they make a heck of a lot of money. The problem is that they made this money without delivering the value to the customers. So, in that sense, any amount of money was too much. If there were real accountability, executives could make a lot of money IF they did a REALLY GOOD job! They need to have their own skin in the game. Clearly, they did not.
I could go on with this post, but I've got a life, and so must attend to it. I do want to point out one more thing: I had the sneaking suspicion during this film, that none of the politicians, as well as most of the financial players, did not actually have a firm understanding of what they were doing---regardless of how greedy or dishonest they were. They are obviously all very proud people, an I'll bet they'd rather go to jail for fraud than admit that they created a monster they couldn't control. It shows us that you can have all the fancy schmancy degrees in the world, the approbation of millions, and still be a total dunce.
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