Tomaz Powell

Corporate Governance
Inside Job film paper
Professor Joseph Blasi

The film is an easy to follow narrative about the financial collapse of the American
economy during 2007 and 2008. During the crisis tens of millions of people lost their
homes, jobs and assets and America fell into an unfortunate recession. In September of
2008 one of Americas biggest investment bank Lehman Brothers filed for bankruptcy.
Then the worlds largest insurance company American International Group fell apart and
triggered a global financial crisis. The collapse doubled the national debt of the United
States and it was mainly due to the financial sector which dates back to the 1980s. But
before the recession back in the 1900s there was formality because of tight regulations
with investment banks and there were small organized partnerships. The problem of
finance came about in the 1980s when investment banks went public giving share
holders large amounts of currency. President Ronald Regans administration deregulated
loan and savings companies which allowed for them to make risky investments with their
depositors money. During 2001-2007 there was a housing bubble which was also a
factor for the financial collapse. In many boardrooms top executives picked their board of
directors and dispersed billions of bonuses during the government bailout. Another
problem that occurred was even during the crisis many economists were opposed to
reform. They disregarded change and always encouraged deregulation and also since
president Obama has been in office his financial reforms made no significant difference.

A role that corporate governance has played during the financial collapse was
executives not aligning interests for the public good. Due to deregulation investors
continued to move money around and create Ponzi schemes which in turn caused
companies to go downhill. According to the film during the crisis investors asked for 700
billion to help bail out banks who were filing for bankruptcy. That did not work because
the economy was by that point disbanded and many people were suffering from losing
their businesses, foreclosures on their homes and loss of assets. A good reform to have
to prevent the financial crisis from happening again is to have better government
monitoring to control proper credit practices. By having proper corporate structure
depositors money would not be used as bargaining chips for Ponzi schemes are for the
personal gain of an investor. Another reform I think is a good way to prevent another
financial collapse from happening is to have have banks not be self regulatory. Due to
banks being self regulatory that caused a major problem in the housing market because
that contributed to the housing boom which caused inflation that ultimately led to
multiple foreclosures. A possible reform that I can see in place is making sure that a firms
are constantly inspected by the national securities exchange committee. By having this
reform in place exchange officers can constantly be on the look out for insider trading
and misuse of hedge and pension funds so that they can shut operations down before it
affects different sectors in the United States. Lastly a reform that would be good is to
have banks go back to its roots described in the video during the 1900s. instead of
having large multiple partnerships banks should form small partnerships so that if a
regulatory issue happens multiple fingers will not be pointed to a plethora of different
partners from within the banks.