“The financial industry is a service industry. It should serve others before it serves itself.” So said Christine Lagarde in the movie “Inside Job”. It is not uncommon for huge “service” companies to look after their own interests before that of their customers, which makes it very hard to argue that these industries do not need to be regulated. Greed is one big reason that these companies should be under constant scrutiny and held to a higher standard by governments.
One of the finest examples that was presented in the movie “Inside Job” was the Icelandic Banks. For years they were regulated by the government of Iceland and during that time the country itself was very prosperous and economically safe. Then the unwise decision of deregulating the banks was made which led the country and the economy of Iceland went down the tubes. Once given free reins to do whatever they wanted, the bank executives borrowed more than 10 times the Gross Domestic Product of the nation. With more than a third of the nations citizens working at the banks, Iceland had no choice but to bail out the banks. However there was still massive fall out for the small country, unemployment tripled in the months that followed the banks meltdown. Gylfi Zoega said it best “Finance took over. Um, and uh, more or less wrecked the place.” Just like a child when their parents are away, the banks played and played with no consequences.
Just like the financial industry here in the United States. For 40 years our nation enjoyed a relatively stable economy with no major crisis. In 1982, President Ronald Reagan made a decision that would ultimately lead to the global recession 26 years later in 2008. President Reagan thought that deregulating the banks and financial industry, the economy would help the economy boom. In fact when announcing his newest policy he was excited about it “The highest order of business before the nation is to restore our economic prosperity.” Of course as we all know, the policy brought about a new culture of greed. Even Andrew Sheng, the chief adviser of the China Banking Commission said it “ They were having massive private gains at public loss.”Again when left to their own devices, the people who held the power at these institutions chose personal gain and gave no thought to the impact the devastation would have on the rest of the worlds population.
What were the consequences for the rest of the residents of world, particularly in the United States? Many lost their life saving, their retirement funds and/or their homes. As Matt Damon, the narrator of “Inside Job” relays in the film “One group that had purchased these now-worthless securities was the Public Employees Retirement System of Mississippi, which provides monthly benefits to over 80,000 retirees. They lost millions of dollars, and are now suing Goldman Sachs” All of the retirees now have to find jobs at Wal-Mart or other degrading and stressful positions just to make ends meet. Of course that does not come near the agony and pain that it has caused homeowners who lost their living spaces, once again Matt Damon points to real problem that was destroying the economies of the world “By 2008, home foreclosures were skyrocketing, and the securitization food chain imploded. Lenders could no longer sell their loans to the investment banks; and as the loans went bad, dozens of lenders failed.” Once again epic fail by the Government to protect us.
Some people would argue that the government should not have to protect us. “Survival of the fittest and what not”, they would claim that politicians have no place in business. While their point is taken, it has to be pointed out that it is completely flawed. If politicians, government don't have a place in business and therefore should have no rules then the banks have no right to come begging those same establishments to bail them out. When the banking industry hit the hard times, they ran crying to the Government begging for money, and pleading poverty. If they truly believed that only the fittest outfits should survive, then wouldn't they have just let their institutions go under and accept with dignity the fate that awaited them? Of course the story that has already been painted continues to reveal itself when the fact that executives at this large financial firms were given huge bonuses despite having taken the tax payers money. Another interesting fact is that not one resident outside of big business was given any kind of bail out like these companies did.
“If you look at the cost of it — destruction of equity wealth, of housing wealth; the destruction of income, of jobs; 50 million people globally could end up below the poverty line again — this is just a, a hugely, hugely expensive crisis.” That was how the Narrator of “Inside Job” described the economic crisis that is currently being experienced. The cause of all of that mess was the greed and corruption of a handful of people but the effects will be felt by millions for years to come. Maybe if the governments stepped in and put the regulations back into the game, there would be some security with the average citizen of the world.