Gonzalo Vidaurrazaga
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Inside Job

21/3/2014

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CEO. Government Officials. The entire Wall Street. All of them took wrong decisions trying to maximize profit gambling with money, which most of the times they didn't have. Each government official had sever lobbyists to convince him on what they should do. Bribing was common to change several laws. For example: The CEO of certain company earned 400 million dollars. The tax rate was 15%, but with money he convinced authorities like the president or the treasurers chairman to take it down to 5%. In this case we would be earning 40 million dollars more. From those 40, he had used probably 20 or 30 to bribe and change the law and would earn an extra 10 or 20 million dollars. This made the rich richer and the poor poorer. 

Watching Inside Job takes no more than 40minutes, but analyzing takes much more time. A whole lot of key terms need to be known to understand what they discuss. A great content-rich film that shows how an economic system can tear down to nothing when decisions are based on incentives. 

The most common incentive its money. A government official changed the tax law because he had a big incentive. The same happened with bank brokers. They started getting bonuses for every loan they gave out. This was an incentive to give as many loans as possible, so they started accepting everyone, even those who didn't have the money to pay them back.

Incentives go hand-in-hand with manipulation, and that played a vital role in this crisis. Risk rating agencies such as Standard and Poor's were manipulated to give AAA ratings to new sub-prime mortgage or bonds. People would start investing on those and the company then started to bet against those investments (bet for the failure of those). Having such a control of the market was the start of the catastrophe.

The worst of all is that they knew what was going to happen. At some point, they started quitting their jobs to avoid assuming responsibility and they took away about 400 million dollars. People who did that thought they were extremely smart to set up a system for they favor. But if they knew that it would create a recession for a country and they still did it, I doubt how smart they are. Even though you are smart, one of the most important skills is decision taking. There are many other ways to maximize profit rather than decreasing the tax rate.
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