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Evidence used by Charles Ferguson to explain the occurrence of financial crisis
Ferguson used securitization food chain system to explain the occurrence of financial crisis. Securitization food chain is a system of investing with debt that the financial institutions in the United States of America adopted and had been in operation for the past fifteen years. The system was encouraged by the friendly policies of the government. Many investment companies such as JP Morgan and Lehman Brothers therefore started to transform the banking landscape, to purchase mortgages and to perform other forms of debt that were worth billions of dollars. Allied financial institutions became a dept at trading cheap mortgages to common individuals, developing an inflated housing market. Ratings and insurance organizations bought in. the speed of development and scale of this securities chain was extraordinary. The impact on the economy of the country was also great, both at the peak of the market and after its collapse. The most convincing idea is that the government policies had been friendly to securitization food chain system. The least convincing is that financial crisis occurrence can be evidently explained by securitization food chain system.
Who a greed to be interviewed and who refuses
The movie weaves together the story of the financial crisis by interviewing the key individuals that were warned about the crisis. However, those people who knew very well they bare great responsibility refused to be interviewed while those who knew that the fate of the financial system does not rests on them were interviewed.
The main causes of the disaster
Financial crisis in United States was mainly caused by uncontrolled financial strength. The evidence for uncontrolled financial power lies in the fact that the response of the government to the disaster was engineered by Wall Street insider's intention on shoring up firms too big to fail. Fraud of the economics discipline such as increase participation of money in politics and the rising concentration of wealth in the hands of a few individuals were among the main contributors of financial crisis.
What movie makers want us to do
The movie makers propose for a political structure that does not interfere with matters relating to finance and money. By doing this the interests of financial giants cannot be challenged. They argue that the financial world requires its checks and balances.
How innovation set table for suicidal destruction
In the book free fall, Stiglitz explains how banks, mortgage industries, greedy lending and uncontrolled trading contributed to financial crisis. Introduction of easy loans made many people to be able to buy mortgages. With time they were not able to pay back the loans and the mortgages were not being purchased thus causing a financial crisis.
"Freefall Chapters 4, 5, and 6"
Why efforts to reform the banking sector had been a complete failure
The efforts to reform the banking sector had been a complete failure because the American economy was being sustained by a debt-financed consumption binge that was being supported by a housing bubble before the crisis.
Factors in the banks that led to variance triumphing over prudence
One of the factors that led to variance triumphing over prudence was Provision of easy credit to low-income earners enhanced home ownership. The misunderstanding of financial engineers invented products by managers in the banks led to variance triumphing. The incompetent of the regulators also lead to variance and triumphing.
What could be done to make banks favor more prudence and less avarice?
To make banks favor more prudence and less avarice, financial institution was supposed to regulate the financial trading more effectively. The financial regulation was supposed to be tougher and allowance for Federal Reserve growth was necessary.
Whose Explanation is better and why?
Charles Ferguson explanation is much better. He exposes the greed of some Americans and complicit government officers. it is therefore important for all Americans, high school and colleges students included, to watch this movie so that they can understand well the unbridled greedy of individuals in positions. We should therefore push for change to individuals.