The Inside Job

Warm-Up * Explain the global economic crisis of 2008 in your own words. Discussion Listening Comprehension 1. What were the government losses in Iceland? 2. How did US ratings firms rate Icelandic banks? 3. How many bank regulators went to work for the Icelandic banks? 4. Which two firms' insolvency triggered the economic crisis? 5. Explain the division of banks in the 40 years following the Great Depression. 6. What major change happened to investment banks in the 1980s? 7. What happened to Charles Morris' bondtrader friend from the 1970s to 1986? 8. How much did the Savings and Loan crisis cost taxpayers? 9. Which economist did Charles Keating hire to give his S&L a postive review? 10. Which merger led to the demise of the Glass-Steagal act? 11. What was Clinton's Treasury Secretary Robert Rubin's next job? 12. What was the next crisis triggered by the investment banking industry? 13. What did Eliot Spitzer's investigations find? 14. What penalty was accepted by the banks? 15. What does Andrew Sheng of CBRC suggest led to the rise of derivatives? 16. What happened to the CFTC's suggestion to regulate derivatives? 17. After legislating no regulatory oversight of OTC derivatives, where did Senator Phil Gramm go to? 18. What happened to amount of mortgage loans between 2000-2003? 19. Why were subprime loans attractive for investment banks? 20. What happened to housing prices between 1996 and 2006? 21. What did Martin Wolf, Chief Economics Commentator at FT call the housing market? 22. Why did Alan Greenspan as Fed Chairman refuse to regulate the housing market even when Robert Gnaizda showed him the complexity of the Countrywide loans? 23. What change did the SEC make in 2004? 24. What did AIG do with the Credit Default Swap payments? 25. What did therapist Jonathon Alpert see as real world evidence of the investment bankers' risk taking personalities? 26. How many customers did Kristen Davis claim used her elite escort service? 27. What did Goldman Sachs bet against in 2006? 28. What happened to Moody's profits between 2000 and 2007? 29. What did the FBI start warning about in 2004? 30. What did the British gov't want to allow Barclay's to buy Lehman? 31. How much did the AIG bailout cost taxpayers? 32. How many Chinese workers lost their jobs? 33. How was the profit and loss for the top five executives at Lehman between 2000-2007? 34. How much did the financial industry spend between 1998-2008 on lobbying and political contributions? 35. Why did economists and economics professors not speak out about the

risk of deregulation? 36. What major academic faux pas did Frederic Mishkin and Richard Portes commit? 37. How much has University of California tuition rose from 1977 to 2010? 38. Where did most of the Bush tax cuts go? 39. How did things change when Obama got into office? Discussion Questions Did you find the documentary surprising or interesting? Why or why not? Who or what do you think it to blame for the economic crisis? If you could interview any of the people mentioned in the documentary, who would it be and what would you like to know? What do you think of the current state of: The financial system? - The current amount of leverage? Financial regulation? - Economists and academic impartiality? Incentive programs? - Derivatives trading?

Do you think a class system exists in the USA or European countries? If so, does it matter? Is it possible to change this system? What needs to change to fix this system? What do you think of the Obama administration and its actions in the financial sector? Where are we headed over the coming years? What will happen with the US and EU economies? There seems to be an ideological rift between the Democratic and Republican parties over how to deal with unemployment and create jobs in a weak economy. Dems have been favoring some Keynesian economics (government spending) while Republicans still favor monetarism (i.e. Milton Friedman and the control of money supply to affect price changes). What do you think about these? Who is right? Is it possible to use both?

Answers 1. 100 billion 2. AAA 3. 1/3 4. AIG and Lehmann Brothers 5. Savings banks and Investment banks (Partnerships) 6. Stopped being partnerships. Became public corporations. 7. He worked as a train conductor at night. Became millionaire in 1980s. He thought it was because he was smart. 8. $124 billion 9. Alan Greenspan 10. Citibank and Traveller's Group 11. Vice Chairman of Citigroup 12. Dot-com bubble 13. The investment banks were recommending stocks they knew would fail. Externally, they promoted them. Internally, they trashed them. e.g. Infospace, Excite 14. $1.4 billion and a promise to change their ways. 15. After the Cold War, unemployed mathematicians and physicists decided to offer their skills to financial institutions. 16. Larry Summers told the head of the CFTC, Brooksley Born, to stop. 17. He became the Vice-Chairman of UBS. 18. Quadrupled from $1 trillion to nearly $4 trillion. 19. Higher rate of interest. 20. Nearly doubled, 194%. 21. A great Ponzi scheme. 22. According to Robert Gnaizda, it was ideological. 23. It softened the leverage limits for investment banks. 24. It paid bonuses to staff. 25. Strip bars, prostitutes, drug taking (cocaine) 26. 10,000 27. Its own CDOs. 28. Quadrupled, from $0.5 billion to over $2 billion. 29. Fraudulent mortgages. 30. US gov't guarantee 31. Over $150 billion 32. Over 10 million migrant workers. 33. Over 1 billion 34. Over $5 billion 35. They got paid to support that view.

36. They were both paid by the Icelandic Chamber of Commerce and did not disclose that info. Both gave rosy views of the issue. 37. $650 to over $10,000 38. Wealthiest 1%