Inside Job Review

Why Not Do Something Different?

Why Inside Job? I’ve mentioned in several blog posts the mortgage foreclosure crisis of 2008 and the financial crisis caused by the COVID-19 pandemic that will result in an increase in household debt and a rise in bankruptcy filings.

I’ve also stated how the mortgage foreclosure crisis resulted in a voluntary foreclosure of my house and the consequences of that. During that time, realizing, actually hoping, this was a once-in-a-lifetime experience, I spent endless hours researching the subject.

This resulted in watching numerous documentaries and reading articles and books on the issue. But for one reason or another, I didn’t come across the 2010 documentary directed by Charles Ferguson and narrated by actor Matt Damon.

It was never my intention when I created Bankruptcy.Blog to write a review on a documentary. But I realize this site provides information on bankruptcy and eliminating debt and other financial issues we all encounter.

The goal of my site is that we all be better informed financially so that the right decisions are made and, ultimately, you walk proudly down the path of financial freedom.

So, why limit this blog and box myself in? How could I not write about a topic that has affected many of us, including future generations like Generation Z (Gen Z), who grew up in an era of mass unemployment and mortgage foreclosures?

It’s well documented that the trauma of growing up during the time of underwater mortgages and foreclosures has resulted in Gen Z affecting how homes are built. Gen Z isn’t interested in McMansions. Nor is Gen interested in spending all weekend working in the yard.

Inside Job the Movie: The Mortgage Foreclosure Crisis

First and foremost, the mortgage foreclosure crisis of 2008 is highly complex, yet it was simple to understand in Inside Job.

Mortgages are also not a sexy subject, but this documentary was riveting, to the point that my wife stopped what she was doing to watch it as well. It even won Best Documentary at the 83rd Academy Awards.

Inside Job was divided into five parts, further simplifying the issue and making it easier to digest the information. I’ll discuss the five parts.

Part I: How We Got Here?

The beginning of Inside Job focuses on the deregulation of the financial industry. Deregulation began in 1981. This part puts everything in focus. It’s the financial industry stating we can police ourselves. They couldn’t.

The players in the deregulation game included investment banks Goldman Sachs (more on them later), Morgan Stanley, Lehman Brothers, Merrill Lynch, and Bear Stearns.

Also, financial companies Citigroup and JPMorgan Chase and securitized insurance companies AIG, MBIA, and AMBAC were involved, as well as the three rating agencies Moody’s, Standard & Poor’s, and Fitch.

Part II: The Housing Bubble (2001–2007)

With deregulation, that’s where predatory lending comes into play. The way it’s explained in Inside Job is easy enough.

In the “old days,” the bank had strict guidelines to approve a homeowner for a mortgage because they wanted to get paid back. With deregulation, mortgage lenders could get anyone approved because the ultimate goal was to sell the mortgage along with thousands of other mortgages and debts to investors.

Since mortgage lenders weren’t holding on to the mortgage, who cares if the homeowner defaults and gets foreclosed on years later. During that time, mortgage brokers always said they could approve anyone with a pulse.

Once the mortgage lenders sell the debts to the next bank/investor, that’s where the rating agencies step in.

The rating agencies rated those bonds AAA, the top rating. Now imagine when other countries see Bond X is rated AAA. They invest in it, only to discover that Bond X is worthless. That small town or country loses hundreds of millions of dollars. Hence, the global recession.

Mortgage Foreclosure: Your Options Explained

But it gets better. Goldman Sachs would buy what is known as credit default swaps (CDSs), which were akin to an insurance policy, to bet against CDOs they did not own. Similar to the term shorting a stock.

For example, say you buy a stock at $5 with the idea that it will increase to $10. With shorting, you are stating the opposite. It won’t go up; it will go down. So, if the stock dropped to $1, the profit would be $4 per share.

Here, Goldman Sachs is telling investors they are high-quality investments. Which, of course, is backed by the three biggest rating agencies. At the same time, Goldman Sachs is betting that the investments will go down in value. Apparently, that’s not a conflict of interest.

Part III: The Crisis

When those mortgages came due, then came the collapse. Remember, with predatory lending, home buyers were being qualified for mortgages they ultimately could not afford, such as interest-only mortgages.

Interest-only mortgages mean only the interest is paid on the mortgage for a few years. However, once principal and interest are due, mortgage payments can double and triple, making it unaffordable for homeowners.

• The Impact of Rising Interest Rates on Divorces and Mortgages
• How Falling Mortgage Rates Can Save You Thousands: Is Now the Time to Buy or Refinance?

Home buyers were also qualified with minimal down payments; sometimes, no down payment was required. So imagine you want to rent at $1,500 monthly and need to pay first, last, and security. That’s $4,500. But if you can buy a house with a $1,000 down payment or zero down, it makes sense to buy.

But that also means when the interest-only mortgage’s period expires, with minimal equity or nothing invested in the home, there’s no motivation to try to save the house from foreclosure.

The more homes in foreclosure, the more housing values drop. In my situation, keeping my house made no financial sense, so I let it go into foreclosure.

How Falling Mortgage Rates Can Save You Thousands: Is Now the Time to Buy or Refinance?

During what became known as the Great Recession, everyone, well… almost everyone, paid the price. By November 2007, Bear Stearns was cashless, and the federal government took over Fannie Mae and Freddie Mac.

Here’s the interesting part: Henry Paulson, the Secretary of Treasury from 2006-2009, doesn’t try to bail out Lehman Brothers, the country’s oldest bank.

This forced Lehman Brothers into Chapter 11 bankruptcy because they couldn’t get a government bailout. However, a few days later, Paulson and Fed Chairman Ben Bernanke asked Congress for a $700 billion bailout for the banks.

Guess which one of the banks got bailout money from President George W. Bush’s Troubled Asset Relief Program (TARP)? Goldman-Sachs. Who was Secretary of Treasury Paulson’s former company? Goldman-Sachs.

Of course, all these entities had AA or AAA ratings within days of being bailed out. So what happens to the ratings company once the lawsuits start? Surely, the rating companies had some explaining to do.

Well, their arguments in court and before Congress were repeated ad nauseum; they were giving their opinions, which is protected under the First Amendment.

Part IV: Accountability

By now, you think someone is going to prison for this, right? There are obvious conflicts of interest, a tsunami of foreclosures nationwide, hundreds of thousands of people losing their jobs, and destroying the world economy.

Not really. Top executives got billions in bonuses while we lost our homes. Here’s a question: How do you get a bonus if you drive your company into bankruptcy? For the rest of us, I’m sure if you make your employer lose hundreds of millions of dollars, you will lose your job.

Part V: Where We Are Now

Nothing has changed. Executive compensation is still not regulated, and rating agencies are still paid to write wonderful things by these investment banks if the price is right. No wonder Inside Job calls it a Wall Street Government.

Watching this documentary, I thought of the movie “Dumb Money,” which is also available on Amazon and is based on the internet personality “Roaring Kitty” (Keith Gill).

I recommend this movie because, this time, the little guy won. But I found it absurd that Gill had to go before Congress to testify because he was pushing Game Stop stock on his YouTube Channel. This created a buying frenzy of Game Stop stock from which he profited.

Luckily, no charges were ever filed against Gill, but the hypocrisy is overwhelming. Of course, if you are on television like Jim Cramer on Mad Money, that’s fine. Create a global recession, meh.

I hope you enjoyed my first review. I certainly did and may do more in the future.

Oh, and more recommendation: watch The Big Short with stars Christian Bale, Steve Carrell, Ryan Gosling, Brad Pitt, Jeremy Strong, and Marisa Tomei.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. For paralegals and students buying single copies, you can do so via Amazon books. To access my YouTube channel, click this link.

Please note the information on this site does not constitute legal advice and should be considered for informational purposes only.

Additional blog content is available below:

• Bankruptcy
• Your Wallet

Updated with links on February 27, 2025.