Last week our class was given the opportunity to watch the “Inside Job” instead of our normal lecture. Having seen this movie, (or horror movie as some people may have described it), I knew what to expect. The movie/documentary try’s, and in my opinion succeeds, in explaining what happened during the last financial crash. The film is given much credibility by the fact that there are interviews with the heavy hitters in the industry.
The first aspect that sickens myself is how economists from Ivy League universities were paid money in order to write reports condoning deregulation. The main issue the film raises here is how ‘unethical’ this is as when the Banks who are in favor for this deregulation are paying large sums of money for the report to be commissioned then it is perhaps in the economists benefit to write what the banks want?
The second issue is that of the bonuses taken by the CEO’s of the banks. I understand that during good times when the bank makes a lot of money that they feel they deserve a bonus but when the bonuses are so ludicrously high (over 100 million to one CEO in 1 year), then something seems to be wrong. My proposal of re-structuring the bonus scheme would be as follows. I would pay all the money that would normally be paid as a bonus into a fund. Each year the fund would pay out a certain percentage such as 20-30% but if the bank had a loosing year then the loses would be recouped from this fund. This would give more incentive to bankers for longer sustained profit and growth instead of just gambling recklessly as they realize if the gamble works they get a huge bonus and if not they get a ‘golden parachute’ and new job offers in another bank.
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