My friends have been telling me how good Matt Damon’s documentary titled the ‘Inside Job’ is. I finally had a chance to watch it and I found it really interesting and a good use of my time. The documentary explains the global financial crisis that stemmed from the U.S in 2008. The crisis started when big investment banks like Lehman Brothers and Goldman Sachs were investing in subprime mortgages. Banks were lending to borrowers that could not afford having homes. As a result, many of these borrowers could not afford to make the payments of their loans and this led to a crash in the financial market.
Lehman Brothers was one of the investment banks that became bankrupt as a result of the subprime mortgage crisis. The shocking thing about Lehman’s collapse is that S&P (a credit rating agency) gave Lehman Brothers an ‘A’ grade rating just a few weeks before it went bankrupt. Also, the documentary shows that the amount Lehman Brothers paid S&P kept increasing each year; S&P were paid a lot of money for their ratings. Obviously, Lehman Brothers did not deserve an ‘A’ grade rating. The question I asked myself was why will S&P give Lehman Brothers such a high grade when they clearly did not deserve such a rating? S&P were supposed to be opinion leaders and objective but they have betrayed the trust of the consumers. They were supposed to be a guide to consumers (investors) and help them make decisions in whether to invest in Lehman Brothers’ products (stocks and bonds). However, they failed as opinion leaders.
As a consumer, I feel that opinion leaders are supposed to be truthful, honest, and objective, however, it seems to me like the credit rating agencies who were supposed to do their job as opinion leaders failed.