Financial Crisis Assignment: In 2008 The World Financial Sys

Financial Crisis Assignment: In 2008 the world financial system was on

Analyze the 2008 financial crisis in the United States by reviewing the HBO film “Too Big to Fail” and the documentary “Inside Job,” complemented by research on the actual events. Summarize what the financial crisis was, compare the two films regarding their portrayal of the events, and determine which provides a more accurate depiction. Include supporting research to justify your analysis. Discuss whether legislation was enacted to overhaul the banking and lending system as a response, providing an overview of such legislation. Identify three aspects of the crisis or legislation and explain their potential impacts on the profession of Industrial Engineering and related businesses. Conclude by exploring the ethical implications involved in the crisis and how these relate to the Code of Ethics for Industrial Engineers. Incorporate references from credible sources, and ensure proper citations and well-structured writing throughout.

Paper For Above instruction

The 2008 financial crisis, often regarded as the most severe economic downturn since the Great Depression, was marked by the collapse of major financial institutions, a significant downturn in housing markets, and widespread economic distress globally. Rooted in complex financial products, excessive risk-taking, and regulatory failures, this crisis exposed vulnerabilities within the U.S. financial system and had profound implications for industries worldwide. This paper synthesizes insights from the films “Too Big to Fail” and “Inside Job,” compares their portrayals against historical research, examines legislative reforms enacted afterwards, and explores the implications for the field of Industrial Engineering and ethical considerations.

Overview of the Financial Crisis in the United States

The financial crisis originated from a confluence of factors including the burst of the housing bubble, risky mortgage lending practices, and the proliferation of financial derivatives like mortgage-backed securities and collateralized debt obligations. Financial institutions, driven by profit motives and inadequate risk assessment, engaged heavily in subprime lending—loans issued to borrowers with poor creditworthiness. As housing prices declined, defaults increased, leading to massive losses for banks holding these securities. The failure of Lehman Brothers in September 2008 symbolized the crisis’s peak, triggering panic across global markets, credit freezes, and severe economic downturns affecting millions of Americans and international economies.

The crisis was intensified by regulatory failures, excessive leverage, and interconnected financial institutions whose collapse threatened the entire system under the “Too Big to Fail” doctrine. The U.S. government responded with unprecedented measures, including bailouts and emergency legislation, in an effort to stabilize markets and prevent a complete economic meltdown. The crisis highlighted systemic risks inherent in modern financial systems and underscored the importance of regulatory oversight and risk management.

Comparison of the Films “Too Big to Fail” and “Inside Job”

“Too Big to Fail,” produced by HBO, dramatizes the efforts of government officials and financiers to prevent the collapse of the financial system. It emphasizes the interconnectedness of major banking institutions and the urgency of government intervention, highlighting key players like Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. Its narrative suggests that the crisis was driven by reckless behavior of financial executives, compounded by political and regulatory failures.

In contrast, “Inside Job,” a documentary directed by Charles Ferguson, offers a broader critique of systemic corruption, deregulation, and greed within the financial sector. It meticulously links deregulation policies from the 1980s onward, including the Gramm-Leach-Bliley Act, to the escalation of risky practices leading to the crisis. The film emphasizes the moral hazards associated with Wall Street greed and the complicity of policymakers in fostering an environment conducive to crisis.

Both films accurately depict important aspects of the crisis, but they differ in scope and focus. “Too Big to Fail” provides a dramatized perspective centered on governmental response, while “Inside Job” offers a detailed investigative account emphasizing regulatory negligence and systemic issues. Research indicates that the latter’s emphasis on deregulation and corruption aligns closely with scholarly analyses of the causes, making it a more comprehensive and critical portrayal of the root issues.

Legislative Reforms Post-Crisis

In response to the crisis, the U.S. Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This comprehensive legislation aimed to address systemic risks through stricter regulation of financial institutions, greater transparency, and consumer protections. Key provisions included the creation of the Financial Stability Oversight Council (FSOC), the requirement for large institutions to conduct annual stress tests, and the establishment of the Consumer Financial Protection Bureau (CFPB). It also imposed tighter regulations on derivatives trading and increased capital requirements for banks.

The Dodd-Frank Act sought to mitigate the “Too Big to Fail” problem by reducing moral hazard through measures like orderly liquidation authority and enhanced oversight. However, critics argue that it increased compliance costs and regulatory burdens on smaller banks, potentially stifling innovation and competition. Overall, the legislation represented a significant attempt to overhaul the financial regulatory framework and prevent future crises.

Impact on Industrial Engineering and Business Practices

Three significant items from the crisis and legislation that affect Industrial Engineering include risk management practices, regulatory compliance, and organizational resilience. Firstly, the emphasis on risk assessment and management is crucial, as Industrial Engineers often optimize processes and systems that must now incorporate stricter risk controls and compliance measures. Proper risk management can prevent catastrophic failures and improve organizational stability.

Secondly, the increased regulatory requirements, such as audits and compliance protocols, directly impact businesses employing Industrial Engineers by necessitating new quality control, process optimization, and reporting standards. Engineering firms engaged in financial services or manufacturing must adapt their processes to meet these demands, fostering a culture of accountability and continuous improvement.

Lastly, the crisis underscored the importance of organizational resilience and contingency planning. Industrial Engineers can contribute by designing systems capable of withstanding shocks, ensuring supply chain robustness, and maintaining operational continuity in adverse conditions. The legislation’s focus on systemic stability incentivizes industries to adopt proactive strategies, which align with principles of sustainable engineering and corporate social responsibility.

Ethical Implications and Connection to the Code of Ethics for Industrial Engineers

The financial crisis revealed profound ethical lapses, including reckless lending, misrepresentation of financial products, and inadequate oversight. These actions eroded public trust and caused widespread economic suffering. For Industrial Engineers, the ethical concerns relate to integrity, transparency, and responsibility in designing and managing systems that impact stakeholders. The NSPE (National Society of Professional Engineers) Code of Ethics emphasizes guiding principles such as holding paramount the safety, health, and welfare of the public and acting with honesty and fairness.

Industrial Engineers, while not directly involved in financial decision-making, share responsibility for ensuring ethical considerations are integrated into organizational policies and operational practices. They must advocate for sustainable, transparent processes that prevent moral hazards and systemic risks. The crisis underscores the importance of an ethical framework rooted in accountability and social responsibility, essential for rebuilding trust and fostering long-term stability.

Conclusion

The 2008 financial crisis was a complex event driven by risky financial practices, deregulation, and systemic inadequacies. Both “Too Big to Fail” and “Inside Job” provide valuable perspectives, with the latter offering a more comprehensive critique of systemic failures. Post-crisis legislation like Dodd-Frank aims to mitigate future risks but also impacts business practices, especially within fields like Industrial Engineering that emphasize process optimization and risk management. The crisis also serves as a powerful reminder of the ethical responsibilities shared by professionals to prioritize transparency, integrity, and societal well-being. As industries evolve, integrating these lessons is essential for safeguarding economic stability and fostering sustainable practices based on ethical principles.

References

• Ferguson, C. (2010). Inside Job [Documentary]. Sony Pictures Classics.
• HBO. (2011). Too Big to Fail [Film]. HBO Films.
• Board of Governors of the Federal Reserve System. (2010). Dodd-Frank Wall Street Reform and Consumer Protection Act. Public Law 111-203.
• Magali, L. (2013). The Role of Regulation in Financial Crises. Journal of Economic Perspectives, 27(3), 77–98.
• Perlman, M. (2009). The Causes of the Financial Crisis. Columbia Business School Research Paper.
• Shiller, R. (2010). The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do About It. Princeton University Press.
• Stiglitz, J. (2010). Freefall: America, Free Markets, and the Sinking of the World Economy. W. W. Norton & Company.
• U.S. Congress. (2010). Dodd-Frank Wall Street Reform and Consumer Protection Act. Public Law 111-203.
• Martin, R. (2012). Ethical Challenges in Financial Services: A Professional Perspective. Journal of Business Ethics, 107(4), 503–518.
• National Society of Professional Engineers. (2019). NSPE Code of Ethics for Engineers. Retrieved from https://www.nspe.org/resources/ethics/code-ethics