The Big Short : Inside The Doomsday Machine

Then, in the 1990s, bonds were created consisting of subprime mortgages, which were higher risk mortgages with high interest rates, made to borrowers with lower credit levels. Essentially, banks were handing out mortgages like candy to consumers who were never going to be able to make the payments, but Wall Street kept buying and packaging the mortgages into bonds. Since these bonds were inherently riskier, one wonders why investors were still willing to buy. Investors, who look at ratings by agencies such as Moodys and Standard & Poors, had no reason to believe these bonds were risky investments. The agencies, whom were being paid by Wall Street, were assigning high ratings to these risky bonds.

The financial collapse is a very complex issue rooted in multiple causes, making it hard to put into a single sentence. However at it’s core the reason for the collapse is that many investors and banks tried to get rich by taking on assumptions about the housing market and taking on huge risks that they didn’t realize the full extent of.

In 2008 America’s financial system was brought to a stand still as decades of negligence and financial decisions caused our economy to sink into the worst recession since the great depression. Cultivating a problem worse than America has seen in roughly a century points one finger not at a particular cause, but a string of events that finally gave way. Now, eight years later our economy is still recovering, and time has allowed us to look back at decades of mistakes to try and connect the dots of the perfect storm that collapsed our financial market in 2008. In 2009 Brookings Institution, one of Washington’s oldest think tanks, concluded there were three causes that resulted in the crisis. Economists Martin Baily and Douglas Elliot stated that the results of government intervention in the housing market, the influences Wall Street had on Washington, and global economic forces were the three main causes of the economic collapse. They believed that a housing bubble inflated when Fannie Mae and Freddie Mac, two government-sponsored enterprises, intervened in the housing market. The banking industry was called out to be blamed for years of manipulation of our political and financial systems. Lastly, Baily and Elliot cite the global economy and the existence of a credit boom throughout European and Asian nations. Low inflation and consistent growth throughout the world economy spiked investors’ interest in acquiring riskier investments, which encouraged

Michael Lewis, The Big Short, film strategically provided three separate but parallel stories of the U.S mortgage housing of 2008. The movie demonstrated how Wall Street, in a desperate search for profits, lunched “bonds” products with riskier mortgages. As a result, lenders were no longer interested in if a borrower could pay them back. In disbelieved, I noticed deceitful tactics that lenders used, throughout the movie, to convince Americans to take out mortgages they could not afford. Chronologically, Americans’ saving levels dropped while countries ' savings tripled. Once the Recession was in full effect, the US government rescued Wall Street, passing an unimaginably large bill, the bill we are still paying off. To most Americans’ surprise, nearly all of the rescue money went into Wall Street executives’ pockets.

Where do you begin with covering one of the greatest economic crash of our time, and the worst recession since the Great Depression? Michael Lewis takes us to the very beginning, covering the story of how cynical mortgage brokers and CDO managers were playing fraudulent roulette. A rigged system that was doomed from the beginning but that very well needed every piece to be in place for 2008 to happen. Credit rating agencies S&P and Moody’s had to be completely oblivious in properly rating the CDO tranche system, mortgage lenders had to be eager to write down sub-prime loans, and . Yet, through all the dust came a story of the underdogs; Steve Eisman, Michael Burry, Greg Lippmann & his Chinese side kick Eugene Xu, and Cornhole Capital

The Big Short is a movie that discusses the housing market crash in 2008. As you may know, the banks, the mortgage brokers, and the consumers were all affected by this collapse. On each level of the system, there were things that went wrong and that could have been changed or could have prevented the failure of the housing market.

The Giant Pool of Money is an episode of the radio show This American Life which originally aired on May 9, 2008. The episode described to a general audience the causes and factors which led to the subprime mortgage crisis. There is about $70 trillion dollars that is circulating in the world today. The $70 trillion dollars refers to that subset of global savings called fixed income securities. The cause of these crisis is the result of investment companies falling in love with securitizing mortgages, taking them and building them into these large pools of loans. Then sell these mortgages to investors. These investors would make this pool bigger by creating adjustable-rate mortgages (ARMs), subprime mortgages, and no-income loans. These loans would allow people to take out home equity loans that they could not afford. This paper is going to address the major issues that lead to the housing crisis and the economic collapse, describe moral failings of the parties involved, and give feedback on how Biblical teachings could have impacted the crisis.

From the beginning of his book Cassidy comes to the conclusion that the financial collapse of 2008 was not an inescapable fate. Rather, it was the result of the general ignorance of warning signs from leading economists and Alan Greenspan, the chairman of the Federal Reserve for the United States, which resulted in the collapse due to their

June 13, 2007 is the day that Richard C. Cook claims in his article, “It’s Official: The Crash of the U.S. Economy Has Begun.” In the past couple of years, months, and weeks, the United States economy and stock market showed significant failures and inefficiencies to the world. Perhaps the greatest evidence signaling the recent economic meltdown is the subprime mortgage problems that started a little over a year ago. The burst of the U.S. housing market bubble was caused by a combination of risky lending and borrowing practices and higher interest rates coupled with dropping housing prices, making refinancing more difficult. To deepen the drama, Wall Street’s excessive debt and unsustainable

In 2008, one of the worst financial crises since the Great Depression occurred. The severity of this collapse cannot be understated as demonstrated by the bankruptcy of Lehman Brothers, the fourth largest investment bank in the US, and with many other financial institutions such as Merrill Lynch and the Royal Bank of Scotland having to be bailed out. In addition, the Global Banking System was within a whisker of collapsing and if it where not for the trillions of dollars invested in the system by national banks then this banking collapse would have lead to economic catastrophe. Therefore, in order to avoid such a calamity from occurring again, it is important to ask the question why did this financial recession occur and what factors contributed towards this downfall? Although there are many reasons as to why this recession occurred it could be argued that securitized lending and shadow banking played the largest role in this economic crisis. It is therefore important to understand what securitized lending and shadow banking means. Securitized lending is the process by which a financial institution such as a bank pools illiquid assets, such as residential and commercial mortgages and auto loans (by which the bank receives from the public through house mortgages and loans), and loans these newly formed short-term bonds to third party investors in exchange for cash or collateral. Since its creation in the 18th century, securitized lending was increasingly popular and very much

The financial crisis of 2008 was an enormous catastrophe and therefore a perfect story to be adapted to film. Retelling the story of the collapse of Wall Street had a further result than merely being lucrative though. Movies like Inside Job (2010), Too Big to Fail (2011) and The Big Short (2015) also inform people about the causes and dealings of the financial collapse. Most importantly however, they evoke an emotional response by telling the audience where to lay the blame. However, the movies not only helped shape the public narrative, they are also reflections of the people's attitudes towards Wall Street. While the movie's narrative stands in contrast to the narratives that advertising, journalism and public relations told, it is still the more commonly accepted one.

In 2008, one of the biggest financial recessions of our time occurred. The blame that should be placed on the unexpected crash of the housing market should come from the shady business strategies used by banks and investment agencies, which caused millions of everyday people to lose their jobs and homes. The role of subprime mortgages, CDO’s, and illicit ratings caused the biggest financial crisis since the Great Depression. The culmination of these things led to the downfall of the economy and start of a recession.

“It ain 't what you don 't know that gets you into trouble. It 's what you know for sure that just ain 't so” – Mark Twain [1]. As children we are taught to look both ways before crossing the street because something can be approaching at either side, as adults we have yet to learn to look to the past and then back to the present to prevent ourselves from causing the same economic mistakes. It is no secret of mine, that I have the strong notion that majority of our American society is lazy when it concerns self-educating, but also blind to the destruction we may cause due to greed. I have decided after our in-session viewing of the film “The Big Short” to write my final paper on the information and effects that were portrayed by the film which was based upon the novel, “The Big Short: Inside the Doomsday Machine” by Michael Lewis. This film for many Americans was a necessary wake up call to educate themselves about the causes behind the Financial Crisis that struck our economy in 2007, and what better way to educate an over indulged lazy society than to put it in a movie with attractive actors breaking down basic financial terms into layman’s terms.

Financial journalist and New York Times best seller, Michael Lewis is the author of many published books on various subjects ranging from politics to Wall Street. 2008 global financial meltdown with the build-up the housing and credit bubble during the 2000s are the main topics of some of his best sellers’ books: “Flash Boys”, “The Big Short”, and “Boomerang”. Rare storyteller’s ability to make the virtually any subject, lucid and compelling is the main reason of his popularity.

Before the 1970s the banking was not a business that you went into to make money. That was until Louis Ranieri came around. Louis Ranieri had one idea that changed the housing market forever. His plan was to have a mortgage back security. A mortgage back security is an assist based security backed by a mortgage. For example, if you use your mortgage to start a business, your business is backed by that mortgage. The average mortgage loan has a fixed rate loan and takes thirty years to pay off, but then he thought to bundle them all together. They thought these would still be less risky because who would not pay their mortgage. They were doing hundreds of million dollars in mortgage bonds a year, but that all changed when they ran out of mortgages to put into the bonds. If there were no bonds then there was nothing left to make money, and the banking world was going to back to the way it was. Rather than letting that happen, the banks made a loan called a subprime loan.