The Big Short Movie Financial Crisis

In 2008, the world experienced a tremendous financial crisis which rooted from the U.S housing market; moreover, it is considered by many economists as one of the worst recession since the Great Depression in 1930s. After posing a huge effect on the U.S economy, the financial crisis expanded to Europe and the rest of the world. It brought governments down, ruined economies, crumble financial corporations and impoverish individual lives. For example, the financial crisis has resulted in the collapse of massive financial institutions such as Fannie Mae, Freddie Mac, Lehman Brother and AIG. These collapses not only influence own countries but also international area. Hence, the intervention of governments by changing and

The U.S. economy is currently experiencing its worst crisis since the Great Depression. The crisis started in the home mortgage market, especially the market for so-called “subprime” mortgages, and is now spreading beyond subprime to prime mortgages, commercial real estate, corporate junk bonds, and other forms of debt. Total losses of U.S. banks could reach as high as one-third of the total bank capital. The crisis has led to a sharp reduction in bank lending, which in turn is causing a severe recession in the U.S. economy.

Many people today would consider the 2008, United States financial crisis a simple “malfunction” or “mistake”, but it was nothing close to that. Contrary to what many believe, renowned economists and financial advisors regarded the financial crisis of 2007 and 2008 to be the most devastating crisis since the Great Depression of the 1930’s. To make matters worse, the decline in the economy expanded nationwide, resulting in the recession of 2007 to 2009 (Brue). David Einhorn, CEO of GreenHorn Capital, even goes as far as to say "What strikes me the most about the recent credit market crisis is how fast the world is trying to go back to business as usual. In my view, the crisis wasn't an accident. We didn't get unlucky. The crisis came

In this essay, I will briefly explain what happened during the financial crisis of 2007-09, and also discuss the contribution of the government to the financial crisis.

Before the 1970’s banking was not a business that you went into to make money and it remained that way 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. Mortgage back securities are an asset 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, however, when bundling them all together it’s an opportunity to make greater profits. Mr. Ranieri believed these would still be less risky because people are more likely to pay their mortgages off.

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.

Now these financial markets have allowed many to become successful and live the “American Dream,” but have also caused many to suffer and lose everything. Back in 2007, the United States’ economy experienced a large financial crisis that almost paralleled the financial crisis during the Great Depression. Large financial institutions suffered a great deal and the stock market plummeted worldwide. The housing market took a huge hit as well, causing many foreclosures and evictions. This crisis stemmed from a major default in the subprime mortgage market. The bad credit records should have given some forewarning to the looming crisis, but the financial innovation for these mortgages gave investors a chance to succeed in the market. So as a large volume of cash flowed into the United States, the subprime mortgage market took off and became a trillion dollar market by 2007 (Mishkin 208). With prices rising in the housing market, subprime borrowers could simply refinance their houses by taking out even larger loans as homes appreciated in value. These borrowers were also unlikely to default because the houses could be sold off to pay back the loan. This benefited investors since the securities backed by cash flows from subprime mortgages had high returns. And this continued growth of the subprime mortgage market further increased the demand for houses and continued to fuel the increase in housing prices.

The current economic-financial crisis was indeed caused by the simultaneous occurrence of events in different parts of the world that all had a negative effect. These events are subtly different and therefore it is common that only one event is held responsible for the crisis. In reality, the world economy became critical due to the mix of four major events: 1) the unrestrained greed of financiers in the U.S. and U.K., which transformed bad mortgages into toxic financial assets 2) the habit of getting deeply indebted in the U.S. and U.K., 3) the excessive liquidity in Europe, 4) the real estate bubble in the U.S. and some European countries (Thomas, 2011) At the beginning of the financial collapse in the United States, many commentators, among which was the President of the Federal Reserve, hastily affirmed that the situation would only affect the United States and at most, the UK, where the banks,

Collateralized debt obligations (CDOs) refers to a kind of innovative derivative securities product which simply bundling mortgage debt, bonds, loans and other assets together and then rearranging these assets into different tranches with different credit ratings, interest rate payments, risks, and priority of repayment to meet the needs of different investors. As borrowers began to default, investors in the inferior tranche of the CDOs took the first hit, so the owner of this tranche of CDOs may be riskier. In order to compensate for the higher risk, the subordinate tranche receives higher rate of return while the superior tranche receives lower rate but still nice return. To make the top even safer, the banks ensured it small fee called the credit default swap (CDS). The banks do all of the works so that creating rating agencies will stamp the top tranche since as a safe, triple A rated

A few months ago I decided to make a trip to the local theater to check out a new release called the Big Short. The trailer played all over primetime and made the movie look very interesting. It was based on a true story and the plot was the mortgage crisis our country witnessed in 2008. I have always been interested in how the Wall Street money market works and how people make and lose millions every day. I myself play with a few stocks once and awhile, but nothing too fancy. The mortgage crisis didn’t affect me as much as it did too many other Americans, I guess I can say I made good out of the whole situation. I purchased a home in 2015 as our country was still recovering from the crisis. Not sure how accurate the movie portrayed

In 2008, the US experienced the traumatic chaos of a financial downturn, whose effects rippled throughout Europe and Asia. Many economists consider it the worst crisis since the Great Depression, and its alarming results are still seen today, a long six years later. Truly, the recession’s daunting size and formidable wake have left no one untouched and can only beg the question: could it have been prevented? The causes are manifold, but can be found substantially rooted in illogical investments and greedy schemes.

The Big Short tells the story of the crazed USA housing market of the 2000s, and of those financial experts who recognised and predicted its collapse. Ultimately, this resulted in a global financial crisis with millions of people losing their jobs and homes. The Big Short demonstrates a realistic insight into the investing and trading in the financial market and can provide us with useful business lessons.

Just after ten years of Asian financial crisis, another major financial crisis now concern for all developed and some developing countries is “Global Financial Crisis 2008.” It is beginning with the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and spread like a flood. At first U.S banking sector fall in a great liquidity crisis and simultaneously around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. (Global issue)

The world is facing the worst financial disaster since the Great Depression. Millions all over the world have lost a countless number of jobs, seen cuts in their hours, wages, and benefits. In 2008, banks and financial institutions became bankrupt because of the unaffordable loans they lent out. Many lost their homes to foreclosures because of they could not pay off their loans. Those who invested in the stock market lost an abundant amount of money. The impact has been detrimental to Western Nations, but the financial disaster has had an effect globally. The global financial crisis has crucially affected the globe and slowed economies

“The American subprime mortgage crisis that occurred in July 2007 led to the crash of the global stock market” (Yun, Chan 2010). This statement shows that not only was the U.S market was negatively affected by the mortgage crises, other economies across the globe also felt the shock.