The Big Short

The panic of 1907 and the Great Recession of 2007-2009 has both been major economic events in the United States economic history. This paper compares and contrasts these two major events and enables us to understand importance of certain financial institutions and regulations during troubled times in the financial sector. In this paper, both panics of 1907 and 2007 are historically analyzed and compared.

On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is commonly referred as the Dodd-Frank Act. This act was passed as a response to the Great Recession in order to prevent potential financial debacle in the future. This regulation has a significant impact on American financial services industry by placing major changes on the financial regulation and agencies since the Great Depression. This paper examines the history and impact of Dodd-Frank Act on American financial services industry.

Our economy is a machine that is ran by humans. A machine can only be as good as the person who makes it. This makes our economy susceptible to human error. A couple years ago the United States faced one of the greatest financial crisis since the Great Depression, which was the Great Recession. The Great Recession was a severe economic downturn that occurred in 2008 following the burst of the housing market. The government tried passing bills to see if anything would help it from becoming another Great Depression. Trying to aid the government was the Federal Reserve. The Federal Reserve went through a couple strategies in order to help the economy recover. The Federal Reserve provided three major strategies to start moving the economy in a better direction. The first strategy was primarily focused on the central bank’s role of the lender of last resort. The second strategy was meant to provide provision of liquidity directly to borrowers and investors in key credit markets. The last strategy was for the Federal Reserve to expand its open market operations to support the credit markets still working, as well as trying to push long term interest rates down. Since time has passed on since the Great Recession it has been a long road. In this essay we will take a time to reflect on these strategies to see how they helped.

“Hamilton’s dedication to fix america came from his term as secretary of treasury.”(Freeman, Joanne B.). When Hamilton was secretary he was given a large task that could have decided his future. “Given the enormous task of bringing order to the nation's disordered finances, he forged a national financial infrastructure through a combination of administrative organization and bold policies. (Freeman, Joanne B.) Hamilton always had a plan which made him ready he should be honored for how quick witted he was and his speed at solving problems. Hamilton wanted to establish a national bank for america to fix its financial problems. Hamilton did build a system for America, “ He established the Treasury Department, dealt decisively with the nation’s financial crisis, put in place a financial system that remains in the early twenty-first century, and sketched out a plan and justification for the encouragement of manufactures.”(Diarity, William A) Hamilton knew what to do he fought for his plan and he made it a reality. Hamilton’s ideas are around to this day he made America better financially for the

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.

A Colossal Failure of Common Sense was one of many books to be published in the aftermath of the Financial Crisis of 2007. After seeing the global economy stall in the face of massive losses in word financial markets, many Americans sought to better understand the crisis and its causes. This book, written from the perspective of a financial market insider, provides a glimpse into the world of global finance and also seeks to explain how the players in this world were involved in the crisis. In the words of the author Lawrence McDonald, “My objective in writing A Colossal Failure of Common Sense was twofold. First, to provide … a close-up, inside view of how markets really work…..And, second, to give… as crystal clear an explanation as possible about the real reasons why the legendary Lehman Brothers met with such a swift end”1. By writing about his personal experience at Lehman Brothers and recounting stories from within the famous investment banking firm, Mr. McDonald largely succeeds at his first goal. However, the elements of personal biography and the chronological order of the book make it difficult for the reader to fully appreciate all of the varied causes of the financial crash. I believe that the main value of reading this book is in understanding these causes, with Lehman Brothers acting as a microcosm of the greater financial universe. As such, in this review I have isolated elements from Mr. McDonald’s book which highlight how the crisis

The Courage to Act memoir is essential reading for people who wants to know what happened at Federal Open Market Committee meeting on Aug. 5, 2008. It invokes comparisons to the Great Depression and at the same time suggests that Shucks, it was not all that great, was not a depression or anything (Bernanke). But Bernanke is persuasive in arguing that it was pretty damned high i.e. terrible and he and his members at the Fed deserve credit for the fact that it wasn 't a heck of a lot greater. Bernanke pulls back the curtain ornament on his endeavors to keep a mass commercial disappointment, working with two U.S. presidents and utilizing each Fed ability, regardless of how arcane, to keep the U.S. economy above water. His encounters amid the underlying emergency and the Great Recession that took after giving audience members a unique point of view on the American economy since 2006 and his story will uncover surprisingly how the inventiveness and definitiveness of a couple of famous pioneers kept a financial fall of unimaginable scale. The Act provide a means of different points in the banking factor by a central banking system. The Courage to Act explains the worst financial crisis and economic recession in America since the Great Recession, providing an insider 's account of the policy response.

The United States has one of the biggest and fastest growing economies of the world. Our financial system has been affected by numerous crises throughout the years and as a result Congress has reacted in the most recent times and two well-known acts have been signed into laws by the presidents at the time to protect investors and consumers alike. A brief overview of the Sarbanes-Oxley Act of 2002, a discussion of some of the provisions therein, opinions of others regarding the act and also my personal and professional opinion will be discussed below. The same will be examined about the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The enormous amount of unsecured consumer debt created by this speculation left the stock market essentially off-balance. Many investors, caught up in the race to make a killing, invested their life savings, mortgaged their homes, and cashed in

The Big Short is based on a real life story that is about the 2008 financial crisis which was a result of housing bubble. Sadly, unethical choices made by bankers, financial institutions and rating agencies led to a crisis that hurt the World economy badly. The main ethical business dilemma is that many people were aware of the potential risks; however, they preferred to avoid the truth, and play stupid. There are many dilemmas throughout the movie that support this finding.

“Too Big to fail” was first known in a 1984 Congressional hearing where Congressman Stewart McKinney discussed the Federal Deposit Insurance Corporation’s intervention with Continental IIIinois. The idea interprates that certain financial institutions are so large, if any of them fails, it will bring an unexpected disastrous effect to the economy. As we all known, the 2008 financial crisis had arose the “too big to fail” problem to the peak controversial point. Banks, insurance companies, auto companies are part of the big company industry. They make profit by creating and selling complicated derivatives and trading loans, commodities and stocks. When the big economic environment is prosperous, those big companies make a competitive

Many people became skeptical of how the housing market was going. A select few of these people found a way to bet against the market called credit default swaps (McKay). This was betting against CDO’s. In The Big Short, they explain credit default swaps in the idea of a poker game. If someone has an 87% chance of winning the hand, the majority of people will just assume that person with the better hand will win. But, there is someone who has looked into it more and believes they will lose that hand. Therefore, those who think they will lose will bet others a certain amount of money. They will say, “I’ll bet you three to one odds they lose, for $20,000.” (McKay) So, if the person is correct, betting that the 87% will occur they will be paid

Jordan Belfort is the notorious 1990’s stockbroker who saw himself earning fifty million dollars a year operating a penny stock boiler room from his Stratton Oakmont, Inc. brokerage firm. Corrupted by drugs, money, and sex, he went from being an innocent twenty – two year old on the fringe of a new life to manipulating the system in his infamous “pump and dump” scheme. As a stock swindler, he would motivate his young brokers through insane presentations to rile them up as they defrauded investors with duplicitous stock sales. Toward the end of this debauchery tale he was convicted for securities fraud and money laundering for which he was sentenced to twenty – two months in prison as well as recompensing two – hundred million in

Money, sex, drugs, and greed-these four words are characterized and displayed profoundly throughout the movie Wolf of Wall Street. Based on a true story about the life of Jordan Belfort (Leonardo DiCaprio), the movie is narrated and gives insight to the struggle, power, and addictions that surrounded Belfort’s life. Belfort was a stockbroker who learned his way as an entry-level worker on Wall Street before creating his own company Stratton Oakmont. Belfort quickly learned that success on Wall Street was a result of doing any means necessary, regardless if it was the truth or providing a false sense of hope. His main scam involved selling cheap stocks and inflating the prices so the brokers can sell at a high price. Although this was illegal, Belfort was so involved and addicted to money and drugs that his scamming ways were irrelevant.

The book starts by talking about the “bond” and how it is used to make interested payments on borrowed money and then gets paid back in the long-term. In the late 1980’s Wall Street had released that is could create products like credit cared, and home mortgages which were very similar in comparison to bonds themselves. The introduction of mortgage bonds allowed the beginning of home mortgages that is a huge part of the financial crisis of 2008. Within the 1990’s mortgage bonds were created that were a much higher risk; these mortgages are called “subprime.” Due to this addition to the market the risks people were taking on became something that they would not realize. Their actions would soon create the housing bubble that occurred and created this financial crisis years and years later.