The Big Short ' Is A Financial Crisis Movie Directed By Adam Mckay

The mortgage crisis of 2007 marked catastrophe for millions of homeowners who suffered from foreclosure and short sales. Most of the problems involving the foreclosing of families’ homes could boil down to risky borrowing and lending. Lenders were pushed to ensure families would be eligible for a loan, when in previous years the same families would have been deemed too high-risk to obtain any kind of loan. With the increase in high-risk families obtaining loans, there was a huge increase in home buyers and subsequently a rapid increase in home prices. As a result, prices peaked and then began falling just as fast as they rose. Soon after families began to default on their mortgages forcing them either into foreclosure or short sales. Who was to blame for the risky lending and borrowing that caused the mortgage meltdown? Many might blame the company Fannie Mae and Freddie Mac, but in reality the entire system of buying and selling and free market failed home owners and the housing economy.

The outbreak and spread of the financial crisis of 2007-2008 have caused the most of countries into severe economic difficulties and also created an adverse impact on the global economy. The beginning of the financial crisis is defaults in the subprime mortgage market in the USA. Although the global economy seems to recover since 2009, the impacts of the crisis still affect many countries until now. This essay focuses on the background and impacts of financial crisis, and the learning from the movie The Big Short.

Mortgage fraud is one of the costliest, yet seldom prosecuted crimes in the criminal world. CoreLogic estimates approximately $13 billion in fraud losses occurred in 2012, according to the latest available data in the 2012 Mortgage Fraud Trends Report (Gerding, 2013). While these numbers may seem high, the approximate $13 billion in losses is only a fraction of what it would be if every case were to be prosecuted. Mortgage fraud was also a major contributing factor towards a national, and nearly global economic collapse in 2008 when the United States economy saw the worst recession it has seen since the great depression. Anyone that has seen the films “99 homes” starring Andrew Garfield and Michael Shannon or “The Big Short” starring Christian Bale and Ryan Gosling has seen a largely realistic glimpse of mortgage fraud and how devastating it can be.

The recent mortgage crisis in the US was unprecedented. It led to a massive clampdown of financial institutions, occasioning one of the worst financial melt-downs the US has ever faced (Jaffe, 2008). Quite naturally, it would be necessary to examine the cause of the crisis in order to draft prophylactic measures that would prevent the same financial disaster in the future. This paper will discuss the events that led to the mortgage crisis.

In the lead up to the current recession, when the real estate market began to fall, there were so many investors shorting stocks and securitized mortgage packages that were already falling, that the market simply fell further. There were no buyers at the bottom, and the professional investors made millions off of the losses of others. Beyond this, there was no real federal regulation for securitized mortgages, since there was no real way to gauge the mathematical risk of any given package. This allowed the investors to take advantage of the system and to short loans on real people’s homes. Once these securities were worthless, many of the homebuyer’s defaulted on their mortgages and were left penniless. No matter from which angle this crisis is looked at, the blame rests squarely with the managers who began the entire cycle, the ones who pursued the securitization of mortgages. Their incompetence not only led to the losses of Americans who have never invested in the stock market, but to losses for their shareholders.

While there are several speculated causes to the recession of 2007, one cause that stands out is the housing bubble burst. "As the housing bubble burst and trillions of dollars ' worth of toxic mortgages began to go bad in 2007, fear spread through the massive firms that form the heart of Wall Street ("Meltdown")". The first repercussions of the housing bubble bursting were the floating rumors about the investment bank, Bear Stearns. The rumors of the bank 's imminent bankruptcy were so abundant, that they became a self fulfilling prophecy ("Meltdown"). In an attempt to save the bank, Federal Reserve Chairman Ben Bernanke created a deal with JPMorgan ("Meltdown"). This deal stated that "the federal government would use $30 billion to cover Bear Stearns ' questionable assets tied to toxic mortgages

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

The movie was an overview of the life of a quirky doctor, Michael Burry, who analyzed the mortgage practices and exposed the fraud of subprime mortgages that allowed people with shaky credit to borrow money. The movie also highlighted two other investors in Burry’s theory, Mark Baum’s group and Charlie Geller, that invested millions to gamble against home loans and short the market by buying credit defaults. All of these people made billions of dollars by betting against the economy, but all three groups realized they were betting for a failing economy. Their win was the world's loss, leading into something similar to the Great Depression of 1929 when millions lost their jobs and were no longer able to keep up with their mortgage.

An individual that played a part in the crisis include Banker Angelo Mozilo of Countrywide, his stated goal was to lower the barriers for American’s to own homes. Though intentions in such a goal are admirable, it created an environment of failures as homeowners defaulted on loans. Countywide was purchased by Bank of America in 2008. Banker James Cayne of Bear Stearns faced criticism as his institution crumbled under his leadership. He was accused of being absent as hedge funds collapsed. As an example as poor leadership during the period he stepped down, and Bear Stearns was purchased by JP Morgan in 2007. Richard Fuld Jr., Banker of Lehman Brothers Holding Inc., moved his institution in the commercial real-estate market years prior to the 2008 collapse of the market. 2008 after filing for bankruptcy Lehman’s was also sold. These are just a select few of the institutional leaders that had an impact during the crisis, but they represent how different personal and organization ethics can impact a company. Other key players involve elected officials that made key decisions to share the nation of financial depression. Henry Paulson, a policy maker with the Department of the Treasury, refused to save Lehman Brothers Holdings Inc. from bankruptcy. Paulson was involved in the Troubled Asset Relief Program that was used for the bailout of banks, auto companies, and other financial institutions. Ben Bernanke, a policy maker with the Federal Reserve, was a key player in approving the funding for J.P. Morgan to purchase Bear Sterns Co.

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 that could have prevented the failure of the housing market.

Two events or portrayals happened: (1) As of my research one of the accurate portrayal or scene in the film in terms of the market is that all men had pin-point the problem about the mortgage securities, particularly the inflation risk of subprime market. It is also accurate, many people including the chairman of the Federal Reserve do not agree to the housing market bubble. (2) The portrayals of the characters are very much accurate to the real character based on the true story. Like Burry who was really a stock market investor at the Scion Capital. Mark Baum a portrayal of Steve Eisman. Jared Vennett who was a portrayal of Greg Lippman and other men major characters. They were a truly and accurately a portrayal of the true business men in

Countrywide’s tactics often led borrowers to expensive and sometimes unfavorable loans that resulted in richer commissions for Countrywide’s sales forces, fees to company affiliates providing services on the loans, and a roaring stock price that made Countrywide executives among the highest paid in America. Countrywide’s entire operation, from its computer system to its incentive pay structure and financing arrangements, was intended to wring maximum profits out of the mortgage lending boom no matter what it cost borrowers (Morgenson, 2007).

The Big Short: Inside the Doomsday Machine by Michael Lewis is a non-fiction New York Times #1 bestseller. This text is published by W.W. Norton & Company and contains 320 pages. This is a book that focuses in on the 2008 financial crisis and the build up of the housing and credit bubble during the 2000’s. The author channels in on the persons who saw the crisis coming that wanted to protect their investments or did not want to speak of the issue.

Housing prices in the United States rose steadily after the World War II. Although some research indicated that the financial crisis started in the US housing market, the main cause of the financial crisis between 2007 and 2009 was actually the combination of housing bubble and credit boom. The banks created so much loan that pushed the housing price to the peak. As the bank lend out a huge amount of money, the level of individual debt also rose along with the housing price. Since the debt rose faster than people’s income, people were unable to repay their loan and bank found themselves were in danger. As this showed a signal for people, people withdrew money from the banks they considered as “safe” before, and increased the “haircuts” on repos and difficulties experienced by commercial paper issuers. This caused the short term funding market in the shadow banking system appeared a

In relation to the increase in house’s price, the rise of financial agreements such as mortgage-backed securities (MBS) and collateralized debt obligations (CDO) encouraged investors to invest in the U.S housing market (Krugman, 2009). When housing price declined in the U.S, many financial institutions that borrowed and invested in subprime mortgage reported losses. In addition, the fall of housing price resulted in default and foreclosure and that began to exhaust consumer’s wealth and