The Big Short: Inside the Doomsday Machine by Michael Lewis spans the 1980s through 2008, illustrating and explaining the introduction of the mortgage bond, transactions leading to the global financial crisis of 2008, and the resulting sub-prime mortgage collapse and vast bank bailouts. Lewis addresses the basic issue rather evidently in the prologue of the novel. With relatively little experience other than a job on Wall Street in the 1980’s, Lewis identified bank error in investing in subprime mortgages, the general instability of the subprime mortgage market, and the inevitable burst of the housing bubble. Throughout The Big Short, Lewis demonstrates that the 2008 financial crisis resulting in trillions of dollars of losses and billions …show more content…
In the early 1980’s Wall Street firms recognized that home mortgages could be used to create bond-like products, functioning similarly to bonds issued by governments and corporations. The “mortgage bond” bundled many individual home mortgages purchased from lenders and the income streams from monthly mortgage payments. The bundle was later termed a Collateralized Debt Obligation (CDO) and was sold by investment banks including Goldman Sachs, Merrill Lynch, Bear Sterns, JP Morgan, and Morgan Stanley on the bond market. In later years, banks generated larger profits by creating mortgage bonds for subprime mortgages, those mortgages with substantially higher credit default risk. A dangerous cycle was established as Wall Street banks bought more subprime mortgages, lenders placed more subprime loans, and individuals, enticed by artificially low interest rates during an initial fixed-term interest period, accepted mortgages that they could not …show more content…
Lewis analyzes the issue of subprime mortgage bonds through the observations and actions of each of these investors. Lewis’ presents his argument in a narrative style and includes the stories of Steve Eisman, Michael Burry, Greg Lippman, and Jamie Mai and Charlie Ledley. Eisman, convinced of the corrupt nature of consumer finance, developed a sufficient knowledge of Wall Street and the housing market. Michael Burry, despite his initial medical career, became intrigued, and even obsessed, with investing and the bond market. Jamie Mai and Charlie Ledley, wealthy from predicting the stock price increase of unfairly undervalued firms, took interest in the subprime mortgage market. Each of these individuals, similarly characterized by their status as outsiders (both generally and on Wall Street), foresaw that subprime mortgage bonds would fail as interest rates rose dramatically at the end of the fixed-term interest period and that the housing market would plummet accordingly. They purchased insurance policies, also known as credit default swaps, against the failure of the mortgage bond, and upon the occurrence of the presumed mass default, stood to profit
I am reading Bomb by Steve Sheinkin. At the beginning of the book, Oppenheimer, who is the main chemical scientist in the novel, sees the effects of the Great Depression on his pupils when they cannot buy chemistry textbooks. During Oppenheimer’s time as a professor, the Nazis discovered the splitting of the uranium atom. When Albert Einstein found out that about the discovery the Nazis did, he informs President Roosevelt about how the Nazis plan to develop atomic weapons. Harry Gold who is a Communist spy, starts to work with the KGB. And starts to steal ideas and projects from the American Uranium Committee.
The United States of America’s use of the atomic bomb on the Japanese cities of Hiroshima and Nagasaki has spurred much debate concerning the necessity, effectiveness, and morality of the decision since August 1945. After assessing a range of arguments about the importance of the atomic bomb in the termination of the Second World War, it can be concluded that the use of the atomic bomb served as the predominant factor in the end of the Second World War, as its use lowered the morale, industrial resources, and military strength of Japan. The Allied decision to use the atomic bomb not only caused irreparable physical damage on two major Japanese cities, but its use also minimized the Japanese will to continue fighting. These two factors along
With the upcoming brand-new installment in the legendary and beloved Star Wars saga, I decided to give props to some of the greatest sci-fi movies to ever grace the silver screen. All of the movies on this list either influenced or were influenced by the Star Wars franchise in both large and small ways. Of course, this list is my own opinion; feel free to share your ideas in the comments or yell at me on twitter.Event Horizon is a 90's horror film set in deep-space that includes fantastic performances from stars like Sam Neill and Laurence Fishburne. A salvaging crew is commissioned to find a lost craft called the Event Horizon designed by an eccentric Doctor played by Neill. The craft disappeared into a wormhole and when the salvage crew goes
A majority of mortgage defaults that Americans used were on subprime mortgage loans, which were high-interest-rate loans lent to people with high risk credit rates (Brue). Despite knowing the risks, the Federal government encouraged major banks to lend out these loans to buyers, in hopes, of broadening ho...
The Manhattan Project The Manhattan Project was a research project, that created the United States first nuclear weapon, and led to its creation of the nuclear department during World War II. M.A.U.D. / M.A.U.D. group was created in 1940. Also, M.A.U.D was the secret name given to the group and it came from a phrase in a message from Niel Bohr (Cohen). This group produced a report that said that producing a fission bomb was possible. James Chadwick, a new member of the British M.A.U.D group, later wrote that at that time he realized that a nuclear bomb was able to be built in his lifetime.
The Sub-Prime Mortgage Crisis of 2008 has been the largest financial crisis to take place since the end of the Great Depression. It was the actions of individuals and companies that caused this crisis. For although it could have been adverted, too much money was being made by too many people in place of authority to think deeply on the situation. As such, by the time actions were taken to attempt to rectify the situation, it was already too late. Trillions of dollar of tax payers’ money was spent trying to repair the situation that was caused by the breakdown of ethics and accountability in the private sector. And despite the government’s actions to attempt to contain the crisis, hundreds of thousands lives were negatively affected before, during, and after this crisis.
Mortgage crisis can evidently be associated with excessive borrowing from the financial institutions without proper considerations of the terms and conditions of the deal. The prospects that surround business in real estate are always promising and this presumption got into the mind of all stakeholders involved in the subprime mortgage lending business. This is because in 2000, the mortgage rates were low and everybody would afford a mortgage. Unfortunately, the financial models were flawed as the rate was adjustable. After many people were nested in the mortgage bracket, greed propelled the rates to levels subprime cannot afford thus leading to foreclosures. It can be concluded that greed, lack of sufficient knowledge and flawed financial models led to the emergency of subprime mortgage crisis.
It can be argued that the economic hardships of the great recession began when interest rates were lowered by the Federal Reserve. This caused a bubble in the housing market. Housing prices plummeted, home prices plummeted, then thousands of borrowers could no longer afford to pay on their loans (Koba, 2011). The bubble forced banks to give out homes loans with unreasonably high risk rates. The response of the banks caused a decline in the amount of houses purchased and “a crisis involving mortgage loans and the financial securities built on them” (McConnell, 2012 p.479). The effect on the economy was catastrophic and caused a “pandemic” of foreclosures that effected tens of thousands home owners across the U.S. (Scaliger, 2013). The debt burden eventually became unsustainable and the U.S. crisis deepened as the long-term effect on bank loans would affect not only the housing market, but also the job market.
"Subprime Mortgage Crisis - A Detailed Essay on an Important Event in the History of the Federal Reserve." Subprime Mortgage Crisis - A Detailed Essay on an Important Event in the History of the Federal Reserve. N.p., n.d. Web. 04 May 2014.
English 122 has been a challenging class for me to learn about my writing and researching techniques. This essay is about how the assignments help me with my writing and which assignments are challenging for me.
Investment banks, Rating agencies and Insurance companies are key components of the financial market. In this presentation, I’m going to explain how these three key roles worked together to create the 2008 financial crisis.
At 5:30 AM July 16th 1945, the nuclear age had started. The world’s first atomic bomb was detonated. On August 6th 1942 at 8:15 AM, an American B-29 bomber, the Enola Gay, dropped a perfected atomic bomb created by the Americans, over the city of Hiroshima hoping to end the war. Thousands of people died in the two cities in Japan. They were Hiroshima and Nagasaki “the Manhattan Project”. The research and development project that produced these atomic bombs during this time was known as “the Manhattan Project”.
The launch of the two atomic bombs on Japan in August 1945 will lead to a long
The "subprime crises" was one of the most significant financial events since the Great Depression and definitely left a mark upon the country as we remain upon a steady path towards recovering fully. The financial crisis of 2008, became a defining moment within the infrastructure of the US financial system and its need for restructuring. One of the main moments that alerted the global economy of our declining state was the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and after this the economy began spreading as companies and individuals were struggling to find a way around this crisis. (Murphy, 2008) The US banking sector was first hit with a crisis amongst liquidity and declining world stock markets as well. The subprime mortgage crisis was characterized by a decrease within the housing market due to excessive individuals and corporate debt along with risky lending and borrowing practices. Over time, the market apparently began displaying more weaknesses as the global financial system was being affected. With this being said, this brings into question about who is actually to assume blame for this financial fiasco. It is extremely hard to just assign blame to one individual party as there were many different factors at work here. This paper will analyze how the stakeholders created a financial disaster and did nothing to prevent it as the credit rating agencies created an amount of turmoil due to their unethical decisions and costly mistakes.
Mortgage loans are a substantial form of revenue for the financial industry. Mortgage loans generate billions of dollars in the financial industry. It is no secret that companies have the ability to make a lot of money by offering a variety of mortgage loan products. The problem was not mortgage loans but that mortgage companies were using unethical behavior to get consumer mortgage loans approved. Unfortunately, the Countrywide Financial case was not an isolated case. Many top name mortgage companies have been guilty of unethical behavior. Just as the American housing market was starting to recover from its worst battering since the Great Depression, a new scandal, an epidemic of flawed or fraudulent mortgage documents, threatens to send not just the housing market but the entire economy back into a tailspin (Nation, 2010).