The Big Short

1425 Words3 Pages
bulb-icon

Recommended: Essay causes of global financial crisis of 2008

The Big Short: Short-Sightedness and Irresponsibility in the Name of Greed The Great Recession of 2007-2009 resulted in 8 million lost jobs, 6 million home losses, and over $5 trillion in lost benefits and investments (SOURCE). Coupled with bailouts, it is clear that the American people paid the price, along with those that were affected by the crisis internationally. Though these events can only be viewed in retrospect – that is, the damage is already done - it is necessary to better understand the events that led to these outcomes in hopes of preventing them. The Big Short takes on this role by depicting the practices that led up to the crises of 2007-2009 from the perspectives of various investment bankers. It demonstrates the disconnect …show more content…

It demonstrates that the legal system is convoluted with business influence, and to some extent promotes unethical behavior because it purposely fails to penalize it. In later scenes, The Big Short patronizes the government by sarcastically claiming that the government started regulating big banks after the crisis. The Big Short may not account for the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law a few months after the book was published and aimed to increase accountability in engaging in risky business practices (SOURCE); however, it’s notable that the Trump administration aims to push back against regulation (he has pledged to repeal Dodd-Frank) and similar measures aimed at increasing transparency …show more content…

As a current example of the home crisis aftermath, Fannie Mae (a government-sponsored entity) backed $1 billion in Blackstone LP’s debt, while Blackstone is the largest rental home company. Americans’ dollars are backing a company, so that that company can control rental home pricing and benefit two-fold. It demonstrates that confidence in home ownership is low, not necessarily due to questionable mortgage approvals, but because large companies also bought out many homes during the crisis, shifting the trend of ownership from individuals to business entities and feeding into the cycle of greed. (SOURCE: https://www.wsj.com/articles/blackstone-wins-fannies-backing-for-rental-home-debt-1485265237). In these respects, The Big Short is not just about the economic crises from 2007-2009, but a much larger problem at hand involving business influence over the American government and leverage over the American people. As long as greed continues to thrive, actions driven by valuing money over human impacts will continue to do so as

Show More
Related

  • Impact of the Great Recession in Texas and the Rio Grande Valley

    2714 Words  | 6 Pages

    This paper aims to discuss the Short-Term and Long-Term Impacts of the Great Recession and

    Read More

  • Causes of the 2008 US Recession

    1519 Words  | 4 Pages

    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 because there have been a lot of bad practices and a lot of bad ideas". The 2007 financial crisis was composed of the fall of many major financial institutions, an unknown increase in mortgage loan defaults, and the derived freezing up of credit availability (Brue). It was the result from risky mortgage loans and falling estate values (Brue) . Additionally, the financial crisis of 2007 was the result of underestimation of risk by faulty insurance securities made to protect holders of mortgage-back securities from risk of default and holders of mortgage-backed securities (Brue). Even to present day, America stills suffers from the aftermaths of the financial crisis.

    Read More

  • Great Depression vs. The Great Recession

    1439 Words  | 3 Pages

    Since being founded, America became a capitalist society. Being a capitalist society obtains luxurious benefits and rather harsh consequences if gone bad. In a capitalist society people must buy products and spend money to keep the economy balanced, but once those people stop spending money, the economy goes off balance and the nation enters a recession. Once a recession drastically takes a downturn, the nation enters what is known as a depression. In 2008 America entered a recession and its consequences were severe enough for some people, such as President Barack Obama, to compare the recent crisis to the world’s darkest economic depression in history, the Great Depression. Although the Great Depression and the Great Recession of 2008 hold similarities and differences between the stock market and government spending, political issues, lifestyle changes, and wealth distribution, the Great Depression proved far more detrimental consequences than the Recession.

    Read More

  • Evicted By Matthew Desmond Analysis

    1076 Words  | 3 Pages

    In “The Big Short”, this movie about the economic collapse of 2008 in America highlights how Americans of all racial backgrounds were hit hard when the housing market collapsed. The film provides a very compelling argument and describes how the market crashed because banks began to give out more unstable loans out to people in order to sell more properties, which eventually led to the housing market to be built upon millions of risky loans. This practice grew until the housing market became too unstable because of all the risky loans and resulted in an economic crash. The housing market collapse led to millions of Americans to lose their homes because of foreclosures and led to massive amount of homelessness and unemployment since the Great

    Read More

  • The Great Recession

    670 Words  | 2 Pages

    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.

    Read More

  • The Collapse of the Madoff Pyramid

    1931 Words  | 4 Pages

    Weiner, Eric J. “What Goes Up: The Uncensored History of Modern Wall Street as Told by the Bankers, Brokers, CEOs, and Scoundrels who Made it Happen”. Little, Brown and Company. pp. 188–192. Print.

    Read More

  • The Great Recession Essay

    1080 Words  | 3 Pages

    What caused the Great Recession that lasted from December 2007 to June 2009 in the United States? The United States a country with abundance of resources from jobs, education, money and power went from one day of economic balance to the next suffering major dimensions crisis. According to the Economic Policy Institute, it all began in 2007 from the credit crisis, which resulted in an 8 trillion dollar housing bubble (n.d.). This said by Economist analysts to attributed to the collapse in the United States. Even today, strong debates continue over major issues caused by the Great Recession in part over the accommodative federal monetary and fiscal policy (Economic Policy Institute, 2013). The Great Recession of 2007 – 2009 enlarges the longest financial crisis since the Great Depression of 1929 – 1932 that damaged the economy.

    Read More

  • Transforming Your Paper into a Presentation

    1045 Words  | 3 Pages

    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.

    Read More

  • Great Recession Essay

    760 Words  | 2 Pages

    In economics, a recession occurs when there is a slowdown in the spending of goods and services in the market. A recession causes a drop in employment, GDP growth, investment, as well as societal well-being. All recessions are caused by a specific cause, but the Great Recession of 2007-2009 was caused by a crash in the housing market. This crash was triggered by a steep decline in housing prices. All of a sudden, people bought houses because there was an excessive amount of money in the economy and they thought the price of houses would only increase. (Amadeo, 2012). There was a financial frenzy as the growing desire for homes expanded. People held a lot of faith in the economy and began spending irrationally on houses that they couldn’t afford. This led to overvalued estate and unsustainable mortgage debt. (McConnell, Brue, Flynn, 2012).

    Read More

  • 2008 Financial Crisis Essay

    1536 Words  | 4 Pages

    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.

    Read More

  • Too Big To Fail

    893 Words  | 2 Pages

    In previous years the big financial institutions that are “too big to fail” have come to realize that they can “cheat” the system and make big money on it by making poor decisions and knowing that they will be bailed out without having any responsibly for their actions. And when they do it they also escape jail time for such action because of the fear that if a criminal case was filed against any one of the so called “too big to fail” financial institutions it...

    Read More

  • Greediness of Mortgage Lenders

    666 Words  | 2 Pages

    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).

    Read More

  • Ffinacialization and the Housing Market

    638 Words  | 2 Pages

    The housing market crash was a response to a chain of businesses and people who believed that the old laws of banking were no longer important. Banks were no longer required to hold on to mortgages for 30 years which gave them the ability to sell off to other companies, without concern for the mortgage holders. David Harvey, a renowned geographer, warned us of this problem, stating that “labor markets and consumption function more as an outcome of search for financial solutions to the crisis-tendencies of capitalism, rather than the other way around. This would imply that the financial system has achieved a degree of autonomy from real production unprecedented in capitalism’s history, carrying capitalism into an era of equally unprecedented dangers” (Coe, Kelly, and Yeung, 2013)

    Read More

  • Ethical Issues In The Big Short Movie

    1581 Words  | 4 Pages

    Individuals like the two young and rambunctious mortgage consultants portrayed in the film gave loans to anyone and everyone that could sign the paper, regardless of the recipient’s ability to pay the loan in full. It is doubtful that all consultants fully understood the ramifications of their actions, but undoubtedly the overall disregard for consequence was the start of the collapse. Mortgage consultants mislead and tricked people into loans they could never afford by playing on their desire to live the American dream. Distributing adjustable rate loans to individuals without jobs, without collateral is unconscionable. Unfortunately, from their perspective they were helping these individuals. In a twisted way, these consultants were acting ethically from a utilitarian point of view. The consultants won because they received utility in the form of a bonus for distributing the loans, and the loanee won because they could now afford the home of their dreams. What the consultants didn’t consider in their calculations were the long term results and utility of their actions, unethically building the flawed foundation of the housing

    Read More

  • The Wolf of Wall Street

    1300 Words  | 3 Pages

    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 restitution to any swindled stock buyers of his brokerage firm. Though his lavish spending and berserk party lifestyle was consumed by excessive greed, he displayed both positive and negative aspects of business communications.

    Read More

More about The Big Short

Open Document