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Ethical Issues In The Big Short Movie

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The financial institutions and banks were providing mortgage facilities to anyone who came in, without proper credit checks on affordability or the ability to pay back the loans. The mortgages were based on the assumption of receiving regular payments from borrowers. The mortgage IOU’s were then converted to various bonds and other securities. The borrowers were not informed about the risks involved when they bought stocks and funds on Wall Street. Even pensions and hedge funds were converted into bonds. These investments were portrayed as being safe. Later, it was found out many of the IOU’s were of no value. This led to foreclosure on houses, as many people could not afford to even pay the monthly rent. Someone earning $40,000 a year could not keep up with mortgage payments and would default. (Wolff-Mann). Similar practices continued due to loopholes in the mortgage sector that led to the creation of Collateralized Debt Obligation – CDOs, which were later sold and resold. This way a bad debt could be covered up as another product. CDOs are assets, such as mortgages, bonds and …show more content…

The main theme of the movie was “short”. Ratings placed by Standard and Poor (S&P 500 is an American stock market index based on 500 large companies with stocks listed on the NYSE or NASDAQ) were over exaggerated. Burry was not straightforward in his dealings. He concealed facts from the fund investors that he was going to short the housing market. On the other hand, S&P should have been transparent and kept investors informed about risks involved in bonds, stocks and securities. When the financial market crash hit the economy, people lost their jobs, homes and belonging; Michael Burry, along with his associates, banks and S&P executives profited from

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Michael Burry is the manager of the hedge fund Scion Capital. In 2005, Burry discovers the housing market mortgage-backed securities are filled with risky subprime adjustable-rate loans. These mortgage bonds that were the highest possible rating and low default risk (65 percent AAA) were worthless and in 2007 they will fail. In response, Burry will “short” the bonds, meaning betting against them. Since no one ever bet against the housing market, Burry will have banks make them (they will later be called credit default swaps) to then buy them.

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Furthermore, the banks had not helped the situation, they were way over loaning to people and to brokers themselves. With the banks overloaded on loans being faulty, they had driven themselves into a financial breakage and brought bankruptcy to themselves. Lastly, brokers had thought to be a foolproof strategy as they were

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The ethical dilemma that was illustrated in this film was bribery. This issue was also viewed very negatively, and as if the bribery offer was too small to even be taken seriously. There were two good examples of PG&E’s attempt to bribe the members of the Hinkley community to drop the charges against them, and even before that to accept that their health issues were not at all related to PG&E. The first example of bribery was shown when a PG&E

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