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The Big Short: The 2007-2008 Global Financial Crisis

564 Words3 Pages

The Big Short is an entertaining film which depicts how the financial industry turned into a world of chaos during the 2007-2008 Global Financial Crisis (GFC). It focused on how several traders and fund managers saw the signs of an impending doom while banks and credit rating agencies ignored them. Bankers preyed on the Americans' aspiration of achieving "The American Dream" by offering mortgages even if they are sub-prime. Believing that people always pay their mortgages, bankers became greedy and overconfident . They have disregarded the loan/borrower quality for the benefits they will reap from the quantity of loan bookings. This neglect on assessing the loan borrower's capability to pay led to large-scale defaults which caused a decline in the housing market. Also, bankers repackaged low rated financial tools as CDOs to get a higher credit rating when in reality, the bonds are made of worthless securities. These eventually led to the collapse on bonds concocted from sub-prime mortgages and breakdown of the US economy. …show more content…

It is the responsibility of the government, especially the SEC, to protect its consumers with regulations and enforcement. There should have been qualifications and restrictions regarding quality of sub-prime loans before being bundled up in bonds. Engagement of private mortgage companies in risky loans and speculative investments should be highly monitored. The SEC should have the authority to police the finance industry for fraud and abuse, and not only for criminal

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It goes showing throughout the film how they were able to predict this event based on the facts from past crises, like the Wall Street collapse in 1929, leading to the so called Great Depression, “in which thousands of Americans lost their jobs and houses, and the trust in the financial institution were severely compromised, mostly due to the fact that the banks used depositors’ money to buy stocks without their approval.” (Amadeo, Kimberly) This offers some context to the movie, and also connects the 2007 financial crisis with another similar event, making a bond that shows how this is not something new and unexpected, but on the contrary, it is something that already happened and it was caused by the same circumstances, the tolerance in the use of fraudulent and corrupted schemes by the financial institutions and the lack of regulation by the

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