The Truth Behind "The Big Short" | The Odyssey Online
Start writing a post
Featured

The Truth Behind "The Big Short"

Did banks intentionally create the bubble? Or reacted to them in a way that made sense—a way that made the most money.

9221
The Truth Behind "The Big Short"
i.ytimg.com

If you have not seen “The Big Short” yet, you should. It is smart, funny and extremely well made. This movie is a portrayal of a few individuals that anticipated the 2008 financial crisis. The film has been well received because of the plausible and captivating story. The movie itself had elements of a documentary including real names and a well-defined point of view. However, this documentary-like portrayal of the 2008 financial crisis bolsters misconceptions about the cause of the event.

The view expressed in the movie is that the housing market crash was caused the greed of big banks and the falsification of mortgage quality by rating agencies. While this is true to an extent, the banks were much more concerned about the bottom lines that they were trying to keep for shareholders. Before the crisis occurred, the conditions of the markets changed in two important ways: the emergence of the housing bubble and the growing movement to make the path to homeownership easier. These changes created the conditions that lead to the crisis.

From 1996 to 2006, the housing prices rose an average of 5.6 percent each year. This price increase transformed all loans, including the bad ones, into good loans. Borrowers could usually refinance or sell the house if they couldn’t pay for them and make a profit due to rising housing prices. This created attractive opportunities to banks due to the continually rising house prices and the illusion that all investments were good ones.

Another view expressed in the film is that bankers targeted low income individuals in order to make a profit. While banks did indeed target low income groups, it was not with malicious intent. In the pre-crisis period, there was as growing movement to make it easier for disadvantaged and low-income groups to own a home. Because of this, big banks were legally mandated that a percentage of the loans they had were comprised of these low income groups. This federal underwriting ensured that banks accepted certain mortgage applications that would normally be turned down.

While “The Big Short” is a good movie, it should be watched with a grain of salt. It presents the banks as evil cooperate machines that were aware of their actions and the potential consequences. In reality, this is not the case: the conditions leading up to the financial crisis are extremely complex and cannot be reduced to corporate greed.

Report this Content
Entertainment

Every Girl Needs To Listen To 'She Used To Be Mine' By Sara Bareilles

These powerful lyrics remind us how much good is inside each of us and that sometimes we are too blinded by our imperfections to see the other side of the coin, to see all of that good.

132332
Every Girl Needs To Listen To 'She Used To Be Mine' By Sara Bareilles

The song was sent to me late in the middle of the night. I was still awake enough to plug in my headphones and listen to it immediately. I always did this when my best friend sent me songs, never wasting a moment. She had sent a message with this one too, telling me it reminded her so much of both of us and what we have each been through in the past couple of months.

Keep Reading...Show less
Zodiac wheel with signs and symbols surrounding a central sun against a starry sky.

What's your sign? It's one of the first questions some of us are asked when approached by someone in a bar, at a party or even when having lunch with some of our friends. Astrology, for centuries, has been one of the largest phenomenons out there. There's a reason why many magazines and newspapers have a horoscope page, and there's also a reason why almost every bookstore or library has a section dedicated completely to astrology. Many of us could just be curious about why some of us act differently than others and whom we will get along with best, and others may just want to see if their sign does, in fact, match their personality.

Keep Reading...Show less
Entertainment

20 Song Lyrics To Put A Spring Into Your Instagram Captions

"On an island in the sun, We'll be playing and having fun"

30650
Person in front of neon musical instruments; glowing red and white lights.
Photo by Spencer Imbrock on Unsplash

Whenever I post a picture to Instagram, it takes me so long to come up with a caption. I want to be funny, clever, cute and direct all at the same time. It can be frustrating! So I just look for some online. I really like to find a song lyric that goes with my picture, I just feel like it gives the picture a certain vibe.

Here's a list of song lyrics that can go with any picture you want to post!

Keep Reading...Show less
Chalk drawing of scales weighing "good" and "bad" on a blackboard.
WP content

Being a good person does not depend on your religion or status in life, your race or skin color, political views or culture. It depends on how good you treat others.

We are all born to do something great. Whether that be to grow up and become a doctor and save the lives of thousands of people, run a marathon, win the Noble Peace Prize, or be the greatest mother or father for your own future children one day. Regardless, we are all born with a purpose. But in between birth and death lies a path that life paves for us; a path that we must fill with something that gives our lives meaning.

Keep Reading...Show less
Health and Wellness

10 Hygiene Tips For All College Athletes

College athletes, it's time we talk about sports hygiene.

28201
Woman doing pull-ups on bars with sun shining behind her.

I got a request to talk about college athletes hygiene so here it is.

College athletes, I get it, you are busy! From class, to morning workouts, to study table, to practice, and more. But that does not excuse the fact that your hygiene comes first! Here are some tips when it comes to taking care of your self.

Keep Reading...Show less

Subscribe to Our Newsletter

Facebook Comments