The Truth Behind "The Big Short"
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.

9180
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
Relationships

No Boyfriend, No Problem

Why it is okay to not be in a relationship when you are 19

232
No Boyfriend, No Problem
Blakeley Addis

I think that as a 19 year old girl that is in college, we often get caught up in the idea of being in a relationship.

Keep Reading...Show less
Featured

Summer Slump

Summer isn't alway just fun in the sun.

561
Summer Slump

Summer is a time for fun in the sun, hanging out with friends, and living it up, but for some people, that's not the case. Summer is a nightmare for idle minds. Let me explain what I mean by that. For people with mental illness having the extra time to think and relax can be devastating for their mental health. Now, this isn't a problem for everyone but for some people who suffer from mental illness, this is a reality.

Keep Reading...Show less
Featured

Which "Star Wars" Character Are You Based On Your Zodiac Sign

"The Rise of Skywalker" really got me thinking...

907
Which "Star Wars" Character Are You Based On Your Zodiac Sign

Here we go...

Keep Reading...Show less
Featured

NYC Classrooms struggle with marijuana and high students

The Cannabis landscape has changed, and so have what schools experience

936
Weed
Instagram
The National Institute on Drug Abuse (NIDA) reported that about 35.7% of 12th graders in the U.S. had used marijuana in the past year, and 11.8% reported daily use. As for coming to school under the influence, specific statistics can be hard to come by, but there is concern that the increasing social acceptance of marijuana may lead to higher rates of use among teenagers.
Keep Reading...Show less
Featured

The Best Capital Cities in the World To Visit

It's easy to overlook some of these, even just one - don't.

980
The Best Capital Cities in the World To Visit

Why think locally? Think big and consider traveling to the best capitals in the world.

What makes a capital "the best" – culture, sights, history & things to do, to say the least.

Keep Reading...Show less

Subscribe to Our Newsletter

Facebook Comments