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The Big Short Movie Financial Crisis

Decent Essays

Lessons from the Financial Crisis in the Movie The Big Short The outbreak and spread of the financial crisis of 2007-2008 have caused the most of countries into severe economic difficulties and also created an adverse impact on the global economy. The beginning of the financial crisis is defaults in the subprime mortgage market in the USA. Although the global economy seems to recover since 2009, the impacts of the crisis still affect many countries until now. This essay focuses on the background and impacts of financial crisis, and the learning from the movie The Big Short. In the movie the big short, Lewis Ranieri, who is a banker of the Wall Street, created an idea that companies packed thousands of mortgage all bundled together to sell, which is the AAA credit-rating bond, and can obtain high yields with low risk because everyone should pay for their mortgage. The concept of Lewis Ranieri is called mortgage-backed securities (MBS). However, the demand of buying MBS is more than MBS supply. Therefore, when the risk of MBS is high, Collateralized Debt Obligation (CDO) is a way to change subprime loans to high- rating bonds and it can be sold again. Although CDO is full of subprime loans, it still can get AAA rating because …show more content…

“When the dust settle from the collapse, 5 trillion dollars in pension money, real estate value, 401k, saving, and bonds had disappeared. 8 million people lost their jobs; 6 million people lost their homes” (120min.).The amount of money is equal, just from one person to anther person. Many people suffer a lot in the financial crisis, and also some people predict the financial crisis to make money. Financial crisis is a certain event and happens not only once. The financial crisis still exists in today’s market. As the movie mentioned last, “In 2015, several large banks began selling billions in something called a “bespoke tranche opportunity”, which is just another kind of CDO”

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