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The Economic Catastrophe In The Big Short

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The movie clarifies the economic catastrophe that happened in 2008 and what triggered it. In the U.S., the economy dove into the Great Recession marking it worse than the one in the 1930s. More than 8 million citizens were jobless with six million losing their houses in the U.S. alone.

During the 1990s, Lewie Ranieri who was a Wall Street banker created mortgage-backed securities (MBS) meaning firms in Wall Street were in a position to collect mortgages together in securities’ baskets then sell them to investors and banks. They were safe ventures until banks started lending money to anyone, including those who could not afford to buy a house, putting more unsafe mortgages in the securities’ basket at C.D.Os (Collateralized Debt Obligation). The bank used CDOs to pile up bonds that weren’t selling together, then thought them diversified, and then acquired AAA ratings with no complains. The assessment organizations gave highest scores nonetheless. Massive leverage, short-term interests, subprime lending, and poor risk controls were unethical behaviors that the firms depicted during this period (Lewis, 2017). Their short-term interests left the whole economy with long-term effect felt over the whole world.

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Experience is the best thing in life. Greed brought about the 2008 fiscal crisis. It was well based on short-term benefits instead of the bigger picture. We can benefit if we learn how to stay away from excessive gains. Firms and assessment groups gave misguided information on rankings and figures. False scales never end up as true. It is best to stick to the truth; even if not that pretty. Banks as well can prevent sub prime lending. If due diligence is done from everyone then the crisis can be prevented. We have learned something from the crisis. We are required to behave ethically because at the end of it all it only affects us in return.


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