The film “The Big Short” tells three stories, each with a loose connection to the other. Each story tells the story of a group and their actions in the wake of 2008’s crash in the housing market.
Christian Bale portrays Michael Burry, an eccentric manager of hedge funds, in one instance. The US housing market is highly unstable due to high-risk subprime loan defaults. Burry expects the market to collapse as adjustable rate mortgages increase. He proposes the creation of a credit default swap that would allow him to profit from the market-based mortgage securities. Burry’s long-term wager was accepted by both major commercial and investment banks. It was valued at over $1 billion. Burry required monthly payments of a significant amount, which upset his clients. Although they urged him to sell, Burry was determined and confident in his decision-making. Burry, under immense pressure, decides not to allow withdrawals. This upsets investors. The market finally collapses. Burry’s risky move paid off, and his fund values increased by 489%. His overall profit was more than $2.69 million. Jared Vennett from Deutsche Bank is another example of a decision-maker responsible for global asset-backed securities trading. He was the first person to respond to Burry’s inquiry. Burry finally realizes he is right and enters the market. Burry then makes a profit by selling swaps to companies that will make a profit when the underlying bond prices plummet. Mark Baum is the Frontpoint Partners hedge-fund manager. Vennet is not a good fit for Baum because he has a low regard of American banking ethics and business models. Vennett explains that the subprime loans packaged in AAA-rated collateralized debt obligations will lead to the market’s collapse. Frontpoint then conducts a study on South Florida to find that Wall Street banks are making a profit from the mortgage deals sold by mortgage brokers. Wall Street banks are able to charge higher margins for more complicated mortgages. This causes a bubble and prompts Vennett to sell them swaps. In 2007, when the loans are slowly insolvent, the prices for collateralized obligations start to rise. Rating agencies also begin to decrease their bond ratings. Baum sees fraudulence and conflicts amongst the credit ratings agencies. Baum is shocked to learn that fraud will cause the collapse of the global economy. The fraudster decides to purchase as many as possible at the expense banks and waits till the last moment to sell. Baum’s fund eventually makes $1 billion in profit, but the banks refuse to accept responsibility for the current economic crisis. This film’s final story is about Charlie Geller (a young investor) and Jamie Shipley (a young investor), who are looking for affordable insurance with big payouts. You must have a minimum capital edge to trade with ISDA Master Agreements, such as Baum’s or Burry’s. Jamie and Geller enroll Ben Rickert, a former securities trader. Geller suspects that the banks are fraudsters when CDOs and bond values rise despite defaults. They also decide to visit South Florida’s Forum to learn that the U.S Securities and Exchange Commission has no regulations for monitoring mortgage-backed security transactions. The hedge fund makes more profit than any other by shorting higher-rated mortgage securities. They were considered very stable and received a greater payout. Eight million people lost jobs and six million lost their homes during the financial crisis. In the United States alone, trillions in consumer wealth were lost (Mary Gotschall from Learning English News). The financial crises spread all over the globe. The global recession saw rising unemployment and slowing economies. International trade also declined. It is evident that different companies were not objective or ethical throughout the film. Fraudulent activity refers to activity that is deceptive, dishonest, and untrue. Wall Street firms were acting unethically by failing to ensure that people can afford their mortgage payments. The fact that different securities were given high ratings by the firms is a clear indication of this. Because of competition, the rating agencies gave investment banks better ratings than they should have.
They are being dishonest and careless, which is fraud. Wall Street firms sold thousands of home loans to commercial banks and investors, then put them in one basket. These home mortgages can be considered safe investments, as homeowners have historically been able to repay their mortgage. The securities basket was overloaded with risky mortgage loans because mortgage bankers were lending money too high to people who couldn’t afford the mortgage. This highlights the fraud and greed of Wall Street mortgage banksters and other members of the realty agency. These banks were quick and easy to approve loans, without even checking that the recipients could pay them back. Unintentional acts of negligence are still criminally punishable by civil law, even though they may be accidental. Other intentional torts include battery and assault, false imprisonment as well as trespassing onto land and chattels. The film could show that mortgage brokers were acting negligently by granting loans to people who could not afford them. Negligence refers to the failure to take adequate care of something. The film showed mortgage brokers acting recklessly, but confident in granting these loans. I believe there shouldn’t be additional regulations to stop this. However, companies should communicate their ethics, morals and values to employees so that they don’t need to involve the government as much as they are. I don’t believe more regulations should be passed. However, companies and rating agents should be more careful about who they loan money to and how they pay it back. Because mortgage brokers were compelled to lend loans to people who could not afford them, government regulations are what led to the market’s collapse. More government involvement can lead to longer processes and higher costs. Because there is less competition among firms, government regulation can make it more difficult for people to be ethical. In the end, I believe that this industry should be free from government regulation. Too much government involvement can lead to more costly, complex, and longer-lasting problems. Employees should learn about ethical principles and how they can benefit society and the people in general so that they can set a goal when lending money.
