I remember in 2007 I was looking to buy a house. I felt the prices were a little high but I had a significant down payment and decent income. I would only consider a fixed rate mortgage, but the lenders would only offer me balloon mortgages and were trying to brush off my down payment. I went to several lenders and had to same experience. I felt something was off so I let the house go. I'm glad I trusted my gut on that.
Great call! I gotta ask... what lenders weren't offering you a fixed rate mortgage? They profit regardless of the product. That's just hilariously bad business.
How does the adjustable rate work. To what would the rate be connected? Your home is worth 200k for example. You pay 1000$ a month.. and as the bubble crashed wouldn't that lower the value of your house and so would be the mortgage payment be reduced as well? I dont get why it would skyrocket
The only two details they missed (probably intentionally) was: A: The credit rating companies didn’t just lower their criteria for home loans, they lied about the bundle quality. Watch The Big Short for a better breakdown of that particular structure, TL;DR they gave a bunch of terrible loans AAA ratings until the bubble burst B: The banks knew the people would “have” to bail them out, to save their financial structure from crumbling. Ironically, the banks set up the housing bubble in this way so essentially the people would have no choice.
Yeah you would think AIG wouldn't be "dumb" and agree to insure a bunch of subprime loans whose teaser rates would run out leaving the homeowner unable to pay. They would do their homework. They agreed to insure AAA rated bonds. That they were lied to about the contents of those bonds is on the ratings agencies.
Mmm. The credit rating agencies you refer to didn't really alter criteria. The banks themselves did that. In a way they indirectly did so, by marking dogshit investments as AAA and thereby removing what was supposed to be a layer of private consumer protection, but that was their only crime. It is asserted in The Big Short that the banks knew there would be a bailout, but what they leave out for some reason is that there's a very good reason they knew: There had already been one six months earlier, when Bear Stearns failed and the government helped Chase buy them.
Yeah but they changed the rules after 08 now they don’t lend money to ppl who actually need it and now we only lend money to ppl who don’t need it lol Dodd Frank in a nutshell
@@mrabrasive51 We called it feeding the Monster. Gosh forbid we ever had year / quarter or month that we did not beat the previous one. They pushed FHA loans as they were more secure to insure than Fannie and Freddie. They still are . Look at most lenders and the FHA rates are lower .
My wife has always held the wallet in check...I cant tell you how many times she has told car dealers and mortgage brokers.."you don't get to tell me how much I can spend...I'll tell you how much I want to spend"....
The average American is not financially educated or savvy. The system (banks) take advantage of them and hedge bets against their ability to follow through on contractual obligations they don’t understand. The average buyer relies on professionals to tell them what they can afford and the terms of home buying. To blame the average consumer for a system that is designed to be impossible to understand (let alone navigate) for the layperson, is incredibly unreasonable. The banks and Wall Street guys were GREEDY. They took advantage of the general population. It’s called predatory lending. Ignoring that fact, blaming the average consumer, is detrimental! It leaves room for this to continue to happen and the cycle to repeat itself. Wall Street, banks, big business, and legislators invest copious amounts of resources to obscure the processes that make them rich. They control banking, markets, and laws to keep ordinary people in bondage while siphoning the wealth. You should watch this clip again and comprehend it.
@@JeffreyGillespie save until you can pay 100% and BTW as long as there are property taxes NO ONE owns their home they are renting it from the government - all a scam.
Not really. Greed is always present, and in the history of the U.S. there hasn't been a particular time when people were more greedy or less greedy. And yet these things don't happen always, they happen sometimes. And sometimes they aren't happening. So greed itself is not the proximate cause. It's sort of like saying the L.A. Dodgers won the World Series because of baseball.
@@wasserperson Hey, thank for your reply. I would agree that no one actually forced them. The one I would say that “forced,” the banks to give out bad loans would be the CRA. By setting discrimination acts against the banks. I’m neither for banks or the government and they both failed massively in this situation.
Fannie Mae is a government sponsored entity with an implict assumption they will buy all mortgages from loan originators for repackaginging as MBSs. That created moral hazard on the governments part, which is not "force" but if someone guarantees they'll buy your poop at $75 a pound, they are incentivizing me to eat burrritos and coffee.
Anyone who hasnt watched this documentary movie about the crisis of 2008 needs to see it. It is the easiest and most accurate way to gain an understanding of what went down and why it COULD very well happen again. I recommend it, having watched it at least a dozen times.
@Grande1124 In what way is that documentary "not accurate." (Be careful how you answer this...I MARINATE in this shit. And I can tell you it is spot on based on my personal recollection of events and a fortune lost during that time.)
“Could”...? Surely it will happen again, no? (I am not in the industry; I am going mainly off Margin Call (dining room scene), and a rudimentary knowledge of human nature!)
@@dennissmathers5391 You know it's happening again except it's on the commericial side not the retail mortgage sector. Come the middle of the fiscal year in January 2021 which is the fourth month in, there will be an immediate sag on rental properties as of now it is against the law to evict someone based on non-payment for their lease agreement due to a CDC order that ends in December. That will put extra load on the public sector and damage the private sector.
Your blaming the end user, instead on the enablers. If you give a druggie a syringe full of heroine, are they going to turn you away. Who’s fault is it when they OD. This was 100% pure capitalism greed. The banks could have absorbed the hits. They could have survived. They wanted to keep their money. They had crap mortgages insured because they didn’t want to lose money. They refused deals that could have stopped it, but they didn’t want to lose money. I’m 99% sure every CEO got paid, even Lehman Bros. The banks got consolidated so now they don’t have to ask for money, the government prints it for them. They put our money at risk so they could make more. My parents refinanced their home when the value was high, then it crashed and they owed more than the house was worth. My father died two years later and he was paying the bills. People knew what was coming (and the signs are popping up again). Houses are becoming so expensive, builders are sitting on empty homes. Electronics are going up due to tariffs. Steel is going up because of tariffs. The builders are not investing profits into these homes, they are borrowing money to build them. They don’t sell them, they can’t pay back the loans. College grads can’t pay back their loans and are defaulting on them. Banks are losing money, but our government is still giving them more money because they really are to big to fail. New bank mergers happen.BB&T just merged with SunTrust to make it the sixth largest in the US.
Alessio Morello it’s highly probable. Think about our current economy. It’s in a boom, booms always have busts. Price of steel is going up, price of electronics is going up, both cause home and auto to go up. People are working two-three jobs to get by because their employers only give the 20 hours. College loans are being perpetually defaulted on. Banks are getting bigger still and regulations are loosening with the dismantling of the CFPB (Clinton and Bush’s deregulation caused the housing crisis). Mega home builders that build developments are sitting on hundreds of overpriced unsold homes (look into Toll Brothers). The only thing missing right now is gas prices rising. The signs from ten years ago are repeating themselves.
That should be directed to both Main Street and Wall Street. They consistently over leverage and buy back stock. You gonna tell them to “don’t live beyond your means.”?
Government set the interest rates and required banks to offer housing loans to unqualified borrowers. Lenders had to do what they did or get sued and also look silly in comparison to other banks that were cashing in on the housing market. For comparison, if interest rates were set by the market there would be an organic barrier to this hyped up market. We can't have that because the Fed knows best when they have proven how completely inept they are and on top of that are driven by political pressures.
The real answer to why they weren't regulated? When politicians say "we need to get rid of onerous regulation" or "the era of big government is over" or "government isn't the solution to the problem, government is the problem" exactly who do you think they were talking to and what do you think they were talking about?
@@solomonreal1977 Bankers and people in the finance industry for one. They were talking about gutting Financial regulations which were put in place to prevent something like the 2008 Crash from happening. And if it did happen anyway, the damage would be contained. That's what the Glass-Steagall Act was all about.
No market ever goes up, forever. Markets always fluctuate. They go down, too. This is not bad. This is the market correcting itself. But the government messes with this and colludes with corrupt businesses and tries to prevent the downside. You cannot prevent the downside. You can only delay its arrival. The more you delay the arrival, the worse it is.
I just happening to look for new house around this time i really couldn't believe what they were trying to tell me i could afford.Lucky for us we knew what are budget was but i have say the temptation was there to buy a property that we could sell later for a enormous profit. The houses they showed us at first where so far out of our price range in was insane.
There are people in my neighborhood who bought at the literal 2007 peak, and didn't break even in real terms until last year. I'm not even joking lol. That's how actually bad the 2000's housing bubble was. My ex's Dad bought a Miami condo for $550,000 in 2007 b/c his brother bought one a year before and flipped it a year later and made $100,000 doing nothing. That's how fast these things were "appreciating". Unfortunately for him, he jumped in too late. By 2010, over 1/3rd of the building was for sale and owners couldn't even find buyers at $200,000. Imagine being -$350,000 underwater within 3 yrs.
You are witnessing the greatest thing and the worst thing about capitalism in a measly two minutes and 56 seconds....risk and deregulation are terrible partners....this is a brilliant explanation....!!!!
Everything said was right....except the part of regulations. The only reason banks did this was because of artificially low interest rates from the fed. Like all gambling, it's not viable. Like all fraud, it eventually fails. The banks know this. The only reason they took on this risk was because they'd be bailed out, and they were right.
Forget who it was but I recall hearing someone point out that one way wall street keeps the common man out of the pond is by making what they do "seem" complicated. Granted some of what they do does take some smarts to understand, but use a degree of artificial complexity to veil stuff like this under several layers that even some of their own people don't see, and those that do see it are either in on it, or unable to do anything, or kept quiet by those in on the scam. But when it's laid out like this it does sound simple...cause it is, and it's just as horrible a scam as it sounds that was bound to come crashing down.
@@EbonFang_92 - And Clinton had absolutely no choice in the matter. The bill that rolled back parts of Glass-Steagall, the Gramm-Leach-Bliley Act, was passed by Congress with a veto proof majority.
@@johnthrush1799 That's not quite right. The original versions of the Senate and House bills passed with much thinner margins, with voting much more along party lines (Republicans for, Democrats against). It wasn't until the after the joint committees hammered out the differences that the veto-proof majority came about... and there was certainly a lot of politicking in the background to gather that support behind the consolidated bill. Clinton and the Congressional Democrats were forced into it, but due to the concessions they extracted, developed the bill into its "veto-proof majority".
And they also fail to mention "Why would all these entities take on all this risk?" And the phrase comes forth- "Too big to fail." And the accompanying thought "The government will bail us out." And the hidden cause, the cause no one wants to acknowledge- the government got involved- owning a home is a right...the CRA (Community Reinvestment Act)...and on...and on... And it all falls on the taxpayer...
CRA had literally nothing to do with this and was necessary because of shit like redlining when it comes to racial discrimination and just in general creating barriers for lower income workers to be able to buy a home even if they could prove they could afford it because white collar workers didnt want blue collar workers moving into their neighborhoods and they especially didnt want non whites moving in lol. Its just a right wing talking point that gets regurgitated because something something government should stay out of the market
this movie lied when it said the banks bought credit default swaps on the MBS to "protect against losses"... the banks shorted the housing market (credit default swaps) cause they knew the mortgages were going to fail.. so now they would make selling the mortgage, and when it falls apart
This scene ignores the fact that what prompted all of this was the Government policy at the root of it. Going back to the 70's with the CRA, and its several reauthorizations since then... or even before that, with the formation of Fannie and Freddie as GSEs. It should be noted that Fannie and Freddie have long histories of mismanagement that require Government bailouts...as a matter of fact of all the people that received TARP money, they were the only ones to not pay it back. Government policy was to use Housing as a way to correct for all sorts of economic disparities, based mostly on race and gender. If a Bank wanted to maintain its FDIC coverage, it had to be lending out X amount to certain groups... Mortgage companies were affected as well by threatening their access to Fannie and Freddie purchasing their loans for servicing. As rates were brought down new loans skyrocketed... then Refinancing old loans... then, they ran out of loans to deliver, but still needed to meet quotas... so they stretched the terms for what qualified: creating the Subprime Market. Many of these Subprime products were also ARMs (adjustable rates)... so when the Fed began raising interest rates it triggered a cascade of defaults. A couple of last points: People believe that this only affected low income borrowers that were "tricked" into taking out these high risk loans... they were not. The risks of the ARM were spelled out very clearly in the terms of the loan as well as by loan officers. People were not tricked into these ARMs. Also, investors were hit very hard by defaults, 40% of which were on investment properties. When people ask me why I support TARP (I didn't at first), this is why. The government created the playing field and set the rules. The Banks were playing by those rules... when suddenly the government steps in and forces them to find work-arounds in order to keep lending... creating the conditions for the crisis.
This as all true, but one question no one asks: Why did anyone take these ratings seriously? Because those credit rating agencies were the only ones allowed to rate those securities, and their rated securities were among the only securities large institutions were allowed to buy. Even if some other company correctly determined the risk and value, it wouldn't matter. It was a government built in monopoly.
The winner here were all the construction suppliers, they were at the end of the pipeline. Someone had to take all those money. EDIT: assuming they took hard cash
One of Topher Grace's lines is wrong here. He talks about how the buyer assumes they can afford it because the bank is willing to lend the money. This isnt exactly true. The buyers were in a scenario where buying a house was pretty much the same thing as renting. If you ended up defaulting on your mortgage, you hadnt put a lot of money down on it, you had just paid your monthly mortgage bill, so if bills got tight you could give up your house without losing a huge investment. It deincentivized people to "tighten their belts" and figure out a way to make a mortgage payment, they simply walked away and rented somewhere else. Or not, im just some guy on the internet.
Imagine you take a loan out for a home. The bank that gave you the loan takes out insurance on you that covers itself in case you default on your loan. In the background Wall Street bets that you will make good on your loan which give birth to those fancy words that they like to throw out such as MBSs and CDOs. But the proverbial needle in the haystack is that bank that just issued you the loan knows damn well that you cannot afford that loan nor will survive the payments needed to be made on it once the interest spikes which double or near triples your monthly payment. Thus you default on it but its starts a panic as banks collect their fees on insurance they bet against you and Wall Street that bet that you will and they stuck on owning your debt which in turn they try to dump that toxic debt onto the next guy. But the sucker that buys it from them believes they are buying good debt not shit that will be worthless. So imagine now millions of same situations with billions of dollars of uranium that no one wants to be stuck holding onto.
@@cornpop8949 But it was their idea to create mortgage backed bonds and CDO's which ended up leveraging those bad loans up to 30 to 1, (the stock market was only leveraged 9 to 1 in 1929 due to margin accounts). This means that a $100,000 home loan could have $3,000,000 of investments based on it. If the bad loans hadn't been leveraged by these new financial instruments created by "financial innovation" then their failure would have not been a financial catastrophe.
@@ericdoberstein8872 Yup. Banks were forced by Clinton Admin and HUD director Cuomo to give bad loans to the most undeserving. Banks refused, Hammer dropped and heads rolled. Banks complied. Big money then came in and bought those mortgage's. Banks couldn't wait to get rid of them, they were suicidal to keep, banks made the mortgage and sold it to the big players in a few hours. Get them horrible things out of here before they kill us all, they are beyond radio active. Big money then combined the Bad loans with the good loans. Hud Director Cuomo then had them rubber stamped all AAA. An excellent place for pensioners and retirees to keep their lifes work in. And New York elected him governor because they love him so much.
Iam betting on the fire insurance of your house because I know your house will burn down so if it dosent burn up I pay you premiums on that insurance if the house but if it starts to burn you give me short payoffs within your insurance
The author of the book, Aaron Sorkin, said something about the whole system of CDOs and derivatives similar to what Bernard Cornwell said about shrapnel shells: "When it's good, it's very good, but when it's bad, it's horrible." It all works splendidly until it doesn't, which is why no one foresaw that the consequences would be much, much worse than the costs of any regulation.
The folks who lived through The Great Depression never forgot the lessons it brought forth. Today, The Great Recession isn't even discussed in the national discourse and it hasn't been for some time. We argue about genitals and restrooms while the system balloons as it did before.
For any financial neophyte like myself I recommend 3 movies that will piss you off. 1. The Smartest Guys in the Room. Enron documentary. Must watch to understand how fucked up these banking people are. 2. The Big Short. What a great movie. 3 Too Big to Fail. This was watched 5 times when it was on HBO.
Like Hank Paulson would ever have said that shit out loud. Guy ran goldman sachs, goldman knew exactly what was going on. Goldman was the first to see the collapse coming and they pulled the trigger so they could get out in front of it...then they pushed for no bailout for lehman bros....because they had shorted lehman. If Lehman had been bailed out, it might have softened what came. What they should have done is bailed out anyone on 1 single primary home, let all the investment properties and second homes crash. They should also have forced the banks to put the houses back on the market. The banks sat on them for years to keep property prices higher than they should have been, in a market economy they should have let the homes crash in value, so the market would adapt and people would have bought homes at depressed values...but that would have basically been a windfall for everyone else. You could argue that only the wealthy would have bought up homes...but that happened anyway. We also didnt have enough government stimulus to people, so ws recovered quickly, and the average person didnt start feeling better about the economy for another 6ish years. But the GOP got congress in 2010 and wasnt going to let anything pass that made Obama look good. The same way they wont address the border, or price gouging, or anything now because they want the issues for the election. Just so they can cut taxes and regulations and we get another economic crash. We have had economic crashes in every single GOP admin since Reagan.
In my humble opinion, the US government should have allowed the losers to lose and the winners to win. However, Wall Street had their "ace in the hole" (Secretary Paulson, the former head of Goldman Sachs) to privatize their profits and socialize their losses. Wall Street always has the best politicians that money can buy, on both sides of the political aisle.
haha. Credit score of 620? This homeless guy comes up to my car window looking for change so I ask him what's his credit rating was and he said 812. For some reason everyone now has a credit rating over 800. 800 was unheard of just a while back and now all of a sudden that's the average?
Funny how none of these films or docus about this never mention the government role in any of this. It's almost like they don't let anyone know the ugly truth.
I know we aren´t all financial experts. But how on GODS earth could some lenders who worked in quite low salary jobs think that there wasn´t something "fishy" going on, considering they could suddenly finance 1 million USD when buying a house?
Just a side bar. The IRS, due to Tax Law in the US, do not raise the person's income threshold as far as income tax. Bonuses paid to the individual, not matter their tax bracket, are taxed a flat rate of 25%. That being said, a banker earning 80million dollars in bonuses is taxed less on those bonuses of that of a high school teacher's salary...... Can we get a Robin Hood/Jason Bourne figure in the US....just saying.
Despite all the financial struggles I and my family faced, everything is finally falling into place! $47,000 weekly profit and riches I'll always praise the Lord
Elizabeth Regina Nelsen has set a precedent for others to follow. We cherish her here in the UK as she has been extremely helpful and made a lot of lives better.
The CRA didn't cause the crisis. They are the scapegoat for the guys that did. Less than 5% of the CRA mortgages defaulted. If anyone really thinks that some heavily screened low income mortgages collapsed the WHOLE world economy, they need to read more. This video explains exactly what happened. The entire financial industry got greedy, relaxed their lending and investment safeguards and there was no industry or govt regulators to stop them. Too much regulation is bad, NONE is worse
Bank of America's CRA portfolio was around 7% but it contributed to about 29% of its losses. Giving loans to deadbeats is a risky move, especially if it's encouraged by the government.
I know exposition is good for story telling in a movie, but damn it sounds like 4 competent people doing the job the job of one person for one, well connected incompetent person.
Three names: Barney Frank, Bill Clinton, and Henry Cisneros. Two more: Fannie Mae and Freddie Mac. End of story. This would not have happened without the government's "help".....
I like how they dont say that the economic incentives for banks to do this were derived from lower interest rates set by the FED to "stimulate" the economy. Also, how governments bailouts create this moral hazard and risk-shifting to the taxpayer. Also, how eternal QE creates massive wealth for banks, while brewing another financial recession, where the cycle will restart. The State is the real culprit here.
This is all bullshit mumbo jumbo. Let me translate. Rich people bet money and lost, but because their rich. EVERYONE has to pay for it, because heaven forbid, a rich ass hole has to go start from scratch and work for a living like everyone else. And because their rich it’s the end of the world. But for you and I. It’s called the everyday struggle.
You're stupid. Everything said was right....except the part of regulations. The only reason banks did this was because of artificially low interest rates from the fed. Like all gambling, it's not viable. Like all fraud, it eventually fails. The banks know this. The only reason they took on this risk was because they'd be bailed out, and they were right.
I remember in 2007 I was looking to buy a house. I felt the prices were a little high but I had a significant down payment and decent income. I would only consider a fixed rate mortgage, but the lenders would only offer me balloon mortgages and were trying to brush off my down payment. I went to several lenders and had to same experience. I felt something was off so I let the house go. I'm glad I trusted my gut on that.
Great call! I gotta ask... what lenders weren't offering you a fixed rate mortgage? They profit regardless of the product. That's just hilariously bad business.
@@eddiemalvin I honestly don't remember at this point. I'd be surprised if any of them survived the 2008 collapse.
You are smart 🤓 man!
Way to give them the finger, mate.
I hope you laughed like a circus clown while those fools attended job fairs.
How does the adjustable rate work. To what would the rate be connected? Your home is worth 200k for example. You pay 1000$ a month.. and as the bubble crashed wouldn't that lower the value of your house and so would be the mortgage payment be reduced as well? I dont get why it would skyrocket
The only two details they missed (probably intentionally) was:
A: The credit rating companies didn’t just lower their criteria for home loans, they lied about the bundle quality. Watch The Big Short for a better breakdown of that particular structure, TL;DR they gave a bunch of terrible loans AAA ratings until the bubble burst
B: The banks knew the people would “have” to bail them out, to save their financial structure from crumbling. Ironically, the banks set up the housing bubble in this way so essentially the people would have no choice.
Hmmm, I wonder why they didn't mention these very important facts...
Wall Street used Main Street as human shields.
@@alberteinstein8131 Main street paid either way
Yeah you would think AIG wouldn't be "dumb" and agree to insure a bunch of subprime loans whose teaser rates would run out leaving the homeowner unable to pay. They would do their homework. They agreed to insure AAA rated bonds. That they were lied to about the contents of those bonds is on the ratings agencies.
Mmm. The credit rating agencies you refer to didn't really alter criteria. The banks themselves did that. In a way they indirectly did so, by marking dogshit investments as AAA and thereby removing what was supposed to be a layer of private consumer protection, but that was their only crime.
It is asserted in The Big Short that the banks knew there would be a bailout, but what they leave out for some reason is that there's a very good reason they knew: There had already been one six months earlier, when Bear Stearns failed and the government helped Chase buy them.
"We were making too much money". Hank Paulson was literally making too much money as CEO of Goldman years before the crash.
Way too much money.
one of the most powerful and probably overlooked scenes. Every person who wants to own their own a home should pay attention to this scene.
Bush speech 2007 about the housing market
And those who were peddling or wants to peddle snake oil needs to see this too.
Yeah but they changed the rules after 08 now they don’t lend money to ppl who actually need it and now we only lend money to ppl who don’t need it lol Dodd Frank in a nutshell
I worked at Wells Fargo and man did we do a shitload of loans we knew were never going to pay of at least have a hard time doing it.
I remember the Wells Fargo pick a pay mortgage......lol.
But w.f. knew the government would back it..Freddy Fanny.
@@mrabrasive51 We called it feeding the Monster. Gosh forbid we ever had year / quarter or month that we did not beat the previous one. They pushed FHA loans as they were more secure to insure than Fannie and Freddie. They still are . Look at most lenders and the FHA rates are lower .
u a ronald reagan fan? de-regulation is a double edged sword.
Thanks for the explanation Eric Foreman.
Lmfao. No money down, w a 500 credit score, and they get a million dollar home loan. Hilarious
620 score and 20% down is pretty goddamn weak, too, in my opinion. How about 700 and 50% down. :)
My wife has always held the wallet in check...I cant tell you how many times she has told car dealers and mortgage brokers.."you don't get to tell me how much I can spend...I'll tell you how much I want to spend"....
The average American is not financially educated or savvy. The system (banks) take advantage of them and hedge bets against their ability to follow through on contractual obligations they don’t understand. The average buyer relies on professionals to tell them what they can afford and the terms of home buying. To blame the average consumer for a system that is designed to be impossible to understand (let alone navigate) for the layperson, is incredibly unreasonable. The banks and Wall Street guys were GREEDY. They took advantage of the general population. It’s called predatory lending. Ignoring that fact, blaming the average consumer, is detrimental! It leaves room for this to continue to happen and the cycle to repeat itself. Wall Street, banks, big business, and legislators invest copious amounts of resources to obscure the processes that make them rich. They control banking, markets, and laws to keep ordinary people in bondage while siphoning the wealth. You should watch this clip again and comprehend it.
@@JeffreyGillespie completely unrealistic for the middle class citizen in America.... You must be a slumlord... 😂😂😂😂
@@JeffreyGillespie save until you can pay 100% and BTW as long as there are property taxes NO ONE owns their home they are renting it from the government - all a scam.
Among the best explanations on what happened to the US economy. Greed was the main culprit.
And by extension...human nature.
no lol... this was a C- explanation lol
Not really. Greed is always present, and in the history of the U.S. there hasn't been a particular time when people were more greedy or less greedy. And yet these things don't happen always, they happen sometimes. And sometimes they aren't happening. So greed itself is not the proximate cause.
It's sort of like saying the L.A. Dodgers won the World Series because of baseball.
Free markets always run on greed
@@Jay2k31313 name me one thing in this world that doesn't run on greed.
I like how they don’t include the fact that the government forced banks to do this and worked with the banks to safeguard them legally.
I can think of several different factors you might mean by "forced" - but they're all incentives, not mandates.
What are you thinking of?
@@wasserperson Hey, thank for your reply. I would agree that no one actually forced them. The one I would say that “forced,” the banks to give out bad loans would be the CRA. By setting discrimination acts against the banks. I’m neither for banks or the government and they both failed massively in this situation.
Fannie Mae is a government sponsored entity with an implict assumption they will buy all mortgages from loan originators for repackaginging as MBSs. That created moral hazard on the governments part, which is not "force" but if someone guarantees they'll buy your poop at $75 a pound, they are incentivizing me to eat burrritos and coffee.
@@wasserperson Lol, nice. thanks for clearing that up for me.
Slick Willy
I finally get it.
Greatest exposition scene ever
Anyone who hasnt watched this documentary movie about the crisis of 2008 needs to see it. It is the easiest and most accurate way to gain an understanding of what went down and why it COULD very well happen again. I recommend it, having watched it at least a dozen times.
@Grande1124 In what way is that documentary "not accurate." (Be careful how you answer this...I MARINATE in this shit. And I can tell you it is spot on based on my personal recollection of events and a fortune lost during that time.)
“Could”...?
Surely it will happen again, no? (I am not in the industry; I am going mainly off Margin Call (dining room scene), and a rudimentary knowledge of human nature!)
@@dennissmathers5391 You know it's happening again except it's on the commericial side not the retail mortgage sector. Come the middle of the fiscal year in January 2021 which is the fourth month in, there will be an immediate sag on rental properties as of now it is against the law to evict someone based on non-payment for their lease agreement due to a CDC order that ends in December. That will put extra load on the public sector and damage the private sector.
COULD = definitely will
@@TPRM1 i totally agree....every economic class should be teaching this
Don't live beyond your means.
800 a month thanks
Your blaming the end user, instead on the enablers. If you give a druggie a syringe full of heroine, are they going to turn you away. Who’s fault is it when they OD. This was 100% pure capitalism greed. The banks could have absorbed the hits. They could have survived. They wanted to keep their money. They had crap mortgages insured because they didn’t want to lose money. They refused deals that could have stopped it, but they didn’t want to lose money. I’m 99% sure every CEO got paid, even Lehman Bros. The banks got consolidated so now they don’t have to ask for money, the government prints it for them. They put our money at risk so they could make more. My parents refinanced their home when the value was high, then it crashed and they owed more than the house was worth. My father died two years later and he was paying the bills. People knew what was coming (and the signs are popping up again). Houses are becoming so expensive, builders are sitting on empty homes. Electronics are going up due to tariffs. Steel is going up because of tariffs. The builders are not investing profits into these homes, they are borrowing money to build them. They don’t sell them, they can’t pay back the loans. College grads can’t pay back their loans and are defaulting on them. Banks are losing money, but our government is still giving them more money because they really are to big to fail. New bank mergers happen.BB&T just merged with SunTrust to make it the sixth largest in the US.
Red Death Scary. So where does it go from here? Is this another bubble waiting to burst
Alessio Morello it’s highly probable. Think about our current economy. It’s in a boom, booms always have busts. Price of steel is going up, price of electronics is going up, both cause home and auto to go up. People are working two-three jobs to get by because their employers only give the 20 hours. College loans are being perpetually defaulted on. Banks are getting bigger still and regulations are loosening with the dismantling of the CFPB (Clinton and Bush’s deregulation caused the housing crisis). Mega home builders that build developments are sitting on hundreds of overpriced unsold homes (look into Toll Brothers). The only thing missing right now is gas prices rising. The signs from ten years ago are repeating themselves.
That should be directed to both Main Street and Wall Street. They consistently over leverage and buy back stock. You gonna tell them to “don’t live beyond your means.”?
Government set the interest rates and required banks to offer housing loans to unqualified borrowers. Lenders had to do what they did or get sued and also look silly in comparison to other banks that were cashing in on the housing market. For comparison, if interest rates were set by the market there would be an organic barrier to this hyped up market. We can't have that because the Fed knows best when they have proven how completely inept they are and on top of that are driven by political pressures.
I remember friends in the 2000s telling me about the ARMs, 85/10/5, and other exotic ways they could get a home instead of 20% down
The real answer to why they weren't regulated?
When politicians say "we need to get rid of onerous regulation" or "the era of big government is over" or "government isn't the solution to the problem, government is the problem" exactly who do you think they were talking to and what do you think they were talking about?
one of the rules of capitalism, too maximize profit every year, even to go as far as to break regulations
The worst part of this speech is the line “Wall Street started pushing the lenders…..” uhhhhh no the Federal Government did
exactly who do you think you're talking to?
@@solomonreal1977 Bankers and people in the finance industry for one. They were talking about gutting Financial regulations which were put in place to prevent something like the 2008 Crash from happening. And if it did happen anyway, the damage would be contained. That's what the Glass-Steagall Act was all about.
The real answer: The so-called Free Marketers were fundamentally in chains, enslaved, and driven by a whip to do what they did, by the government
No market ever goes up, forever. Markets always fluctuate. They go down, too. This is not bad. This is the market correcting itself. But the government messes with this and colludes with corrupt businesses and tries to prevent the downside. You cannot prevent the downside. You can only delay its arrival. The more you delay the arrival, the worse it is.
I just happening to look for new house around this time i really couldn't believe what they were trying to tell me i could afford.Lucky for us we knew what are budget was but i have say the temptation was there to buy a property that we could sell later for a enormous profit. The houses they showed us at first where so far out of our price range in was insane.
There are people in my neighborhood who bought at the literal 2007 peak, and didn't break even in real terms until last year. I'm not even joking lol. That's how actually bad the 2000's housing bubble was. My ex's Dad bought a Miami condo for $550,000 in 2007 b/c his brother bought one a year before and flipped it a year later and made $100,000 doing nothing. That's how fast these things were "appreciating". Unfortunately for him, he jumped in too late. By 2010, over 1/3rd of the building was for sale and owners couldn't even find buyers at $200,000. Imagine being -$350,000 underwater within 3 yrs.
You are witnessing the greatest thing and the worst thing about capitalism in a measly two minutes and 56 seconds....risk and deregulation are terrible partners....this is a brilliant explanation....!!!!
Everything said was right....except the part of regulations. The only reason banks did this was because of artificially low interest rates from the fed. Like all gambling, it's not viable. Like all fraud, it eventually fails. The banks know this. The only reason they took on this risk was because they'd be bailed out, and they were right.
I don’t have a career in financing or economics, but this stuff sounds forbiddingly intriguing.
Forget who it was but I recall hearing someone point out that one way wall street keeps the common man out of the pond is by making what they do "seem" complicated. Granted some of what they do does take some smarts to understand, but use a degree of artificial complexity to veil stuff like this under several layers that even some of their own people don't see, and those that do see it are either in on it, or unable to do anything, or kept quiet by those in on the scam.
But when it's laid out like this it does sound simple...cause it is, and it's just as horrible a scam as it sounds that was bound to come crashing down.
The Book the movie is based on is really well written and explains it quite well, even if you aren't interested in finance
brilliantly crafted scene for us folks on the street.
Woman: “And what do I say when they ask me why it wasn’t regulated?”
The real answer is that there was regulation, but your boss over there kill it.
The Glass Steagall Act, Clinton said that it was a mistake that he repealed it
@@EbonFang_92 - And Clinton had absolutely no choice in the matter. The bill that rolled back parts of Glass-Steagall, the Gramm-Leach-Bliley Act, was passed by Congress with a veto proof majority.
@@johnthrush1799 That's not quite right. The original versions of the Senate and House bills passed with much thinner margins, with voting much more along party lines (Republicans for, Democrats against). It wasn't until the after the joint committees hammered out the differences that the veto-proof majority came about... and there was certainly a lot of politicking in the background to gather that support behind the consolidated bill.
Clinton and the Congressional Democrats were forced into it, but due to the concessions they extracted, developed the bill into its "veto-proof majority".
And they also fail to mention "Why would all these entities take on all this risk?"
And the phrase comes forth- "Too big to fail." And the accompanying thought "The government will bail us out."
And the hidden cause, the cause no one wants to acknowledge- the government got involved- owning a home is a right...the CRA (Community Reinvestment Act)...and on...and on...
And it all falls on the taxpayer...
CRA had literally nothing to do with this and was necessary because of shit like redlining when it comes to racial discrimination and just in general creating barriers for lower income workers to be able to buy a home even if they could prove they could afford it because white collar workers didnt want blue collar workers moving into their neighborhoods and they especially didnt want non whites moving in lol. Its just a right wing talking point that gets regurgitated because something something government should stay out of the market
this movie lied when it said the banks bought credit default swaps on the MBS to "protect against losses"... the banks shorted the housing market (credit default swaps) cause they knew the mortgages were going to fail.. so now they would make selling the mortgage, and when it falls apart
And got the bailout money,on top of that
Yeah moody and S and P used their ratings for fees modus operandi bs to continue the investors buying these crap load RMB MBS
128k in views. Should be 128 million.
Welcome to the trailer park.
(But hey, on the plus side, investment bank executives got record bonuses.)
This scene ignores the fact that what prompted all of this was the Government policy at the root of it. Going back to the 70's with the CRA, and its several reauthorizations since then... or even before that, with the formation of Fannie and Freddie as GSEs. It should be noted that Fannie and Freddie have long histories of mismanagement that require Government bailouts...as a matter of fact of all the people that received TARP money, they were the only ones to not pay it back. Government policy was to use Housing as a way to correct for all sorts of economic disparities, based mostly on race and gender. If a Bank wanted to maintain its FDIC coverage, it had to be lending out X amount to certain groups... Mortgage companies were affected as well by threatening their access to Fannie and Freddie purchasing their loans for servicing. As rates were brought down new loans skyrocketed... then Refinancing old loans... then, they ran out of loans to deliver, but still needed to meet quotas... so they stretched the terms for what qualified: creating the Subprime Market. Many of these Subprime products were also ARMs (adjustable rates)... so when the Fed began raising interest rates it triggered a cascade of defaults. A couple of last points: People believe that this only affected low income borrowers that were "tricked" into taking out these high risk loans... they were not. The risks of the ARM were spelled out very clearly in the terms of the loan as well as by loan officers. People were not tricked into these ARMs. Also, investors were hit very hard by defaults, 40% of which were on investment properties.
When people ask me why I support TARP (I didn't at first), this is why. The government created the playing field and set the rules. The Banks were playing by those rules... when suddenly the government steps in and forces them to find work-arounds in order to keep lending... creating the conditions for the crisis.
This makes me sick to my stomach watching this and hearing that line "no one wanted it. they were making too much money."
“No one wanted *to*.......”
If you were working in finance, and taking home 10x as much money as you were before, you might want to look the other way too.
listen closely and read subtitles, it's not "they" it's "we"...
This as all true, but one question no one asks: Why did anyone take these ratings seriously? Because those credit rating agencies were the only ones allowed to rate those securities, and their rated securities were among the only securities large institutions were allowed to buy. Even if some other company correctly determined the risk and value, it wouldn't matter. It was a government built in monopoly.
We are still dealing with this
I want the sequel to this as far as the next collapse.
100 million loans miss payment in 2 to 3 mo in 2020 on lot of stuff
Her face just screams "how the f- am I going to be able to spin THIS"
The winner here were all the construction suppliers, they were at the end of the pipeline. Someone had to take all those money.
EDIT: assuming they took hard cash
A perfect example of a good written dialog, awefully directed/executed
I worked for a broker 2006-2007 and they doubled down on sub prime, thought it would last forever. Banks loved it too, everyone’s a winner.
I’ll sum it up and three words - greed and corruption!
One of Topher Grace's lines is wrong here. He talks about how the buyer assumes they can afford it because the bank is willing to lend the money. This isnt exactly true. The buyers were in a scenario where buying a house was pretty much the same thing as renting. If you ended up defaulting on your mortgage, you hadnt put a lot of money down on it, you had just paid your monthly mortgage bill, so if bills got tight you could give up your house without losing a huge investment. It deincentivized people to "tighten their belts" and figure out a way to make a mortgage payment, they simply walked away and rented somewhere else. Or not, im just some guy on the internet.
and a decade later we have not fixed any of this.
Too big to fail.
Get Ready for 2008 2.0
I'm still lost on the ”loan, securities default swap” formula... Sounds like some kind of Wile E. Coyote trap.
Imagine you take a loan out for a home. The bank that gave you the loan takes out insurance on you that covers itself in case you default on your loan. In the background Wall Street bets that you will make good on your loan which give birth to those fancy words that they like to throw out such as MBSs and CDOs. But the proverbial needle in the haystack is that bank that just issued you the loan knows damn well that you cannot afford that loan nor will survive the payments needed to be made on it once the interest spikes which double or near triples your monthly payment. Thus you default on it but its starts a panic as banks collect their fees on insurance they bet against you and Wall Street that bet that you will and they stuck on owning your debt which in turn they try to dump that toxic debt onto the next guy. But the sucker that buys it from them believes they are buying good debt not shit that will be worthless. So imagine now millions of same situations with billions of dollars of uranium that no one wants to be stuck holding onto.
@@adinicic4259 The banks had a gun to their head. HUD Director Andrew Cuomo oversaw to that. NINJA loans were not the banks idea.
@@cornpop8949 But it was their idea to create mortgage backed bonds and CDO's which ended up leveraging those bad loans up to 30 to 1, (the stock market was only leveraged 9 to 1 in 1929 due to margin accounts). This means that a $100,000 home loan could have $3,000,000 of investments based on it. If the bad loans hadn't been leveraged by these new financial instruments created by "financial innovation" then their failure would have not been a financial catastrophe.
@@ericdoberstein8872 Yup. Banks were forced by Clinton Admin and HUD director Cuomo to give bad loans to the most undeserving. Banks refused, Hammer dropped and heads rolled. Banks complied. Big money then came in and bought those mortgage's. Banks couldn't wait to get rid of them, they were suicidal to keep, banks made the mortgage and sold it to the big players in a few hours. Get them horrible things out of here before they kill us all, they are beyond radio active.
Big money then combined the Bad loans with the good loans. Hud Director Cuomo then had them rubber stamped all AAA. An excellent place for pensioners and retirees to keep their lifes work in.
And New York elected him governor because they love him so much.
Iam betting on the fire insurance of your house because I know your house will burn down so if it dosent burn up I pay you premiums on that insurance if the house but if it starts to burn you give me short payoffs within your insurance
The author of the book, Aaron Sorkin, said something about the whole system of CDOs and derivatives similar to what Bernard Cornwell said about shrapnel shells: "When it's good, it's very good, but when it's bad, it's horrible." It all works splendidly until it doesn't, which is why no one foresaw that the consequences would be much, much worse than the costs of any regulation.
What a joke, your comment.
"It all works splendidly until it doesn't..."
Modern Capitalism in a nutshell.
The folks who lived through The Great Depression never forgot the lessons it brought forth. Today, The Great Recession isn't even discussed in the national discourse and it hasn't been for some time. We argue about genitals and restrooms while the system balloons as it did before.
For any financial neophyte like myself I recommend 3 movies that will piss you off.
1. The Smartest Guys in the Room. Enron documentary. Must watch to understand how fucked up these banking people are.
2. The Big Short. What a great movie.
3 Too Big to Fail. This was watched 5 times when it was on HBO.
Don't forget margin call
Like Hank Paulson would ever have said that shit out loud. Guy ran goldman sachs, goldman knew exactly what was going on. Goldman was the first to see the collapse coming and they pulled the trigger so they could get out in front of it...then they pushed for no bailout for lehman bros....because they had shorted lehman. If Lehman had been bailed out, it might have softened what came. What they should have done is bailed out anyone on 1 single primary home, let all the investment properties and second homes crash. They should also have forced the banks to put the houses back on the market. The banks sat on them for years to keep property prices higher than they should have been, in a market economy they should have let the homes crash in value, so the market would adapt and people would have bought homes at depressed values...but that would have basically been a windfall for everyone else. You could argue that only the wealthy would have bought up homes...but that happened anyway. We also didnt have enough government stimulus to people, so ws recovered quickly, and the average person didnt start feeling better about the economy for another 6ish years. But the GOP got congress in 2010 and wasnt going to let anything pass that made Obama look good. The same way they wont address the border, or price gouging, or anything now because they want the issues for the election. Just so they can cut taxes and regulations and we get another economic crash. We have had economic crashes in every single GOP admin since Reagan.
Excellent scene / movie - explanation we can understand that highlights what happens when too much of anything is allowed to flourish - not good.
when I watched that movie the Big Short, I wanted to barf afterward
Loaning 400k to a McDonalds employee is asking for trouble.
RIP William Hurt
And how many who participated in this fraud went to jail for this? Not a single one.
I heard there was one guy that went to jail
haha - the normal joe thought the experts knew they could pay it back - how about the individual take a little responsibility
In my humble opinion, the US government should have allowed the losers to lose and the winners to win.
However, Wall Street had their "ace in the hole" (Secretary Paulson, the former head of Goldman Sachs) to privatize their profits and socialize their losses.
Wall Street always has the best politicians that money can buy, on both sides of the political aisle.
wait so the expiration date was the same for everyone? im not following.
Not to take the seriousness of the entire film, but is that Eric Foreman?
Yep
...everyone goes blind...because of greed....stop dreaming and embrace reality
And here we go again. Same conditions, 13 years later.
Of course, AIG was not really offering insurance.
The Short Big Short
haha. Credit score of 620? This homeless guy comes up to my car window looking for change so I ask him what's his credit rating was and he said 812. For some reason everyone now has a credit rating over 800. 800 was unheard of just a while back and now all of a sudden that's the average?
Of the books written covering the financial crisis, I thought Ben Bernanke’s was the best; Tim Geitner’s was also good.
So if staggered payments were used the whole thing could have been avoided?
Or would we have just died slowly?
Funny how none of these films or docus about this never mention the government role in any of this. It's almost like they don't let anyone know the ugly truth.
hopefully more and more people understand this and not push decision maker doing at least their job
Topher was great in this scene
"Why was AIG unregulated"? Bwhahahahaha..
Phil Gramm?
I know we aren´t all financial experts. But how on GODS earth could some lenders who worked in quite low salary jobs think that there wasn´t something "fishy" going on, considering they could suddenly finance 1 million USD when buying a house?
Just a side bar. The IRS, due to Tax Law in the US, do not raise the person's income threshold as far as income tax. Bonuses paid to the individual, not matter their tax bracket, are taxed a flat rate of 25%. That being said, a banker earning 80million dollars in bonuses is taxed less on those bonuses of that of a high school teacher's salary......
Can we get a Robin Hood/Jason Bourne figure in the US....just saying.
So the American Dream died in the early 2000's because of greed...
They should have all been allowed to fail
Are way of life would have changed .
That's a loud ass suit
Despite all the financial struggles I and my family faced, everything is finally falling into place! $47,000 weekly profit and riches I'll always praise the Lord
Do you invest with a professional broker?? I'd appreciate it if you showed me how to go about it.
Thanks to Mrs. Elizabeth Regina Nelsen's time in my life, which had a profound impact on me.
Wow! Kind of in shock you mentioned expert, Elizabeth Regina Nelsen. What a coincidence!!
Elizabeth Regina Nelsen has set a precedent for others to follow. We cherish her here in the UK as she has been extremely helpful and made a lot of lives better.
Life is easier when the cash keeps popping
in, thanks to Elizabeth Regina Nelsen's services. Glad she's getting the recognition she deserves.
honest question. how do all the banks go under if the money is not real? it's just on paper
The CRA didn't cause the crisis. They are the scapegoat for the guys that did. Less than 5% of the CRA mortgages defaulted. If anyone really thinks that some heavily screened low income mortgages collapsed the WHOLE world economy, they need to read more. This video explains exactly what happened. The entire financial industry got greedy, relaxed their lending and investment safeguards and there was no industry or govt regulators to stop them. Too much regulation is bad, NONE is worse
Bank of America's CRA portfolio was around 7% but it contributed to about 29% of its losses. Giving loans to deadbeats is a risky move, especially if it's encouraged by the government.
Deregulation and greed. It's always deregulation and greed.
health insurance, the next chapter o7
It's a good movie, but its far too kind to Paulson, who fought for the deregulation
I know exposition is good for story telling in a movie, but damn it sounds like 4 competent people doing the job the job of one person for one, well connected incompetent person.
Only the human life form trusts predators. Repeatedly.
What about "Bent over by the Fed". Where did all that money come from anyway?
From thin air
Three names: Barney Frank, Bill Clinton, and Henry Cisneros. Two more: Fannie Mae and Freddie Mac. End of story. This would not have happened without the government's "help".....
1:52-1:59... should've had a line saying you'll work on poor bastard.
Banksters learned nothing. Here we are 10 years later, exaxt same situation.🤧😡
No, they know it of course, the upside is they make a shit load of money, thats why they do it
@condor1087 - at least SOMEONE gets it. *internet high five*
Man Eric Forman really grew up
I like how they dont say that the economic incentives for banks to do this were derived from lower interest rates set by the FED to "stimulate" the economy.
Also, how governments bailouts create this moral hazard and risk-shifting to the taxpayer.
Also, how eternal QE creates massive wealth for banks, while brewing another financial recession, where the cycle will restart.
The State is the real culprit here.
Where can I find the movie????
check video description please
No include the politicians who pushed it for brownie points from their poor ass constituents.
Nice wall color
This is all bullshit mumbo jumbo. Let me translate. Rich people bet money and lost, but because their rich. EVERYONE has to pay for it, because heaven forbid, a rich ass hole has to go start from scratch and work for a living like everyone else. And because their rich it’s the end of the world. But for you and I. It’s called the everyday struggle.
300k loan, no credit, no job, no problem!
One low level trader went to jail over this.
en.m.wikipedia.org/wiki/Abacus_Federal_Savings_Bank
The A.I. reason you mean 😮
I hate how that was written.
weird how all these bankers have dual citizenships.
Those Wall street bastards to quote Nixon !
Reagananomics.
At the time I had conservatives telling me that the financial collapse had to deal with liberals who were forcing the banks to give people loans...
The government and the fed did start the ball rolling on sub prime lending, the banks just gave it more speed.
You're stupid. Everything said was right....except the part of regulations. The only reason banks did this was because of artificially low interest rates from the fed. Like all gambling, it's not viable. Like all fraud, it eventually fails. The banks know this. The only reason they took on this risk was because they'd be bailed out, and they were right.
You also don't remember when clinton pushed for banks to lower lending standards so 'everyone could take part in the american dream.'
The American dream, the real American dream is GREED!
No mention of Barney Frank in this scene? Are you kidding me?