The Big Short Review

The Big Short

The movie is based on a true story, the housing collapse of 2008. One man see the bubble of the American housing economy. All sub-prime loans are bundled together and sold to the general public as a great investment. These investments became trickery and trickery to negotiate as layer of investments are created for purchase.

The mortgages start off as just that a mortgage to acquire real estate by a person that is very likely to pay off the mortgage. Next comes the sub-prime mortgages these were risker that the traditional mortgage. Investors bundled these two together, the mortgages and sub-prime, to create MBS or Mortgage back securities. Then investors placed bundles of these MBS together to create CDO’s or Collateralized debt obligations. With the introductions of the CDO’s things have gotten more complicated for the average investors to understand and comprehend. Then the investors take the words of their advisors that these a good purchases, which later will make a need for Fiduciary laws and standards. Lastly investors created a Synthetic CDO. This was the most complicated of all the investment options created. Synthetic CDO we made up of the up of insurance payments from a credit default swap on CDOs made up of MBSs. All these investors selling these think that no one will ever find out because who in their right mind would bet against the American dream. Also, this was a complicated tracking and monitoring of these investments/ securities being sold so there was not much oversite.

In all aspects of the mortgage industry there is greed and fraud at this time. This greed ranges from the investors selling the securities, by knowingly placing not such good loans together, to the underwriters, under writing the loans with fake or missing data. These peoples lively hood was based on how many loans they could close, bonus were based on of closing sales, and these are just