Reddit reviews The Big Short: Inside the Doomsday Machine
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The Big Short Inside the Doomsday Machine
Here's some advice you didn't ask for.
I retired early at age 54 in 2006. Had a military pension, life-long medical care, nice retirement accounts, owned a home, and so on.
Two things upset my calculus.
First, I didn't realize how boring it could be. And I'm a guy who's lived by the adage, "An educated man never gets bored waiting for a train." That's me. I had lists of things to do, books to read, hobbies to start, etc. But fundamentally it was boring, and after a couple of years I resumed working as a consultant, and now I'm back in graduate school.
Second, along came the 2008 crash. It did not have much of an effect on us financially, but that was just because we were luckily completely out of the market. It did, however, have a significant psychological effect. It made me realize that in the 30 or so years I hope to continue on, there's no telling what can happen. I mean, who ever dreamed the housing market would collapse? (A few people actually did, apparently.)
So I just toss it out there: don't burn any bridges. And by that I mean, don't get so completely divorced from work that you'll have a hard time getting back in the work force should you decide to do so. I was very, very lucky in that the stars aligned just right for my consulting gig, which led to other good things. But again, that was not planned for.
Anyway, good luck in whatever you decide to do!
While what you say is true, it is incomplete, and lets the banks off the hook for where they truly are at fault, namely in buying repackaged high-risk mortgages as if they were low-risk, but higher return. In the banking world, high return + low risk = too good to be true, but they bought them like mad anyways.
Basically, mortgage lenders package a bunch of mortgages into one group, then divide that group up by risk (and therefore varying interest rates paid) and sell the different pieces at different rates to financial institutions, like the bank the OP works for. What was new was taking a group of the highest risk loans from various different loan packages, bundling THEM together into a new derivative group, then ranking THOSE loans as being from low risk to high risk (surely not ALL of them would fail at once, right?), and lower to higher returns, accordingly. But remember, all of these loans STARTED as higher return loans already (they were high risk/high return to start with), so now you had a loan instrument that purported to be LOW risk, but with much higher returns than a normal low risk wedge. This made banks and hedge funds salivate.
When these high risk loans didn't default immediately (most were ARM or balloon payment loans and wouldn't become dangerous until the first major raise in rates a couple of years down the road), financial institutions like the bank OP works for started buying them up like mad. FREE MONEY!
This created a HUGE demand for the loans from the money side, not just the home-buyer side. So mortgage lenders started creating really risky and "creative" loans, and pretty much loaned you money to buy property if you had a pulse just to keep feeding the pipe to the banks and funds.
The fault from the banks' side was that they didn't have the financial sophistication to realize this was a bubble about to burst. And I use the term "sophistication" loosely. These are people who get multi-million dollar bonuses to be the "best of the best". Yet even a high-school econ teacher could have pointed the flaws in their reasoning out to them.
THIS is where they were driven by greed to make more money, warning signs be damned. If the bank next door is doing it and making money, it must be safe and we need to get some. They are guilty of being lemmings. Greedy lemmings (in the metaphorical sense, I know lemmings don't really jump off cliffs).
Read "The Big Short" by Michael Lewis (also author of "Liar's Poker", also about Wall Street). Very enlightening.
This greed and, frankly, stupidity, that continues to be rewarded, ignored, denied, and repeated, is what I find most despicable in "Wall Street's" behavior.
PROBLEMS WITH HEDGE FUNDS
One thing you have to hand to hedge funds is that in 2008 and 2009, when investment and commercial banks were all begging for bailouts from the federal government because they were all "to big to fail", thousands of hedge funds died fast and anonymous deaths. Many of them lack the wealth, political connections, and systematic importance to influence the government. If people want to gamble with their money in financial markets, that isn't problematic as long as they are willing to suffer the losses they incur. (It is worth noting that money of them benefited indirectly from the various bank bailouts, and especially the bailout of AIG. Much of the bailout of AIG was to pay off credit default swaps (CDS) on mortgage backed securities, and the proceeds of those CDSs went to certain hedge funds.)
There has been some concern that some of the larger hedge funds could be systematically important, and could cause problems in the future if they place unmitigated bets in financial markets. The Dodd Frank Act made some effort to control them by having them register with the SEC and provide information on their bets to regulators, but as usual the regulation is watered down and many will comply with the letter but not the spirit of the law.
Also, in reviewing the results of most hedge funds, the investors don't seem to be getting a very good deal. First, it's incredibly expensive to pay someone 2% of your money up front and give them 20% of all returns that they earn on the remaining 98% of your money. Many investors would have been better off investing in more conventional vehicles, but the allure of investing in a hedge fund combined with the possibility of outsized returns lures in a lot of people.
The other risk of hedge funds is that they are frauds. Bernie Madoff was running a long short hedge fund, but it was actually a Ponzi scheme. A number of fund of funds were supposed to be diversifying their investor's assets, but were actually just giving it all to Madoff. (It's pretty insulting to pay someone to invest money for you, and give them 2% plus 20%, only to have them dump it all in a Ponzi scheme after performing no due diligence.) Another form of fraud might just be taking on asymmetrical risk. For example if, like AIG, you sell tons of insurance on the housing market, you can pocket a lot of money in the hopes that you never have to pay up on this insurance, and if you do, you just make vague statements about "once in a lifetime" financial calamities.
Further Reading and Sources:
The Economist Guide to Hedge Funds
More Money Than God: Hedge Funds and the Making of a New Elite
When Genius Failed: The Rise and Fall of Long-Term Capital Management
The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History
The Big Short: Inside the Doomsday Machine
Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
TL;DR: They are investment vehicles for rich people and institutions that invest in whatever they think will make money. They're supposed to make their investors a lot of money, but they definitely make themselves a lot of money.
Not only that, their salaries are structured and referred to as "bonuses". It's just easier for people to repeat what they heard on TV.
I think almost everyone in this thread would benefit from reading The Big Short by Michael Lewis. I'm a former FA and Senate staffer, my dad was a banker now FA and we both learned a lot from that book.
Before 2008 spirits were high and low depending on where you were invested. Remember that the .com bubble had just popped a few years earlier, which stung a lot of people, but that the real estate run-up began right about the same time the .com boom ended.
After the downturn it horribly, horribly sucked except for people who were foresighted enough to get short real estate-related derivatives.
Which I wasn't, so for us the downturn sucked, sucked, sucked.
Fannie and Freddie made up less than 1/5 of the crisis.
source source source
Have you seen the movie The Big Short? Based on this book http://www.amazon.com/The-Big-Short-Doomsday-Machine/dp/0393338827
The bailouts were a huge win for the banks. Our economy lost trillions. That's jobs, people's homes, huge amounts from their 401k. Americans killed themselves, because of what they lost.
At the height of the subprime boom Fannie and Freddie's business was actually shrinking, while the large private lenders (Countrywide most notably) were expanding. It wasn't uncommon for them to push borrowers who could qualify for conforming 30s into the exotic types of mortgages. The selling, packaging, slicing, insuring and purchasing of loans was an enormously profitable engagement for everyone every step of the way.
Mortgage lenders won every time they handed out a nonconforming loan, which was a lot more valuable than a vanilla 30 year fixed. They did't care about quality because the banks were all but telling them straight out 'we'll buy anything'.
Banks profited on creation and sale of the collateral debt obligations and because the CDOs allowed them to hold less money in reserve to guard against borrower default. They didn't care about quality because they'd turn right around and package the loan into a CDO.
The insurance company AIG was winning on collecting premiums on AAA-rated securities that they thought had no chance in failing. Oh, and they got to be rated AAA because the agencies handing out the grades were paid by the banks. So if Moody's won't give Countrywide the needed grade, then Standard and Poor's across the street surely will.
Hell, even the man on the street profited by using the house's rising value as a piggy bank. Or they just speculated by buying investment property, waiting not too long of a time, and flipping it for a good profit.
If anyone wants to really understand the full extent of the crisis, pick up All the Devils are Here or Michael Lewis's The Big Short. For the tl;dr version you can read this
Read the book by Michael Lewis.
I think your idea of seeking assistance is an excellent one. Most people don't realize the impact of mental health in tackling intellectually challenging tasks. An athlete knows that to perform well, they must take care of their physical health by working out, controlling diet, etc... Similarly, one with intellectual pursuits need to take care of their mental health, but often they are unfamiliar on how to do so. Sleeping well, eating properly, etc. are very important, and instead of a coach, as in the case of an athlete, counselling services, psychologists, psychiatrists, etc. can help in training for mental health.
Be honest when working with Counselling Services or psychotherapists. If CS hasn't been working well for you, explain to them why you think that is. They will provide you with a list of psychologists / therapists in the area. The University Health Insurance Policy (UHIP) covers 80% of the costs of a psychologist. CS will explain this to you in greater detail.
Other than that, I can recommend a few things to get in better (mental) shape.
And remember, this is exactly why you're here in University! This is part of your education, and as you tackle these challenges, you will grow as a person. Good luck!
The financial crisis was not caused by the CRA or anti-redlining litigation. As Wikipedia helpfully summarizes,
> The Financial Crisis Inquiry Commission reported in January 2011 that "the CRA was not a significant factor in subprime lending or the crisis. Many subprime lenders were not subject to the CRA. Research indicates only 6% of high-cost loans – a proxy for subprime loans – had any connection to the law. Loans made by CRA-regulated lenders in the neighborhoods in which they were required to lend were half as likely to default as similar loans made in the same neighborhoods by independent mortgage originators not subject to the law."[67] Critics claim that the use of the high-interest-rate proxy distorts results because government programs generally promote low-interest rate loans – even when the loans are to borrowers who are clearly subprime.[152] Several economist maintain that Community Reinvestment Act loans outperformed other "subprime" mortgages, and GSE mortgages performed better than private label securitizations.[2][27]
If you want to understand the behaviors that actually caused the suprime mortgage crisis, I suggest that you read The Big Short: Inside the Doomsday Machine. It is an account of the financial crisis from the perspective of a few people who made millions of dollars by shorting (i.e. betting against) the very mortgage-backed securities which caused the crisis. You can read it for free if you have a Kindle and Amazon Prime, or you can check it out from your local library.
Nobody forced these banks to make the terrible subprime loans that caused the collapse. The banks willingly gave mortgages to people that they knew would be unable to repay them. Why? Because the banks wouldn't be on the hook when the mortgages failed. They had invented a bunch of "mortgage-backed securities" (pools of mortgages, and later pools of pools of mortgages) specifically so that they could sell their mortgages (and the risk of people defaulting on those mortgages) to other unsuspecting institutions.
These "financial instruments" were like machines that could turn a pile of crap into 80% gold and 20% crap. The raw material for these machines were mortgages, which is why the subprime lenders wanted to make as many mortgages as they could. They didn't care about the quality of the mortgages that they made, because they were selling the (deliberately-misassessed) risk to other people.
You've probably heard of an insurer called AIG, which the federal government bailed out to the tune of $182 billion during the subprime mortgage crisis. AIG was one of the unsuspecting institutions that bought those bundles of crap mortgages. AIG bought them because the Big Three ratings agencies (Moody's, Fitch Group, and S&P) said the securities were safe investments (I believe they rated many of them as AAA, the same rating given to US government bonds). Of course, the securities weren't actually that safe. One reason for the incorrect ratings was that the investment banks deliberately manipulated their ratings criteria. For example,
> A pool of loans composed of borrowers all of whom had a FICO score of 615 was far less likely to suffer huge losses than a pool of loans composed of borrowers half of whom had FICO scores of 550 and half of whom had FICO scores of 680. A person with a FICO score of 550 was virtually certain to default and should never have been lent money in the first place. But the hole in the rating agencies’ models enabled the loan to be made, as long as a borrower with a FICO score of 680 could be found to offset the deadbeat, and keep the average at 615. [Source: The Big Short]
and
> Eisman learned that the rating agencies simply assumed that the borrower would be just as likely to make his payments when the interest rate on the loan was 12 percent as when it was 8 percent—which meant more cash flow for the bondholders. Bonds backed by floating-rate mortgages received higher ratings than bonds backed by fixed-rate ones—which was why the percentage of subprime mortgages with floating rates had risen, in the past five years, from 40 to 80. [Source: The Big Short]
There were other ways of deceiving the ratings agencies, too. The agencies paid too much attention to the FICO scores, and not enough to the actual credit histories that yielded those scores. So a California grape-picker with a sparse credit history making less than $20k per year could qualify for a very expensive mortgage, because he had never borrowed a lot of money and thus never had a payment to miss or a loan to default on. Worse, the grape-picker might actually be used as the "good" borrower in order to balance out a "bad" lender in the mortgage pool.
Part of the problem is that most of the smart finance people work for the banks instead of the ratings agencies. That's what happens when the banks will pay seven figures and the ratings agencies only five figures. But another issue was that the ratings agencies didn't want to look too closely at these mortgage pools. The ratings agencies were paid by the banks, and so an agency that rated the securities too harshly was an agency that would soon be out of customers. Some employees of the ratings agencies have attested that they were specifically discouraged by their superiors from strictly scrutinizing the securities that they were assigned to rate.
TL;DR: Banks were not forced to issue subprime mortgages. They willingly chose to, because mortgages were the raw material for a Ponzi-scheme collection of mortgage-backed securities. Blame for the subprime mortgage crisis rests primarily on the subprime mortgage lenders and the ratings agencies that enabled them.
edit: typos, removed unnecessary italics
The Big Short, by Michael Lewis
Lewis has a gift for explaining complicated concepts. And before he became an author, Lewis actually started his career working on Wall Street (which he chronicled in the book Liar's Poker). In The Big Short, Lewis explains what caused the Global Financial Crisis of 2007-08. I thoroughly enjoyed it.
If you're looking for something a little shorter to give you an idea of how Lewis writes, here's Wall Street on the Tundra, which is an article about how Iceland apparently became one of the richest nations on earth . . . on paper. And how that led to its own financial meltdown.
The Big Short, by Michael Lewis, does a great job explaining some of the causes of the financial meltdown. It's told from the perspective of investors who saw it coming, and put their money where their mouths were.
IMHO, the credit rating agencies, like Standard & Poor's and Moody's, are the primary source of the entire meltdown. They gave top ratings to mortgage investments regardless of the quality of the mortgages. This led investors to sink tons of money into mortgage investments, thinking they were perfectly safe. This drove demand for banks to get more people to sign up for mortgages, whether they were qualified or not. The whole system was based on the premise that housing prices always go up. As soon as they started going down, everything fell apart.
Very succinct and efficient post!
I also suggest reading The Big Short (the movie helps as well, but comes across as very anti-wall street while the book helps you understand wall street decision making), as the 2007-8 housing market crisis really is still relevant and directly effective Fed Rev policy.
https://www.amazon.com/Big-Short-Inside-Doomsday-Machine/dp/0393338827?ie=UTF8&*Version*=1&*entries*=0
The government is not innocent in this as well, as bond institutions Fannie Mae and Freddie Mac were both equally culpable, hence why they no longer exist.
In no particular order, here are several non-textbooks that were either required or recommended for higher level economics courses that I have taken:
The Big Short: Inside the Doomsday Machine by Michael Lewis
All the Devils Are Here: The Hidden History of the Financial Crisis
by Bethany McLean
Fool's Gold: The Inside Story of J.P. Morgan and How Wall St. Greed Corrupted Its Bold Dream and Created a Financial Catastrophe by Gillian Tett
Zombie Economics: How Dead Ideas Still Walk among Us by John Quiggin
ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism by Yves Smith
You might also have success looking through the "Customers also bought" sections for these books.
> Io al suo posto sarei crollato.
Pah, a me sembra il solito paraeconomista da strapazzo..
Se vuoi leggere la biografia di alcuni eroi dell'economia che hanno osato andare controcorrente (e hanno avuto ragione), piuttosto che Bagnai, leggi (purtroppo in Inglese) The Big Short - storia epica che include un manager autistico fanatico dell'Uomo Ragno (tutto vero), un team di maghi della matematica disposti a tutto, e molto altro ancora.
E' una lettura epica!
Same author. Guy also wrote The Flash Boys, a book on high frequency trading firms. The Big Short is what this movie is based on. Michael Lewis is really knowledgeable of the financial industry.
The Big Short by Michael Lewis was an easy and interesting read
For questions 1 and 2.
Basically how the originator makes their money is by X amount of CDOs they sell. There was no incentive to pick and choose the best borrowers to sell a loan to because how the CDOs were sold they achieved the best rating regardless of the borrowers credit risk.
Due to this model, people are going to try and get as many people into the homes and sell the CDO asap. This caused questionable lending practices to result, NINJA (no income, no job, no assets) loans, manipulating borrowers income, assets, etc.
Things that could be changed to help not have this occur again:
a) Feds monetary policy was pretty meh during this period, due to low interest rates the banks had pretty much an endless supply of money and when all the reasonable ventures dried up they had to explore other opportunities to lend.
b) Ratings agencies need an overhaul in how they receive their commission, preferably they should be being paid by the investor not the person issuing the security. This will help to eliminate the bias that results.
c) Having X% (2-5) remain on the institutions books who created the CDO will help to make them responsibly lend. This is because if they are required to have it remain on their books, they will make better longer term decisions in who to lend to.
I'm pretty sure all of these issues are discussed in Nouriel Roubini's book Crisis Economics
Another Great book already mentioned in this thread is by Michael Lewis The Big Short
If your interested in the European Crisis Michael Lewis also just came out with Boomerang
> Is there a comprehensive list somewhere of the loan types, lenders, loan amounts floating around?
Do you mean in general like kinds of loans and lenders, etc... Then I would start somewhere like investopedia or google.
Alt-A Loans, but it links to a number of other good definitions
Private Mortgage Backed Securities
CBO Report on GSEs
Banking and Finance Law Commons
If you mean in reference to the financial collapse there are lots of books and blog posts.
I agree that those requirements were well-intentioned (at least from the perspective of the legislators) but fiscally foolish. Nonetheless, the crisis had more to do with collaterialized debt obligations (CDOs) and especially credit default swaps (CDSs) than with the home loans per se.
If it were just about the home loans, banks would have foreclosed, people who couldn't afford their house would lose them, and the broader economy would have been fine. The crisis was caused by many factors, but the dominant one was the huge derivative market that magnified the problem. Big banks don't fall because people can't pay their mortgage. They fall when they underwrite cheap, pseudo-insurance policies on risky / poorly-rated derivatives that generate orders of magnitude more debt.
So not only is there a debate, but the CRA stuff (laws requiring loans to unqualified borrowers) is considered a relatively small contributor.
Sources: Economist, Big Short, Wikipedia, This American Life
I'm not aware of a whole lot of books specifically about accounting, but here are a few recommendations of books about finance, economics, business or that I just think might appeal to /r/accounting.
Anything by Michael Lewis. Liar's Poker has been mentioned elsewhere, but The Big Short is excellent as well.
Ben Mezrich has written some good books about business, but not really accounting specifically. He's most famous for The Accidental Billionaires which is about Facebook (I believe it, along with The Facebook Effect were the main sources for the movie The Social Network) and Bringing Down the House which was about the MIT card counting team and inspiration for the movie 21. You might be interested in Ugly Americans or Rigged though.
Here's a few more that are a little less fiction-y:
Too Big to Fail by Andrew Ross Sorkin
Traders, Guns and Money by Satyajit Das
Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay
Priceless: The Myth of Fair Value (and How to Take Advantage of It) by William Poundstone
EDIT: Now with links!
This is a film adaption of the novel, which is excellent (amazon link) and worth a read. You'll learn more than you ever thought you'd know about the subprime mortgage crisis.
The Big Short: Inside the Doomsday Machine by Michael Lewis. Fantastic book. Edited to add Amazon link.
The situations you mention were all fairly different. No short explanation will give a good sense of what happened. I don't know that much about Amarath, but there are good books written about the other two.
There's an excellent book about the rise and fall of LTCM.
I don't think the definitive book on the mortgage crisis has been written yet, but Michael Lewis wrote one I thought was pretty informative.
He's referencing, I believe, a Michael Lewis book, my guess being The Big Short. It's a narrative-style journalistic piece. Personally, I'd recommend looking to more sources than this if you want to really get into a Glass-Steagall (or other financial reform) debate, this one is very much told as a story.
> understanding mortgage backed securities
The Big Short
Actually He's right. The Bank has the right to lend It to other people, Invest It and pretty much do whatever they want. What you have is the promise they'll give you back If you ask for It.
What regular people don't know is that the Bank has the right to take a USD100,00 deposit and basically lend those USD100,00 to about eight (E-I-G-H-T) different people. The law only makes them actually hold like, 20% of the money they put around.
That's why Bank runs are so frightening. If everybody wants to take their deposits out of the bank, the whole house of card.... err.. Bank collapses.
That's the world banking for you, normal folk. They are too big to fail.
Lesson 1 - The world financial system is designed to fuck with people's money and let them pay if something goes wrong.
Lesson 2 - That's why they don't teach financial education to the people, they only teach spending and debt.
Recommended reading: Griftopia and of course The Big Short. Please don't be a lazy man and just watch the movie (also awesome btw).
You've probably seen the movie, but The Smartest Guys in the Room book is a cracking read. I was engrossed the entire time by how fucked up Enron was and what the wall street mania was like in the late 90's. Superbly written, richly detailed look into how corporations go off the rails and how accounting practices and corporate culture and ethics (or lack thereof) intersect. It's a total page turner - even though I knew Enron collapsed and Skilling and others went to jail.
In a similar vein, The Big Short is a great movie and an even better book. Probably less accounting stuff than The Smartest Guys in the Room, but an engaging, informative and personal look at the sub-prime housing clusterfuck of 2008. Anything by Michael Lewis is a good read generally.
Other random books I've enjoyed recently:
You know what is harming UFOlogy? Ignoring the damn evidence. There is enough evidence here for people to stand up and demand disclosure. And what happens? 'meh'.
Apathy.
> It seems that he has gone down the route of a conspiracy theorist.
Oh wow, gee whiz. He should be tarred and feathered, what a kook!
In this world where we watched billions upon billions siphoned out of the housing market, by a literal, fraudulent market in operation, which was covered up for a long time so more money could be made.
When the 'canaries in the coal mine' should've alerted people, Moody's and Standard & Poor refused to downgrade anything. They downgraded AAs before they would BBBs because they wanted the house to stay up. When it was entirely apparent it was collapsing, the banks again, siphoned money out, and the traders who should've been capitalism all stars for calling it out, 1 was audited 4 times and investigated by the FBI. Michael Lewis - The Big Short
Did anyone go to jail? No. Of course not. 1 person did. And a year later they went after the bottom rung, the poorest in the scheme who were being encouraged to take loans. Aka: the people, not the criminals in charge. (Like charging a street vendor or courier after busting the Mob Don)
We live in a world of corruption. There's enough on Hillary and The Clinton Foundation to implode the government, but no worries, no indictment.
If you haven't noticed, we live in a conspiratorial world influenced and run by conspiracies by rich influential people in back room meetings. And if anyone has put even a modicum of effort and actually looked over UFO files themselves, they'd see a documented cover up, and a shit load of evidence staring them in the face. Not to mention the whistleblowers.
Yes there is disinformation, and yes, even good-natured or honest people fall prey to it. But that is far more destructive, and so is "insta-debunking" and pathological skepticism-in-the-face-of-evidence.
The only positive, is maybe Basset is actually on to something this time and if this is an actual leak from an FBI analyst, then Hillary's info can "implode the government" and Trump may leak it. Apparently it wouldn't be the first time leaked to /pol/ or that Trump did it
If the info is as classified and 'world imploding' as they claim, Trump & Hillary will be indicted and about the only thing that will get America out of that slump is Aliens...so.
Note: An FBI analyst likely wouldn't have had the access the leaker is claiming. More likely ISOO or someone leaked it to Trump from ISOO and the guy venting is from the campaign.
If you get a chance, read The Big Short by Michael Lewis. Fascinating book about the people who saw the fiasco coming.
When you're done, order The Big Short. Absolutely fascinating read. It goes into plenty of detail re: CDOs and the rest of the alphabet soup surrounding the meltdown.
Why don't you start with this.
The blame the government holds? In not being involved ENOUGH, not for getting involved in the first place. In not being aggressive enough with regulation, and not just assuming from the get-go that the big banks were flat out lying to them.
The banks, who thought they could make a killing better against bad mortgages, put pressure on lenders to create MORE bad loans to bet against. That's how you get Countrywide giving a sharecropper with 13K in income a 450K loan.
Hell, when they ran out of junk debt to bet against, they simply repackaged existing loans and sold them again.
Please tell me you're not blaming this on the Fair Housing Act. You know, that little piece of legislation that's been around since 1968? How the hell is that to blame for this? If you're referring to the adjustments to the CRA in the mid 90's, I defy anyone to find the sections of that bill that force banks to give bad loans, or even reward them for doing so.
Michael Lewis The Big Short
Hard engineering is ee, bio, Chem, and so on. Easy is mech, civ.
While I know of one guy who is a CS phd, generally I normally see the more applied math guys.
As for things to read. I think you should start at the beginning and not worry about job titles ... Everything will change a few times before now and when it will be your time...
Some fun reads:
The black swan
http://www.amazon.com/gp/aw/d/081297381X/ref=mp_s_a_1?qid=1348162692&sr=8-2
The big short:
http://www.amazon.com/gp/aw/d/0393338827/ref=mp_s_a_1?qid=1348163015&sr=8-1
Dude, read [this one] (http://www.amazon.com/gp/product/0393338827?keywords=the%20big%20short&qid=1450542815&ref_=sr_1_1&sr=8-1) and [this one.] (http://www.amazon.com/gp/product/0393351599?keywords=the%20big%20short&qid=1450542815&ref_=sr_1_3&sr=8-3) [The first one they already made a movie.] (http://www.imdb.com/title/tt1596363/?ref_=nv_sr_1) The second one I'm only starting but people say it's brilliant.
Edit: forgot to say that I really liked the first one, The Big Short.
http://www.amazon.com/The-Big-Short-Doomsday-Machine/dp/0393338827
His story has been corroborated.
After the financial crisis I read as much as I could about the subject, I read "All the Devils are here", The Big Short, Too big to fail, Crash of the Titans, The Chicken Shit club and many others. So I'm well aware of the culpability of the ratings agencies. But that doesn't excuse the big banks or their actions like you seem to be implying. The banks knew that the MBSs were stuffed with dog shit subprime loans, yet they also knew by getting a CDO from AIG they could get a Triple A rating. They deliberately gamed the system so individual bankers could make huge short term profits selling MBSs. Yeah, Moody's, Fitch, and Standard and Poor's were incredibly corrupt, but who was corrupting them? The big banks that were paying them. The Big Banks were not innocent players, who naively saw a short term advantage that they could use. They were an active participant, they gamed the system, then paid off the referees.
On your second point, I agree, the financial recession wasn't caused by bankers being malicious or evil, but I do think it was caused by short term greed, and willful ignorance. A see no evil, hear no evil, let's not rock the boat, while a good thing lasts greed.
The Financial Crisis Inquiry Report
or alternatively for a more readable book (if more focused on the mortgage meltdown) The Big Short by Michael Lewis
There's no margin call book, but the book I was recommending was the big short by Michael Lewis.
http://www.amazon.com/The-Big-Short-Doomsday-Machine/dp/0393338827
/r/SecurityAnalysis maintain a decent reading list.
The following is taken from it:
History
For investing and money management:
And for fun:
:D
I learned the word from Michael Lewis.
You could always read the book. You get a lot more detail, and no contortion of characters.
Pitt was also a key character in Moneyball which was written by the same author as TBS - Michael Lewis.
That would be awesome. I loved The Big Short and Liar's Poker audiobooks but couldn't finish Flash Boys.
I don't have a Twitter. You should Tweet Joe/Michael and set it up! ;)
>It's a well documented fact that tons of "AAA" securities were in fact backed by shitty mortgages.
Jesus christ, are you literally brain dead?
Yes, you are right. unfortunately, it was not realized that this was happening until after the crisis was over, meaning that at the time, nobody knew the AAA's weren't actually AAA.
For someone that wants to send people back to school, you seriously lack even the most basic critical thinking skills that are acquired just by living.
>The whole point of the act was to prevent banks from investing deposits in securities.
No, it wasn't. Try actually reading the paper.
the seperation of investment banking and commercial banking by the glass steagall act would have done literally nothing to prevent investment banks from investing in mortgage backed securities.
Tell me, in 2008, when you found out about the crisis, were you still able to go to your bank and retreive your funds? Of course you were, because there was no bank run, thanks to the fed. Guess what the glass steagall act was originally intended for? Preventing bank runs. This clearly wasn't the problem, and thus, the act would do literally nothing to prevent it.
>This was the cause of the first great depression and reason the act was put in place.
Wrong again. Check out the first 2 paragraphs of the wiki entry. They have more knowledge than you do about economics at large, it seems.
Main stream economists widely believe it was due to under consumption, the exact opposite of what caused the 2008 depression, which was over utilization of appreciating home values to refinance, and thus, pay down mortgages.
Furthermore, your link actually doesn't agree with you either. The main cause of ratings agencies slapping AAA on things that didn't deserve it, was the deterioration of underwriting. Guess who created the model for underwriting a MBS? That's right, Goldman Sachs.
>In their book on the crisis — All the Devils Are Here — journalists Bethany McLean and Joe Nocera criticized rating agencies for continuing "to slap their triple-A [ratings]s on subprime securities even as the underwriting deteriorated -- and as the housing boom turned into an outright bubble" in 2005, 2006, 2007.
The big short movie is heavily biased against ratings agencies, and does a very poor job of showing the complete picture. "The devils are here," the book mentioned in your link, does a fantastic job of explaining why the final fault shouldn't lie with them, if you are picking only one player for wrong doing (there were several parties, in reality).
My degree is in financial economics, minor in behavioral studies.
You truly don't understand the 2008 financial crisis, and because you also don't understand 1929 or 1873, you are compounding even more wrong information on top of what you already don't know, and then questioning others education? That's scary.
>Go do some research on the subject matter.
Watching a movie, and reading a wiki article, is not doing research. If you want to do actual research, so you can start spreading information that is actually correct, here are some sources for you to read (NOTE: read, don't use cliffnotes or wiki)
Understanding the 2007–2008 Global Financial Crisis:Lessons for Scholars of International Political Economy
The economist
Themotleyfool (Best public returns on stock market in recent history)
All the Devils Are Here
The big Short (please actually read the book. It's very different from the movie)
Maybe read the book if you want to learn more about the story? Maybe the plot synopsis even?
Towards the end of this interview
Michael Greenburger says billions of dollars that the Fed gave to AIG for a bailout was simply turned around and sent straight to Goldman Sachs to pay off the same type credit default swap as Michael Burry "The Big Short" constructed (and probably with a LOT more money).
It's a very dense read that I wouldn't recommend to anybody that's not an economist or studying the field.
These are some easier economic reads:
https://www.amazon.com/Price-Inequality-Divided-Society-Endangers/dp/0393345068/ref=pd_sim_14_1?_encoding=UTF8&psc=1&refRID=E0FCHYAXFXG28V0C15Q0
https://www.amazon.com/Debt-Updated-Expanded-First-Years/dp/1612194192/ref=pd_sim_14_5?_encoding=UTF8&psc=1&refRID=E0FCHYAXFXG28V0C15Q0
https://www.amazon.com/Big-Short-Inside-Doomsday-Machine/dp/0393338827/ref=sr_1_1?s=books&ie=UTF8&qid=1510621923&sr=1-1&keywords=big+short+michael+lewis
https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465060730/ref=sr_1_1?s=books&ie=UTF8&qid=1510621964&sr=1-1&keywords=basic+economics+thomas+sowell
The Big Short. Although not necessarily about politics exclusively, this is a fascinating narrative of the 2008 financial crash.
Hollywood didn't write the book.
Barbarians at the Gate
The Box
And obviously The Big Short
Read the following books:
You'll find documented proof in those books (and in the other 15 titles I've read on this subject) that everything I wrote is factual.
Wow. Did you read what you posted?
"The only thing that ought to matter on a loan application is whether or not you can pay it back, not where you live."
Hard to disagree with that. This reg did not instruct anyone to give a lone to anyone who could not pay it back. I understand you would like to blame the government for all problems, but you really should read a bit more. Here is some suggestions:
https://www.amazon.com/Big-Short-Inside-Doomsday-Machine/dp/0393338827/ref=sr_1_2?ie=UTF8&qid=1521419400&sr=8-2&keywords=the+big+shorthttps://www.publicintegrity.org/2009/05/06/5449/roots-financial-crisis-who-blame
https://www.amazon.com/All-Devils-Are-Here-Financial-ebook/dp/B005DIAUN6/ref=sr_1_2?s=books&ie=UTF8&qid=1521419495&sr=1-2&keywords=2008+financial+crisis
Really, lots of real info out there if you really want to know what happened and not just some political opinion.
An initiated "flash crash" is the most immediate way to cause long-term economic chaos in the West. In one afternoon, they could eliminate 10%+ of our major companies' market capitalizations while injecting a very real fear into all stockholders going forward. Trillions in accumulated wealth would disappear; there goes your father's retirement.
Disclosure: I'm an investment manager and oversee a Large Cap Growth stock portfolio.
Want to learn more, read Michael Lewis. The Big Short: Inside the Doomsday Machine, Boomerang: Travels in the New Third World, and Flash Boys, in that order.