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.

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.

How can I safeguard my investment portfolio of around $100k in stocks amidst the economic crisis? What's the most effective strategy to reallocate funds in my portfolio to hedge against downturns?

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.

"We were making too much money". Hank Paulson was literally making too much money as CEO of Goldman years before the crash.

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.

Thanks for the explanation Eric Foreman.

Lmfao. No money down, w a 500 credit score, and they get a million dollar home loan. Hilarious

I finally get it.

Among the best explanations on what happened to the US economy. Greed was the main culprit.

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.

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.

Greatest exposition scene ever

Don't live beyond your means.

We are still dealing with this

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.

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

A perfect example of a good written dialog, awefully directed/executed

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....!!!!

Too big to fail.

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.

I don’t have a career in financing or economics, but this stuff sounds forbiddingly intriguing.

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.

brilliantly crafted scene for us folks on the street.

Welcome to the trailer park. (But hey, on the plus side, investment bank executives got record bonuses.)

Excellent scene / movie - explanation we can understand that highlights what happens when too much of anything is allowed to flourish - not good.

That's a loud ass suit

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.

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.

128k in views. Should be 128 million.

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

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.

This makes me sick to my stomach watching this and hearing that line "no one wanted it. they were making too much money."

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...

Her face just screams "how the f- am I going to be able to spin THIS"

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.

I'm still lost on the ”loan, securities default swap” formula... Sounds like some kind of Wile E. Coyote trap.

I’ll sum it up and three words - greed and corruption!

I want the sequel to this as far as the next collapse.

and a decade later we have not fixed any of this.

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.

Nice wall color

when I watched that movie the Big Short, I wanted to barf afterward

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.

Get Ready for 2008 2.0

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?

@condor1087 - at least SOMEONE gets it. *internet high five*

Of the books written covering the financial crisis, I thought Ben Bernanke’s was the best; Tim Geitner’s was also good.

"Why was AIG unregulated"? Bwhahahahaha..

1:52-1:59... should've had a line saying you'll work on poor bastard.

RIP William Hurt

Loaning 400k to a McDonalds employee is asking for trouble.

wait so the expiration date was the same for everyone? im not following.

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

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.

The Short Big Short

...everyone goes blind...because of greed....stop dreaming and embrace reality

Not to take the seriousness of the entire film, but is that Eric Foreman?

Man Eric Forman really grew up

And here we go again. Same conditions, 13 years later.

health insurance, the next chapter o7

hopefully more and more people understand this and not push decision maker doing at least their job

I love how Hollywood knows nothing about finance

Where can I find the movie????

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 course, AIG was not really offering insurance.

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.

And how many who participated in this fraud went to jail for this? Not a single one.

Deregulation and greed. It's always deregulation and greed.

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

No mention of Barney Frank in this scene? Are you kidding me?

So if staggered payments were used the whole thing could have been avoided? Or would we have just died slowly?

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.

Topher was great in this scene

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.

haha - the normal joe thought the experts knew they could pay it back - how about the individual take a little responsibility

The Big Short was a great movie, but they never really broke it down like this

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.

Only the human life form trusts predators. Repeatedly.

They should have all been allowed to fail

honest question. how do all the banks go under if the money is not real? it's just on paper

What about "Bent over by the Fed". Where did all that money come from anyway?

I lol'd

Banksters learned nothing. Here we are 10 years later, exaxt same situation.🤧😡

300k loan, no credit, no job, no problem!

No include the politicians who pushed it for brownie points from their poor ass constituents.

“You’ll work on shitbag” 🤣🤣🤣

It's a good movie, but its far too kind to Paulson, who fought for the deregulation

My high ass thought that was Heisenberg on the thumbnail.

Glass Steagle

The A.I. reason you mean 😮

still not regulated haha

One low level trader went to jail over this.

weird how all these bankers have dual citizenships.

Keep on rockin in the free world.

The American dream, the real American dream is GREED!

listening to this scene scares the shit out of me, to understand how corrupt the fucking banks are.

"...but why male models?"

Greed, hubris, and dickheads with Maybachs? Final answer.

And here we go again with SVB .... domino effect incoming...again...