In 2008 the financial market was rocked when Bear Sterns closed its doors, having over invested it’s entire portfolio in involvement mortgage backed securities. This triggered a complete meltdown of the financial markets resulting in Hank Paulsen’s famous 2 page recommendation for 700 billion dollars in emergency govt funds.
The root of the failure was the hyper sale, investment in and criminal misrepresentation of subprime mortgages as means for investment banks, trading houses, hedge funds to make money from duped investors.
The movie The Big Short starring Steve Corell, Ryan Gosling, Christian Bale, with Margot Robbie, Anthony Bordain, illustrates the insanity and the ultimate betrayal of the American people and investors worldwide. The best part of the movie is the way that the typically confusing financial jargon is explained, giving you insight that the those closest to the scandal hid the truth by pretending that fake math and big words ensured the validity of mortgages that should have never been granted.
What Are Subprime Mortgage Bonds By Margot Robbie
Bonds from finanical institutions backed by mortgages originally had only the mortgages considered to A+, that the owners would pay. In order to sell more bonds, lower rated bonds were included.
Ryan Gosling Presents An Opportunity to Steve Correll
Deutsche Bank delivers a sales pitch that the mortgage backed securities were bound to fail, and that while “common knowledge” and Alan Greenspan claimed that mortgage bonds were robust, shorting the bonds, or betting that the priced would go down was an opportunity to make billions.
What is a CDO by Anthony Bordain
The bonds with the subprime mortgages that did not sell were “recategorized” as Collateralized Debt Obligations, then passed off as sound investments based their sheer number and the fact that “not all could fail”. The more bonds with subprime mortgages, the safer. These new “investment vehicles” hid the truth from investors, who were sold the story that the repackaged mortgages. Investment banks, hedge funds and other jumped at the chance to make easy money, unaware of what they were getting into.
Steve Corell Verifies That Mortgages are going to fail
Skeptical that Ryan Gosling of Deutsche Bank is telling the truth, Steve Correll and team gather intel from Florida, and discover that everybody gets a mortgage, sometimes they get five. The mortgage industry gets signs up and resells the mortgage to other financial institutions.
“Why are the confessing?”
“They’re not, they’re bragging.”
Steve Corell Can’t Keep His Mouth Shut
“The mortgage continues to be the bedrock upon which this great economy is built.”
Steve Correll, unable to contain his disdain for those believing the market is strong, speaks out. In a startling way.
Financial Managers Were Arrogant Criminals
Steve Correll: “You’re a lying piece of shit!”
Even The "Objective” Evaluators Were In On The Lie
Mortgage bonds begin to fail, but contrary to Steve Correll’s instincts, the ratings agencies still kept the lie going. Mortgage backed securities remained an A+ rating despite failures to pay the mortgages piled up. It defied logic.
Bear Stern Fails, Spectacularly
Steve Correll’s team weathers the storm of market failures, holding the short position. But Steve reveals the failings are so monumental that the entire economy is a risk, and innocent people will be greatly harmed. Despite being right, he struggles with what is about to happen.