The Big Short

[frayne]

Saw it at a matinee today and even DW enjoy it. I think most of the nerds here would enjoy it. By the way, I say the word "nerd" as a term of endearment.

The movie did a pretty good job explaining; mortgage backed securities, credit default swaps, CDOs, synthetic CDOs, etc. and really demonstrated the house of cards some financial products/companies are built on.

I give it two thumbs up.

 

[6miths]

Thanks Frayne. DW asked me if I wanted to go yesterday but put it off and will go next week. I enjoyed the book and am glad that they were able to get a good cast together to make it a movie as well. Merry Christmas.

 

[Moemg]

I am going next week . I loved the book .

 

[Brat]

I loved the book too. My DD is in venture capital in the silicon valley so I asked her about the guy in the book who lives in her 'neighborhood'. She said that he is brilliant but his personality/skillset isn't a good fit for VC partnerships. There are a couple of other venture capitalists in the 'hood' who fit that profile, she wishes them the best.

 

[John Galt III]

I saw it. Very good. It made a lot of the same points as the movie *Inside Job*. It left out a couple things, though, like the fact that *some* financial reporters did see the trainwreck about to happen, and were screaming it from the rooftops, on certain talk shows, but were simply not taken seriously.

 

[eytonxav]

We are planning to see it this weekend, so good to hear some positive reviews from our expert critics.

 

[RockyMtn]

Thought it was great. Will probably pick up the book with my new Amazon gift card!

 

[jfn111]

Going to the 1:00 showing today.

 

[Closet_Gamer]

Looking forward to seeing the movie.

I thought the book was great. Made me really angry that lots of people didn't go to jail for fraud on both the borrowing and lending side.

 

[travelover]

Looking forward to seeing the movie.



I thought the book was great. Made me really angry that lots of people didn't go to jail for fraud on both the borrowing and lending side.

I noticed a rather successful counter campaign that has convinced a significant portion of the masses that the government forced the banks to grant loans to poor people that they could not afford to pay, thus all blameless except federal government.


Sent from my iPad using Early Retirement Forum

 

[frayne]

I noticed a rather successful counter campaign that has convinced a significant portion of the masses that the government forced the banks to grant loans to poor people that they could not afford to pay, thus all blameless except federal government.


Sent from my iPad using Early Retirement Forum

I think in that case, a counter to the counter could be made that there was something called due diligence that was slightly overlooked.

My take away from the movie was, actually, very little has changed.

 

[HFWR]

I noticed a rather successful counter campaign that has convinced a significant portion of the masses that the government forced the banks to grant loans to poor people that they could not afford to pay, thus all blameless except federal government.


Sent from my iPad using Early Retirement Forum

"Encouraged"...

Certainly Congress, and several administrations, supported policies that encouraged, and facilitated, an increase of "home ownership". Heh heh... And regulators were either complicit, or asleep, or both.

As with any bubble, the few who remained sane were outnumbered...

Though some were smart enough, ballsy enough, and well-positioned enough to short their way to riches!

 

[Closet_Gamer]

I noticed a rather successful counter campaign that has convinced a significant portion of the masses that the government forced the banks to grant loans to poor people that they could not afford to pay, thus all blameless except federal government.


Sent from my iPad using Early Retirement Forum

The government certainly created some dumb incentives to originate subprime loans, but what happened from there was fraud.

No one told Wall Street to invent CDOs that took one pile of bad loans and sliced/diced them around the world as supposedly safe debt for pension funds. No one told AIG and the banks to create endless speculative "insurance" swaps so that they could load up their balance sheets with loans they wrote with willful blindness and convinced themselves they were "hedged." These people can't be brilliant in one breath but so blind in the next. As an outsider I can understand how it was all a house of cards built on interlinked BS CDS's, so the folks doing it sure as heck knew.

No one told the ratings agencies to put "AAA" ratings on debt instruments that were so complex they had to ask the issuers themselves to build the ratings models.

No one told the banks that they should continue accepting "low doc" loans that everyone in the industry brazenly called "liar loans."

And no one told the borrowers who were lying on those loans they had to do so.

The fraud was systemic and well known. Bad judgement (getting in over your head on a loan or writing a sub-prime loan that goes bad) is one thing. Lying repeatedly on loan docs, knowingly issuing 6 mortgages to a nanny, or telling telling shareholders/regulators that you've bought loan insurance to protect your balance sheet while at the same time selling loan insurance on the same piles of crap back to the other bank is fraud.

Government regulators being asleep at the switch -- and in a revolving door with Wall Street -- was the icing on the cake.

As Jimmy Buffett reflected in "A lot to Drink About":

Repeat after me, it's so easy to see
We're just talking 'bout simple greed

(Yes, I'm still really PO'd about all this )

 

[kcowan]

Sadly the factors that made it happen are still there. Can mortgage originators still sell the mortgage paper? That was the root cause...

 

[NW-Bound]

What krotoole said...

When people are willing to take risks to get financial rewards, they must be made to bear the consequences if it does not work out. One cannot have heaven without hell. When one books the gains but passes on the losses to the gummint or the tax payer, a child can predict the results.

Sadly the factors that made it happen are still there. Can mortgage originators still sell the mortgage paper? That was the root cause...

Let the buyer beware. If it is his own money at stake, he will evaluate the merchandise very carefully. If he does not, he will soon run out of money, and the problem self-terminates.

 

[clifp]

I am looking forward to seeing the movie, I loved all Micheal Lewis books including the Big Short.

Krotoole is right, but I think it extends even further. I've said before virtually nobody is blameless.

Every liar loan even if was pushed by a greedy mortgage broker to average American, required that same average America to sign a piece of paper which said, generally in 24 point type and red letters.

"I certified under penalty of perjury that all the information on this loan application is true."

Nobody made me chase yield by buy banking stocks with high dividends or some of the exotic debt instruments linked to the stock prices of various companies, that I bought during this time.

The same thing is true of the various cities, town, and counties treasuries who bought these higher-yielding securities without understanding them.

Gordon Gekko isn't always right, greed isn't good, at times it can be disastrous

 

[travelover]

The government certainly created some dumb incentives to originate subprime loans, but what happened from there was fraud.

My thinking is that the story that " the government made us do it" was successful to the point that there was no public demand for prosecution.


Sent from my iPad using Early Retirement Forum

 

[Closet_Gamer]

My thinking is that the story that " the government made us do it" was successful to the point that there was no public demand for prosecution.


Sent from my iPad using Early Retirement Forum

That was certainly true on the borrower side -- tho it was some version of "the evil bank made me borrow the money."

On the lender side, I think most folks just not understand what the lenders did well enough to demand prosecution.

Pure speculation on my part, but I wonder if there weren't some behind the scenes exchanges of immunity for cooperation. Though nauseating, these bank execs had to agree to take the government's money in a short timeframe to prevent financial hell in the form of mass bank defaults. If they hadn't taken it, they likely would have later been subject to charges of violating their fiduciary responsibility for letting the banks go under, but that would have been after the economy imploded. In the moment, I wonder if a number of them didn't say "Sure, I'll take the money but I want blanket immunity for myself and senior staff." Bernanke and Paulson tell Bush his choice is immunity and non-disclosure agreements or depression v2.0. Who knows what conflicts and skeletons Paulsen and other members of the administration had in these same structures anyway.

I'm not a conspiracy theorist, but the complete absence of any indictments -- even if they had to leverage the RICO laws -- baffles me.

 

[John Galt III]

They made a B type movie a few years ago in which an average Joe loses everything in the crash, finds out it was all fraud, and goes Berzerk on the the Wall Street s**mbags. I enjoyed it. Lots of slow mo violence. Can't remember the title.

 

[Brat]

When I lived in Washington my computer tech guy's SO was the VP of Mortgage for a leading bank. I called him for service one day and he said that there was a huge fight at the bank's executive level the day before, his SO resigned and they were moving to FL. That was my first hint of problems in mortgage lending. At least one mortgage executive had ethics.

 

[Jpg1717]

I saw the movie Wed and thought it was excellent, although my wife thought it was boring and walked out after 15 minutes.The ratings agencies rated this crap AAA because they knew that the firms paying them wanted the high ratings, and would just go to a competitor ratings firm if they did not get what they wanted. It showed most of Wall Street and big banks as a big fraud only looking out for their own interests, and not their clients. This is why I do not have a financial advisor, and try to only invest in low cost broad index funds. Do not trust anyone.

 

[rayinpenn]

I have a younger friend who worked for Bear Sterns (that went under during that time period). We chatted nearly daily back then. He told me about colleagues who had all their retirement funds go from 2 million to nearly zero. It was difficult to hear about them - kids ready for college - I read the Times and Journal every day to see the carnage caused by over-leverage and dishonesty.

Financial weakness in individuals helped facilitate the fall...
1. We bought a smaller home (cape cod) then we could afford. The upstairs was unfinished and pretty everything need to be redone. Our mortgage payment was nearly the same as the rent of our apartment. I was shocked at some of the income/mortgage ratios some colleagues took on - a disaster waiting to happen.
2. We avoided consumer debt - I drove our first car for 13 years.
3. I've limited our holding in company stock.
4. We paid for home improvements with cash
5. We both worked.
6. We worked hard at thrift big night out was pizza or Chinese food take out.

Yeah the regulators / rating agencies totally dropped the ball: take a sample of the mortgages backing the MBS and see if they are solid. Obviously they were not.

Why someone would take on a mortgage they had no hope of paying I'll never understand. The big house, the flashy cars, exotic vacations and general over spending. We saw neighbors/ friends lose there homes - there were lessons to be learned for those paying attention.

Forgive my preachy nature but for many it just didn't need to happen and did they all learn? - One friend who lost it all seems to be out to dinner every night from what I see on Facebook. Jeeze.



Sent from my iPad using Early Retirement Forum.

 

[Walt34]

Why someone would take on a mortgage they had no hope of paying I'll never understand. The big house, the flashy cars, exotic vacations and general over spending. We saw neighbors/ friends lose there homes - there were lessons to be learned for those paying attention.

Forgive my preachy nature but for many it just didn't need to happen and did they all learn? - One friend who lost it all seems to be out to dinner every night from what I see on Facebook. Jeeze.

We've seen it too and don't understand either. My best guess is that people evolved to survive on the plains of Africa, not do long term financial planning and that's why so relatively few can do it well. They're outliers. What's the point of long term planning if your life expectancy is 35 and there's a good chance that tomorrow you're gonna be some lion's lunch?

One couple that we're acquainted with (really can't call them friends - they're friends of SIL) has lost one home to foreclosure, they've exhausted all available credit lines and declared bankruptcy. And she's a retired MATH teacher! Go figure.

 

[aaronc879]

I'll see the movie soon. Don't tell me how it ends.

 

[frayne]

Why someone would take on a mortgage they had no hope of paying I'll never understand.

I think back in the hey day (pre 2008) people were buying with the idea of speculating/flipping when real estate was going up and up.