Changing Of The Banking Concept Free Essay Example

In the late 70’s, banking wasn’t a job that you went into to make a substantial amount of money. Then Lewis Ranieri came and changed the entire banking concept. Came up with a profitable rendition of the standard 30-year mortgage that most people want. With thousands of mortgages bunched together, the yield goes up, but the risk is still small because everyone will make every effort to pay their mortgage. However, thirty years later in mid 2008, the entire world economy took a swan dive and affected the masses all over the globe.

But while the rest of the world was oblivious to the eventual downfall of the economy. A small group of “weirdos” saw what no one else did. And they cashed on that in a huge payout.

Mark Baum was one of those outsiders who worked right in the heart of Wall Street. He built his reputation on never assuming anyone or any company was legit without proving it. He didn’t care about being on anyone’s good side, he just spoke about what was on his mind.

Meanwhile Michael Burry, a hedge fund manager creates a credit swap market allowing him to bet against mortgage-backed securities. His bet is accepted by major commercial banks but would require paying high monthly payments. Jared Vennett, a salesman from Deutsche Bank gets in on Burry’s bet to earn a fee on selling swaps to firms who will profit. He piggybacks on a credit default swap. Essentially it is like insurance on the bond and should the bond go bust, there would be a huge payout on it.

Jared pitches to Mark Baum’s fund and Mark and his team explore around and see if there is any validity to Jared’s claim. Ben Rickert, a former securities trader in Singapore assists Brownfield Capital consisting of Charlie and Jamie to invest in credit swaps as it helps to buy cheap insurance with big potential payouts. Brownfield Capital makes a fortune on their trades, but then the group is left highly dejected about the amount of risk taken and the moral hazard that ultimately would fuel the bailouts of several banks.

Some of the compelling scenes in the movie I would say are some celebrities making a cameo appearance to explain banking terms that most people wouldn’t understand, I included. From Anthony Bourdain, to Margot Robbie, to Selena Gomez. It is very intriguing how they are able to explain something that sounds so complex but breaks it down simply. Bourdain would explain what Collateralized Debt Obligation (CDO) was. Essentially explaining about the unsold triple B bonds to unsold fish. Whatever isn’t sold, Bourdain would put unsold fish into a fish stew much like a bank taking the unsold triple B bonds and repackage it and when it’s diversified, the credit rating agency give it a 92% – 93 % triple. A rating which is the best bond that people go for. Actress Margot Robbie explains derivatives while reclining in a bubble bath. Though I don’t think I absorbed the information from Margot has the it was distracting seeing her in a bubble bath. Selena Gomez turns to the camera and explains synthetic CDOs while playing poker. Gomez explains the concept of the “hot hand fallacy,” a key behavioral feature that drove the rise of synthetic collateralized debt obligations – one of the key drivers of the US subprime mortgage crisis in 2007.

The major argument would be that the big banks essentially were oblivious to the fore-coming recession. Instead of being aware and seeing the entire mortgage industry was rotting away quickly, high-level bank executives were taking advantage of seven-figure bonuses. The banks whipped the market to unsustainable heights because it was lucrative for them to do so. They demanded more and more kindling for their fire, and didn’t care that the only way to obtain more mortgages was to push them on an increasing number of people who had no ability to afford them.

The film does relate to some topics on what was discussed this past semester. Most of the topics would reference to equal rights for all and to criticize those who took advantage of certain aspects of society. From civil rights to independence from England, etc. It would reference that no single entity be it a successful company or a single race can take advantage of those who are trying to get through life.

I would highly recommend this movie to a friend. Not just based on the revered acting of Steve Carrell, Christian Bale, etc. It really gives an in-depth look on the basis of what happened; how after the recession, it devastated a lot of people. Unemployment rising, people evicted from their homes. People working at the big banks, such as JP Morgan Chase, Deutsche Bank, etc. were packing up their desks and leaving dejected. Even some of the minor characters in the film would be seen at job fairs after the recession smacked them in the face.

Remember! This is just a sample.

You can get a custom paper by one of our expert writers.

Get your custom essay

Helping students since 2015