CAT had been using more and more of its cash the red bar to buy back its own shares inflating the apparent demand for them and therefore their price. And where was CAT getting the money with which to buy those shares?
Inside the Doomsday Machine. They foresaw that the housing market and the supporting subprime mortgages were going to crash, and they found a way, using credit default swaps, to bet that the housing market would crash, and they won.
Along with them is a supporting cast of stupid, sleazy bankers and real estate brokers Housing bubble case essay sold subprime mortgages, created the fraudulent subprime mortgaged backed synthetic securities, and defrauded investors. In many ways the movie is a comedy because the material is presented in a clever way.
For example, the movie might cut to a girl taking a bubble bath who looks into the camera and describes a type of investment; or to a chef who chops up three-day-old fish representing rancid investments and throws them into a pot to make fish stew representing collateralized debt obligations or CDOs.
A lot of the movie takes place in Las Vegas, so there are a lot of pretty semi-dressed girls as backdrop. The purpose was to make this super-dry financial stuff interesting enough to make it interesting to the audience. In the movie, Baum spoke to mortgage consultants who bragged about selling huge subprime mortgages Housing bubble case essay people with no jobs, no income, and absolutely no chance of meeting the mortgage payments.
The bank lends the money for the interest-only mortgage and the banker gets a huge commission; the mortgage consultant gets a huge commission; the mortgagor gets to move into his new house, and will stay there until the interest-only period ends, and then he gets evicted and screwed.
The total immorality of the mortgage consultants and bankers, bragging how they screwed people, is clear. Baum visited a stripper who had gotten a mortgage through the consultants.
He had to pay her fee for an hour of her time in order to interview her. He told her that her mortgage payment would soon double or triple. After learning that, she was no longer pretty.
Baum went to Florida and found developments with hundreds of houses, almost all abandoned because the owners had been foreclosed. The few people left looked like they were staring death in the face. Baum also visited a money manager who had merged thousands of faulty subprime mortgages, knowing that they would default, and created the CDOs and CDOs-squared other fraudulent securities that he sold to investors as AAA investments.
I saw all this stuff going on and I became angrier and angrier. As long-time readers know, I have been writing about the housing bubble sinceand how it was going to cause a financial crisis.
And there were so many levels on which this movie infuriated me. First, this movie was full of crooks, some of whom made thousands and other who made hundreds of millions — on the backs of families who lost their homes and jobs and went bankrupt.
But now, innot one goddamn one of them has even been prosecuted and sent to jail.
The Obama Justice Department has adamantly refused to prosecute anyone, because they all used a portion of their fraudulently obtained millions to make large contributions to the Obama campaign or projects sponsored by Obama. Not one single person has been prosecuted.
Prior to the s, I would never have believed that this massive level of corruption and criminality was possible in the United States. Maybe in Russia, maybe in China, but not in the United States.
It was only made possible with the rise of Generation-X in the s. The second infuriating thing is that so many mainstream economists and bank managers and politicians claim they never saw the financial crisis coming.
They did not even know there was a housing bubble until well after the financial crisis began. And my question, the one that I have asked myself over and over for years, is: If none of these people knew that there was a housing bubble, then how the frigging hell did I know it in ?
And why, year after year, did people I tried to explain it to treat me as a pariah? Yes, this has gotten very personal for me. The fact is that I have concluded long ago that they were not caught by surprise at all.
The Gen-Xers who created the fraudulent synthetic securities had by and large graduated with Masters degrees in Financial Engineering in the s.
There are huge amounts of stuff on the internet about this.Housing Supply and Housing Bubbles Edward L.
Glaeser, Joseph Gyourko, Albert Saiz. NBER Working Paper No. Issued in July NBER Program(s):Public Economics Like many other assets, housing prices are quite volatile relative to observable changes in fundamentals. A survey that Karl Case and I conducted in , for instance, found that on average, San Francisco home buyers expected housing prices to increase by 14 percent a year over the next 10 years.
May 08, · Everybody knows what caused the housing bubble, with its breathtaking, though ephemeral, increase in prices, right? A long run of low mortgage . America is facing a higher education bubble.
Like the housing bubble, it is the product of cheap credit coupled with popular expectations of ever-increasing returns on investment, and as with housing prices, the cheap credit has caused college tuitions to vastly outpace inflation and family incomes.
Housing Bubble And Financial Crisis Case Solution & Answer Examination of the Housing Bubble, and The Subsequent Financial Crisis The case is centered on the financial crisis of to thatwas due to the bursting of real estate bubbles around the world, which started from as early as the s. Mar 25, · The journalism craft should take a long, hard look at what it’s failed to do, yet again, in the housing bubble. It has failed to warn — as loudly and incessanty as it did in promoting the housing bubble — that a financial crunch was on the way. In the early s, St. Louis began construction of the Pruitt-Igoe towers and other high-rises to house the African American poor. Pruitt had been intended for blacks and Igoe for whites, but by the time the projects opened in –56, few whites were still interested in urban public housing; there were so many inexpensive options for them in south St. .
The immediate or proximate cause of the crisis in was the failure or risk of failure at major financial institutions globally, starting with the rescue of investment bank Bear Stearns in March and the failure of Lehman Brothers in September Many of these institutions had invested in risky securities that lost much or all of their value when U.S.
and European housing . The concept of a mortgage backed security (MBS) is essentially a financial derivative of a pool of mortgages. Here is a short video explaining the concept of .