What Is The Big Short Essay

The Big Short is an amazing movie that not only teaches viewers lessons on economics, but shows how smart and affluent people, in terms of economics, make a fortune by exploiting the housing market. Michael Burry is a hedge fund manager who discovers that the housing market is extremely unstable. The instability is due to the high risk subprime loans that banks are giving out to people that want homes. However, because of the tremendous amount of loans given out, big banks mix in really bad loans with a handful of really good loans, to make their whole package seem very appealing. Therefore, people have the perception that the housing market is stable, and therefore, decide to invest in it. However, Burry saw past all the benefits of these loans, and instead, found a way to profit off the bad housing market. In 2005, Burry decides to short, or to bet against, the housing market. He takes his fund and visits many big banks to open a credit default swap which allowed him to make an area where he can bet against the housing market. Many of the people that worked for Burry's hedge fund thought he was
Without a surprise, his analyst does find one. In fact, this is worsened by the fact that the banks are taking the risky loans, and putting them into CDOs that are given triple A ratings. Essentially, as explained before, the unsellable loans are placed into a pool of good loans in order to make the CDOs look attractive. Therefore, with more and more CDOs being sold, the more it contributes to the instability of the housing market. To confirm that this is a nationwide issue, Vennett decides to send a couple of his business partners to Miami to observe the process on how loans are being sold, and it comes to his knowledge that the loans that are being sold are