Can somebody explain to me what was alluded to in The Big Short

Not sure I understand your question, but

the banks had a relationship with the credit rating agencies. The result of that relationship was collusion and fraud.

I think the banks would have been forced to start paying on the CD's the moment the credit rating agencies started downgrading them. And the credit agencies did not.

It would be like a building being on fire, and the firefighter telling the insurance company that the building is fine, and not on fire.

Only after things hit a peak and 2 major financial institutions failed were the banks and credit agencies forced to admit to the public how bad the housing loans and CD's were.

>>1227818
I think its funny how the whole world wants to say everybody on 4chan is a bigoted piece of shit, yet here i am, with no way to compensate you, and youre taking 5+ minutes out of your day to answer the question of some poor bastard like me...
Its kind of funny

>>1227748
Just watched this movie on the plane. It was awesome, really enjoyable and I like the topic.

What bothers me the most is how people believe this whole situation was caused by greedy buisnessmen. Bullshit, it was coruption and shit policies by the government.

Businesses were in some cases forced to have quotas for certain races/demos disregarding their credit worthiness. The whole thing with bailouts is a prime example of private profits and public losses. Gambling with money knowing tax dollars will pay for fuck ups.

Banks should have fails. Politicians should have been held accountable for pushing policies to “expand homeownership” (to people who shouldnt own). Bankers should have suffered losses and been held accountable as well.

>>1227944
I don't think it's funny, it is a typical oversimplification. The (relatively few) people that know of 4chan know /b/, which is -by choice and persona- the most wretched hive of scum and villainy of the mainstream internet.

Some of the other boards show that the same people who are /b/tards or enjoy or at least don't mind /b/tardery are highly functional, knowledgeable and creative.

Also, fix your fucking apostrophe key.

>>1227748
Google "michael hudson"

quoting and shorting are 2 different things. The bank quotes the product, gives it a value. For further explanation we will get Morgen Freeman: Once upon space and time. Just kidding. In order to keep the bank safe, they have several clauses in their contract which prevents them from quoting a product. For example "technical issues". Take a look at the contract. This is not your standard security your trade on an exchange. These are OTC trades, over the counter. There is/was no regulation, so the buyer says I want X and the bank creates that product and sells it to you OTC. Now they have pages of pages of pages on contract, which only a lawyer might understand. If the banks say "the value is 0" in this case, what can you do? Sue them? This would take ages. You can clearly see how they had technical issues for a week or so as soon as they (the bank)had to quote, as it was more than obvious that the value isn't 0.

Also they were most likely to go to other banks and short the market themselves. Of course they have to secure their positions. But nobody thought that they had to secure their positions, as the housing market seemed too good, and the money they made from the ones who shorted was just side money with "no risk". As soon as the risk kicked in they started securing this risk.

I've seen a lot in retail so far, just in a smaller scale.

>>1227961
>Bullshit, it was coruption and shit policies by the government.
It was both, government gave banks the legal authority to make bad decisions. Banks do hold some responsibility in that they made those bad decisions.
Agreed, though. The movie was not nearly critical enough of the role of government in the entire failure.

>>1228025
what do u mean exactly by securing the risk? the banks buying cds's themselves so that when the market imploded they would at least cover their long losses?

>>1228226
Bump

>>1228042
>>1227961

Government and business are two sides of the same coin. Businesses operate in the marketplace that lawmakers create for them. You can't really blame one or the other, they share the responsibility.

>>1227961
Keep grinding that axe bro. The government certainly was not encouraging lenders to make NINJA and liar loans with teaser rates that ballooned and completely relied on house prices appreciating forever so people could refinance. Fannie and Freddie wouldn't even guarantee such shit loans.