![]() ![]() ![]() On expiration, the interest rate would double and sometimes triple resulting in the borrowers not being able to meet their obligations. The crux of the impending problem was that many of these subprime loans had a low interest rate that would expire after a few years (teaser rate). The loans were packaged into a mortgage bond, then to be accredited by the rating agencies, of whom were just as complacent as Wallstreet was greedy. Wallstreet became greedier and as more loans were issued, they became known as subprime loans. Lewis’s explanation of the housing bubble is narrated through three groups of unsuspecting short-sellers and structured as follows: As the price of housing rose to irrational levels, banks started to lend money to people who were less creditworthy, preying on people’s dreams and using history to justify the issuance of the loans - ‘One can just re-mortgage after a few years since house prices will continue to rise, don’t worry about the interest payments.’ This made money, lots of it. Like the Hobbit Trilogy, the Harry Potters, and The Hunger Games the movies simply don’t do the books justice, a skilled author’s ability to conjure scenes in one’s head is unrivalled - Michael Lewis is no exception. ![]() After watching Adam McKay’s “The Big Short”, I approached Michael Lewis’ “The Big Short: Inside the Doomsday Machine” not completely in pitch black. ![]()
0 Comments
Leave a Reply. |