Report of recent financial crisis and writing a report Essay

Report of recent monetary crisis and writing a base - Essay ExampleThe Big Short significantly explains the banking crisis of crisis of 20072008 by unfolding the events preceding the crisis, the actual crisis, and the characters twisty (Lewis 1-5). Michael Lewis derives that a crazy, fabricated money machine, built on flawed mathematical models that most financial executives did not really understand the caused the crisis leading to loses of several trillion dollars through government activity bailouts. He establishes that in the tardy 1980s, Wall Street imagined that it could generate bond-like financial products from other debt-based income streams like home mortgages and credit cards. In this context, a bond represented an income stream based on borrowed money. As such, Wall Street designed mortgage bonds in form of stacked specifyers to enable everybody to access them. As a result, investors craving for higher returns on their money invested in the lower tranches while inve stors seeking lower returns invested in the higher tranches. Indeed, we can sense of touch the 2008 financial crisis from the development of the mortgage derivatives (Lewis 21-27). With the help of ratings agencies, Wall Street turned subprime mortgages into exotic, toxic financial products that attracted long turnovers through laundering and reselling. The subprime mortgages had higher gambles attached to them but equally paid much higher stake rates designed for borrowers with lower credit worthiness. As a result, the demand for the subprime mortgages from Wall Street change magnitude leading to increased motivation on the lender for additional subprime mortgages. In addition, marketing for the subprime mortgages increased good and more people took up the loans. Indeed, Michael Lewis argues that these financial instruments became opaque and complex everyday overshadowing the fact that their foundation lay on suspect loans that kept rising (Lewis 112-117). With more people wi lling to buy the subprime mortgages, the quality of the mortgagees decreased, the risk for Wall Streets mortgage bonds increased, and it became harder to sell the bonds to investors. Unfortunately, as the unstable foundation of subprime mortgages became weaker and posed a greeter danger to the world economy, the chief executives of Americas premier banks did not foresee it. Indeed, government regulators and treasury officials also failed to identify the eminent danger. Nevertheless, some investors saw it and used the opportunity to make extensive financial benefits from the financial crisis. However, Michael Lewis notes that Wall Street firms had the ability to hide the risk by making the mind complex and using the rating agencies. Actually, the rating agencies that included Moodys and Standard & Poors helped in giving risky ratings that equaled the US treasuries thus opening the financial market to many of CDO buyers. At this period, Americans bought the mortgages in large number s without knowing that the mortgage demand emanated from their actions. Michael Lewis introduces one of the investors who sought to benefit from this financial crisis as Darwinian world of the bond market. He also introduces Michael Burry, who became obsessed with investing and started a investment firm with the family money. Lewis states that after studying the bond market in 2004, Dr. Burry became convinced