The Credit Crisis Visualized (THIS IS A MUST SEE)

[THUNDER HANDS]

Run time: 07:32 https://www.youtube.com/watch?v=Q0zEXdDO5JU   Posted on YouTube: February 18, 2009 By YouTube Member: Views on YouTube: 0   Posted on DU: February 21, 2009 By DU Member: THUNDER HANDS Views on DU: 1763

 
OMG, this helped explain the whole credit and banking crisis so much better than any talking head on TV ever could. This should be required viewing for every American who wants to understand how we got into this mess and how hard its going to be to get out of it.

[Skink]

1. Billing concepts.

There is a building in the San Antonio Medical Center that on the top reads "billing concepts", in bold letters.

Right now I am deep into those very concepts. Later when I sober up I'll watch the video.

[MADem]

2. That deserves a rec!

That must be the son or grandson of the guy who used to narrate filmstrips back in the dark ages!!!!

[lxlxlxl]

3. It's sort of o.k.

Doesnt really bother explaining how the homeowner might default because of layoffs.

Doesnt explain Money Markets and Lehmann...

I guess its better than most explanations out there.

[rd_kent]

6. Im gonna go out on a limb here

but Im willing to bet that those homeowners who got laid off and cannot pay their mortgages make up a tiny fraction of those facing foreclosure. I think that this video does a great job in explaining, in laymans terms, what is going on and how it got to this point: investor greed and consumer greed. Those who took sub-prime mortgages are at fault just as much as those who gave them are. Goes back the old saying : "if a deal seems too good to be true it probably is."

[liberation]

14. It omits a lot of fundamental "details"

Most of the issue is not regarding the defaulting of loans. Honestly, the actual footprint of the loans that were toxic were in the low billions. Those loses, under normal conditions, could have been absorbed with just having to go through a mild recession.

The problem were the derivatives, which are in the trillions of dollars. The authors of this tutorial should also have gone in more detail over the credit swaps. In which they are not investments, they are insurance... which were being backed by companies without enough assets.

As much as it would be easier to assume that a couple of family who did not pay their mortgages was the reason the whole economy went down... the main part of the problem is the fact that wallstreet was literally making money out of thin air. And they were expecting almost infinite returns, from what amounted to basically move paper around. The authors also omit going into the details of why people were defaulting...

I will give the benefit of the doubt to the authors. However, those are some very glaring omissions...

[rd_kent]

4. Wow! Thats good!

Im sending it to everyone I know. Great find!

[tabatha]

5. Good video, thanks.

[truth2power]

7. Nah! I don't think so...

Characterizes those getting sub-prime mortgages as "less responsible".

Blame the victim. While some applicants were, indeed, irresponsible, many more were victimized by predatory lenders in the most outrageous ways.

On that basis, this presentation fails.

[Arctic Dave]

13. I thought they explained it well when he talked about

the investors wanting more mortgages. It essence this is were predatory lenders arrive on the scene.

[BeliQueen]

15. I agree

There were some risk takers, but there were also good people who were given the opportunity to own a home--where before it was denied--and then had the net stripped out from under them in the form of ballooning interest rates.

It also fails to show the role of higher gas prices and how they affected the family's ability to pay.

As a simple explanation it works.

[dixiegrrrrl]

8. Part 2 here

http://www.youtube.com/watch?v=iYhDkZjKBEw&feature=related


nicely done. I do much better with visuals, this is helpful.

[Bread and Circus]

9. The thing is that this system works as long as people can make their payments...

however, we decided to ship all our well paying jobs overseas and replace them with less well paying jobs. Then, we let speculators and oilmen game the system to drive the cost of fuel through the roof which raised the cost of everything. So then, people couldn't make the payments anymore, and the system crashed.

The underlying key is lack of rising wages to keep up with rising house costs and mortgage payments.

[THUNDER HANDS]

10. from what i gathered by watching the video

it seemed to me that the underlying factor was that the whole thing was like a ponzi scheme that had no long-term chance of success because in order for the cycle to keep going, the mortgage brokers had to keep going out and looking for less and less reliable applicants. at some point the system was going to have to come crashing down. From what I gathered, it seemed to last about 10 years or so before things completely fell apart.

[Bread and Circus]

11. I'm with you up to a point...however, there's a few fundamental errors

of assumption in the video...

1.) The notion that somehow brokers run out of houses to sell unless you start selling to cigarette smoking, tattoo wearing, obese, baby pumping losers (look at the cartoon of the "risky family" - it's funny).

Reality: Responsible people buy and sell houses all the time. There's always new mortgages to be written.

That's not to deny predatory lending and the ponzi scheme of subprime mortgages. However, the video acts as if once all the houses are sold, that's it..unless you sell to the "losers".

2.) That people who default on loans are basically trash.

Reality: Yeah, there's a lot of deadbeats out there. However, the video ignores the whole huge and fundamental fact that in the past 8 years of Bush wages have stagnated or went down while basic necessities (food, fuel, and heating fuel) have went up.

It's certainly true the system crashed because of the game that was played. But what's being forgotten here is the fundamental engine that drives all of this when it works: WELL PAYING JOBS.

Sub-prime or not, if you lose your job you can't make your payments.

I just hate that wonderful videos like these don't even mention one of the fundamental things that is crippling us: the wholesale outsourcing a lot of our manufacturing and technical jobs.

We cannot sustain the largest economy in the world on foreign oil, greeting folks at walmart, selling loans, and trading lattes with each other.

Right now, our country is sucking wind and China is buying up contracts for future oil on the cheap.

[Seldona]

12. K&R

I agree. Must see.

[Lorien]

16. Kick

[Quantess]

17. Great!

[wuvuj]

18. Needed to tie in AIG...who insured the CDOs?

And the fact that it was a worldwide problem in that they were sold in other countries? And that banks in other countries took the lead of US banks as far as increasing risk and leverage?

[PA Democrat]

20. I agree that they really needed to include credit default swaps because the

CDSs tied to those CDOs were for many times more than the total value of the CDOs themselves and so when default rates exceeded X amount, the CDSs kicked in and had a huge multiplier effect on the entire crisis. Unlike an insurance policy, issuers of credit default swaps are not required by law to hold ANY reserves in the event they have to pay out.

[rollingrock]

19. Sounds like a classic Ponzi scheme to me

the few people on top of the Ponzi pyramid get rich at the expense of the millions on the bottom.

[graegoyle]

21. Look up the poster Khanacademy

Seems like a lot of good, informative stuff and doesn't seem ideological. Here's a two-parter on Shorting Stock:

Shorting Stock 1
Shorting Stock 2

[RoyGBiv]

22. That's a good video ...

It leaves out a few essential elements, but it works.