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Economy

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snot

(10,945 posts)
Sun Apr 21, 2024, 12:58 PM Apr 2024

Question(s) about the 2008 crash [View all]

I recently saw The Big Short (https://www.amazon.com/Big-Short-Christian-Bale/dp/B01995O5OS ) for the first time. I'd thought I had a pretty good understanding of the causes of the worst of the losses in the 2008 crash, but this film portrayed an aspect or two somewhat differently than I expected – in particular, it portrayed the big banks, including e.g. Goldman Sachs, as just plain stupid, and if I understood the movie correctly, it suggested that banks like Goldman only bought the shorts AFTER the MBS mortgage bonds were already seriously cratering.

I find it hard to believe that banks like Goldman were so clueless about how risky the mortgage bonds were – I always assumed they were placing their own bets against them before it became obvious to everyone else. (Granted, there may well have been situations where the right hand didn't know what the left handwas doing; but I always assumed that the left hand, at least, knew perfectly well that the right hand was selling sh*t bonds, and started betting against them from earlier on than the movie suggests. And I would have assumed that some banks, e.g. perhaps Deutschebank, WERE that stupid – but not Goldman). Does anyone here have any inside scoop on that? Did the big banks really not purchase any shorts until things were already, obviously falling off the cliff?

Also, as I understood, the bailout of AIG was key – I thought it was the issuer of many of these shorts or bets against the bonds, and that our bail-out of AIG made it possible for it to make good on the shorts, thus saving/enriching the big banks who'd bought them. But the movie never mentioned AIG at all. I expect the filmmakers may have felt that AIG could be eliminated from the narrative without greatly impairing viewers' insight into the causes for the crash; but I just wonder if anyone here knows more about how central AIG's role really was or wasn't.

Any other comments re- the accuracy/inaccuracy of the movie are also welcome.

If you happen to have saved links to any sources backing up your answers, that would be really great.

Fwiw, if you haven't seen the movie, I highly recommend it – I wish more people had seen it, because it looks to me like we're approaching a similar crisis.

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