It is quite puzzling how rating agencies can give triple-A rating to all these junk subprime loan backed bonds. And till today, investors are still paying so much attention to the ratings coming out from them. Can they still be trusted with their ratings?
Very nice explanation: thank you. Stronger at the beginning than at the end. We need better explanation of precisely how things came down. Also, I'd like a clearer definition of the term "sub-prime."
@RichardKoenigsberg Subprime is kinda mean sub-class. Subprime loans are loans that are made to people without credit-worthiness. They totally skip pass the need to check if one is even able to repay the loan prior to the lending.
Kinda of layman explanation but hope you get what it means. ;)
most people including Jonathan just gloss over the "borrower who took loans they knew they couldn't' afford". The borrowing class is just as culpable as everyone else in the chain.
i also dont get how it goes from mortgage firm, to bank, to investment firm.. how is that making money? like if you originally bought it for 100, then sold it for 200, doesnt the person know that you are just selling it for double the price? who wants to buy that? idk i guess im just REALLY confused...
The interest rates were high, meaning high returns for the companies. They would sell it on for a quick profit, whereas in the long run, it would be profitable for the end company because of the interest paid. It didn't matter if the people defaulted as well - that was desirable because house prices were rising so high that they would profit from acquiring and selling the house.
@bauer18 Subprime lenders (like Countryside) sold the loans to banks (non-depository banks, like Lehman Brothers) so that they could replenish their reserves (so mortgage lenders could keep lending). Investment banks like Lehman brothers took the crappy mortgages and paid rating agencies to AAA or BBB stamp them while hiding the really crappy mortgage loans off their books)=. These investment banks then bundled up these mortgages and sold them to investors (companies, commercial banks, etc)
im confused so when the person gets a mortgage, and the mortgage broker sells it to a bank, etc.... who is the payments going to? the original person you got it from or the current holder? and does the mortgage owner know this? like one day youll be paying salle mae or w.e then the next day your bill comes and it says chase bank (you got wtf?!) ???
You forgot to mention that alot of the subprime mortgages had spiked interest rates (after the fixed rate period ended) called adjustable-rate mortgages (ARMs).
Idiot, McDuck was the Federal Reserve itself. What was invested wasn't savings but printed money. Dumbass, those bad investments were done purely because of the fact that the money came from the printing presses. Why don't you go and see who was pushing the subprime mortgages. You are an uneducated idiot. Government is the problem.
Out fiat currencies are not backed by gold. McDuck hasn't got a pool of gold. He has a pool of worthless fiat money. The bank has a 'printing machine'. With the use of fractional reserve system, the banks printed most of the money out of thin air. They charged interest on non-existing money and diluting the value of money in circulation in the meantime.
@johammbass Well said. At least someone here has some sense. Whenever, the government gets involved in fixing prices of anything, they distort the market. Remove government guarantees from any transaction between two parties and even the most ignorant will use some rationality to make the decision that satisfies their interests or hire an agent who can do so. Decentralization of authority returns accountability to the locals. Washington D.C is still to problem.
This video makes out that there is an evil center figure called scrooge in the world. This is not true. The fact is that the pool of money is everyones money, and everyone wants more money. that is what caused it. Ever hear anyone say they wish they could earn less?
Scrooge Mcduck is the only one who wants to make money, BS!!! everyone wants to make more money, ever get anyone telling you they feel like they should earn less??
@paulaelli Umm.... The use of Scrooge is to show the average person a broad overview of what occured. Scrooge is EVERYONE,,The INVESTORS in so called high quality safe investments those CDO's the AAA or BBB securities. The investors are anyone or any town,big business,small business, a pool of investors that make up scrooge mcduck. The video is just a broad overview of what has nuked this country's financial system
I just saw this, it helped me to better understand the subprime mortgage in order for me to participate in a forum critical for my diploma, Thanks alot, you're awesome in the way you make big ideas easy to understand
I'm doing a 1000 word, six graphs, six citations, two sources, explaining bout the Economic Meltdown, and have to explain Federal Reserve, monetary Policy, intrest rates, ARM, Sub prime, mortgage back securities, inflation, deflation, selling and buying securities, finacial giants. ANd ur video is helping meh with the Sub prime, thank ya!
"what do u think about credit unions? are credit unions better than banks?? i want to close my account with bank of america schwab and vanguard but i need a place to put my money
6:32 seems like an oversimplification, without exact or even general details.
Truth. If lenders stuck with 65-75% ltv - as they do in Canada for instance - instead of the 80 or 90%+ ltv the fallout woud have been alot less and losses - even among foresclosures - would have been manageable.
Not surprisingly, this video ignores the Community Reinvestmen Act (Sounds sweet, doesn't it?) and it's cause of the banks being forced to make bad loans.
@kettefu Very true! CRA targetted the low income, moderate income demographic. If subprime credit card loans failed ...gee. who would have thought subprime lending of mortgages would have been hugely successful!
@DullardGuy It actually was successful its just when deregulation started where all these banks started to lend to anyone then that's when the problems started. Data actually shows that about 15% of CRA approved banks lent sub prime mortgages.So anyone with logic would be able to see CRA didn't cause this crisis. Maybe your not stupid but just uninformed so hope this helps.
I think what is important and possibly what should be highlighted is the effect of the Basel II Accord of the mid 1990's. Without this regulation Asset Securitization, which is based on Asymmetric Information, would never have become so prevelant...
Saying that Blacks and Hispanics were to blame is very very naive. the default correlation was not properly simulated, by any of the rating or quasi-govermental agencies, in the event of a pervasive shock and that shock was mortgage delinquencies...
My econ professors went over this a little differently.The investors, or "scrooge" was lied to about what they were investing their money in.The government under the Community Reinvestment Act, essentially forced banks to give mortgages to people that couldn't afford them.Mortgage brokers get incentives based on how many people they give mortgages to so they were giving mortgages to everyone, unchecked and w/o restraint.Then bad mortgages were pooled with good mortgages and sold as if they were
Saudi Arabia is not a poor country. i suggest you do your research properly. Saudi Arabia's GDP growth Rate has always been at record high only falling down a little at 80’s. they have the world largest oil reserves and totally an oil based economy.
Saudi Arabia is not a poor country. i suggest you do your research properly. Saudi Arabia's GDP growth rate has always been at record high only falling down a little in 80’s. they have the world largest oil reserves and totally an oil based economy.
I think I really liked this video. Not only you have used a very imaginative way to explain the credit crisis but also the caricatures and reference to Scrooge Mc Duck is brilliant. There are a lot of videos in youtube which I checked before I looked at yours and I wasnt quite sure whether I am wasting my time..but it was time well invested.
A new financial reform bill titled "Inclusion of Minorities and Women; Diversity in Agency Workforce" requires each federal financial agency, the Fed Board of Governors and the 12 regional Fed banks to "establish an Office of Minority and Women Inclusion" with the purpose of ordering regulators to allocate credit by race and gender.
A new financial reform bill titled "Inclusion of Minorities and Women; Diversity in Agency Workforce" requires each federal financial agency, the Fed Board of Governors and the 12 regional Fed banks to "establish an Office of Minority and Women Inclusion" to allocate credit by race and gender ignoring the fact that our current recession’s catalyst was the “housing bubble.”
You know, I dont get it ... instead of buying the "toxic assets" from the banks, why did the government buy the houses and pay the banks off and then hand them over to the people who were defaulting? then the people would not loose their houses and the banks would also get their money and the evictions would stop. all the bail out did was give money to the bank who are foreclosing on the property anyways ...
@porchmonkey401k You can't blame politicians. If you were going to blame politicians you would blame Bush for deregulating facilitated junk loans that literally never existed before the Bush administration. Teaser rates, ARMs, credit default swaps, and securitization of AAA rated bonds with SUBPRIME loans were illegal under every president until Bush pulled the rule... Anyway, in the end, it came down to subprime borrowers defaulting on their loans because they are LOSERS.
thanx..this video helped me loads...got an inclass assesment and was wondering what the hell was this was about...thanx...cheers!it gonna help me alot!
I wrote the 3 previous comments, because first of all it was the truth, and second, I grew tired of hearing how the subprime was due to banks giving to minorities, mainly blacks. This is what kills me about people in general. They hear one thing without reading shit, and researching shit. I think I will start a rumor like, for example, Death Panels. Mine will be gum drops will fall from the heavens. I'll bet a few million will believe it if I say it constantly/.
The financial crisis was caused by blacks and Hispanics. Other things played a role, but if you could remove the minority factor it wouldn't have happened.
@Mortison77577 Yeah right. Your talking to an intelligent individual who gathered this information from far more intelligent people than you, and I combined. The truth is a bith isn't it? Also, since I've heard this for too long since your obvious racist. Look what race group is on welfare the most in America. Good luck with that racism in your blood. Sucks to be you.
You just demonstrated how dumb you are by responding without saying anything of substance and just resorting to name-calling. Obviously a lot of whites took advantage of the crappy loans and played a role, but if there hadn't been an effort to increase home-ownership among blacks and Hispanics, the whites wouldn't have tried to take advantage of the new terms and conditions that they were offering.
@Mortison77577 Good luck with your idiocy. The blacks, and latinos. Yeah right. I'm still laughing at that one. Like my father always said. "You never know a dummy until they open their mouth." Good luck with that. You have a good day.
Due to no deposit insurance for institutional loans measured in hundreds of millions of dollars, counterparties demanded collateral to back overnight REPO loans that replaced demand deposits in the bankiing syste. Subprime began in Jan 07, and hit hard in Aug 07 which started the bank panic. Lenders began making collateral fire sales at discounted prices from borrowers that led to big banks being seriously under capatialized.
The Renew Sales & Repurchase Industry is what keeps money flowing in the world. When Money Market funds, & Junk Bonds hit in the 80's, it took all the profit from being a traditional bank. So banks began securitizing loans to regain lost profits. The REPO market of interbank loans always existed, but grew dramatically in the 90's to support securitization.
The true subprime came from the Renew Sales & Repurchase Industry (REPO) Something many have never heard of. It's a $20 trillion dollars unregulated, uninsured industry. Subprime caused only $1.2 trillion. Not nearly enough to cause such a debacle per the National Bureau of Economic Research, and Gary Gorton, Yale Economic Professor.
generally good, but the whole scrooge gig was a little self righteous. The Global pool is everyone who invests at all. Every middle class person wanting to retire, every waitress looking to save some money- everyone that has any money to save over the long term. Essentially you said investment = greed and that's just false. Investors offer a service at market prices that entrepreneurs need to leverage it to make a profit themselves, through which they employ people. That is a good thing.
Wow! Who would have thought it was all an animated duck and an albino version of the cookie monster that brought the entire residential housing market to its knees! I have just one question, if it ends with "The Global Pool of Money" and "Scrooge McDuck" holding A PILE OF WORTHLESS MORTGAGES and losing all their gold and the United States walking away rich in the biggest international swindle ever!
What about the ppl who can't even rent a fuckin apartment! These NYC landlords wount even let you in the fuckin door unless you show them. 5 fuchin pay stubs and your savings account. How are you supposed to even get a fuckin apartment to live in!!!
I'd say you're mostly right here. A couple points, brokers don't sell loans then sell them to the bank. They facillitate the loan to the bank. The banks did loosen guidelines but it also had a lot to do with Clinton wanting to make owning a house available to everyone and putting things in motion to make this happen this lead to a huge inflation of borrowers that has now severely constricted and here we are.
If I remember correctly. Even asshole Bush said everyone deserves to own a home. I agree. Home prices should be adjusted to an individuals income. I don't care how nice the home is. As long as that individual(s) are law abiding citizens, and works hard. These types of people should always be able to be sold a home. For example. If a home cost 300k, and a person makes 40k, then the loan should be fixed to where the person can afford the mortage comfortably.
I agree with what you are saying for the most part but I think you have it a little backwards. I think if a person makes $40K a year they should buy a house that they can afford. Not take $300K and make it affordable for the $40K income.
@WilliamHCarney No one is entitled to own a home. If you drop out of high school and work a shitty job where you make 30k a year, then why should lenders drop their rates so you can get a home? That's not fair. You don't have the money yet you expect them to loan you 300k for a home? It would take a person 40 years to pay it off, lol. Not worth it to banks. You want a home, you have to earn it. Get and education and a good career, or work your ass off and save.
Essentially, what you're saying is that because people who didn't have jobs were given mortgages and then defaulted they caused the subprime mortgage crisis? Hmm...Do you know what you're talking about? Waht are your qualifications besides you did a vid on youtube? This is exactly how ignorance is spread. You didn't even speak about mortgage rates going up unexpectedly! And NO broker ever gives out loans to people with no job. Funny as heck. But, insanely dangerous and ludicrous video.
When it comes down to it, yeah people didn't make their payments. They bit of fmore than they could chew. It had a LOT less to do with rates going up than it did with people not making payments, therefore the programs they could refi into weren't available then they were stuck. I'd say this video is 90% correct. Have you heard of No Doc loans? Yes people COULD get a loan with no job. I know a couple who did. Before you start telling people how ignorant they are you might look in the mirror.
Funny how you just signed up for youtube b4 commenting on me. Ever heard of loan sharks? predatory lenders? well, the legislator I worked for sponsored the law that regulated lending practices in NYS in 2006. It's very real. Either way, capitalism doesn't work, because if you need the gov't to bail out the richest companies (BANKS!!) then you have a failed CAPITAL system. btw, your company sucks. "GTS" = "GET THE SUCKERS". Yep.
I signed up a few weeks ago. You are further showing your ignorance with your reply. There are predatory lenders out there but that's only a small part of it. Bottom line in the vast majority of cases people bit off more than they could chew. The money was offered so they took it even though they knew they couldn't make the payments. Now go learn what you're talking about and grow up. Remember it's better to remain silent and be thought a fool than to speak out and remove all doubt.
shouldn't you be online working for GTS=Get the Suckers given you are under a professional title instead having a debate with someone who is using their free time informing you of something you should actually know? Paradoxical, huh? The interest rates of predatory lenders can go up w/out notice, even banks inform you that they can do the same. Anyone ever read that their bank can make changes WITHOUT NOTICE. Well, that includes interest rates. Those are predators. New profession!!!!
LOL! You're just to comical. You obviously have no clue what you are talking about and rather than be able to actually debate what I said with something intelligent you just bash me personally. You obviously have no idea what drives rates or why they change. Rates can go up OR DOWN at any given time. EVERY bank is like that. So does that mean EVERY bank is a predatory lender? Again learn what you are talking about before you remove all doubt that you don't know what you are talking about.
You haven't said one thing that shows you belong in that 2 week business you just began. All US banks are based on speculation. Which is why the US can run a country on trillions of dollars of debt. You speak as if banks can't just do what they want to and haven't been. For the most part banks are predatory lenders, but legally they're ok. Why should you be listened to when you are in conflict of interest because you are SELLING mortgages. A fool would agree w/ you. You predator! Hide ur house!
Well lets close all the banks and go back to everyone paying cash for their homes. That should make you happy. Still all you can come up with are insults and no valid rebuttal. Get an education before you speak. You sound like a disgruntled homeowner that didn't pay your mortgage and got foreclosed on. Sorry to hear that but if you were more responsible then it wouldn't have happened. I am certainly NOT a predatory lender and look out for my clients best interests.
And why did anybody get a mortgage they couldn't afford? Because the federal government removed the Risk by insuring the loans. Therefore all of these companies that give out loans did not have to deal with risky loans because they weren't on the hook when the loans went bad therefore they just gave out loans left and right. If the government meddle with the housing market, the bubbly wouldn't have been started.
This guy is so wrong its not even funny. When the federal reserve lowered intrests after 911 to jump start the economy which sank into recession, the restriction on borrowing became lacked. As the money supply increased and interest rates dropped the commodity of money became easier to get through mortgages. Usually subprime mortgages required bigger down payments, higher interest rates as a way to protect the lender if the loan went bad. That wasn't the case this time around.
@yourdeadmother : You can't be serious? That must be what they told you in school. Think about how there can be all that money in savings in a debtor nation where very few people have any savings. Here is how the Federal Reserve System creates money. The Federal Government borrows money and issues an instrument of indebtedness. The Federal Reserve Bank takes this debt instrument and gives the Federal Government a line of credit to spend. Loans are made in amts 20 or times this asset/debt
I'm a senior in college sitting in front of a packet of powerpoint slides for my investment management class. The diagrams in this video with Scrooge McDuck and stick figures are almost identical to what I pay $20,000 a year to read. Bravo.
I would like to second this comment. I am one year later than tophers in the exact same situation...a senior at Penn State. I learned more about the subprime mortgage crisis in 7 minutes and 44 seconds than I have all semester, or year, or longer. I'm not paying 20k a year but not far off and I want to cry now. I am going to download the This American Life podcast immediately. Thank you!
yessss I was just about to basically say the exact same thing. This video just helped me get through a good portion of studying for my final tomorrow!
I think this video is good but it's only telling half the story. What about how government through its failed policies was the primary source and accomadated the credit crises.
uh wrong - the greedy banks let this happen. They are PRIVATE business. They are responsible for giving loans to people THEY feel can pay them back - they didn't. They got f**ked. And so did we all.
youre a dumb ass yes they have control they open the gates so to speak. thats why they say it's everyones fault but really it's the people who open the gates. remember the zero down while that was bills idea.
uh wrong.. do some research. That idiot president Carter signed the community reinvestment act and Clinton issued heavy regulations that tracked sub prime loans and rated banks accordingly. Then congress passed laws mandating GSEs to buy up bad loans and the treasury dept established a fund to give banks tax dollars for more bad loans. The FED helped screw things up with bombing interest rates to almost nothing. Most of this mess was caused by GOVERNMENT.
This was a GREAT video! A very simplified explaination for a started and now I can go elsewhere to find more details. I started with the others but they were too detailed and confusing and now this really, really helps! Thanks sooooo much!! Very well done.
Sorry the content is very wrong. Didn't hear "Government" at core of incentives and distortions from conceited, central planning politicians causing this bubble and crisis. Greenspan was exactly the opposite, too accommodating in the money supply available to lend and inflate the housing bubble. Better info by Wikis for CRA, GSE, Too Big To Fail. Govt. prodded banks to create sub-prime time bombs, pulled them to Fannie, "guaranteed" them to Wall St. All rational within perverse Govt. construct!
people would have had to realize that the opinion of a thing signifies choose between right and wrong opinion and when you learn to choose correctly and not to act as bulk reactions of people who chose wrong, simply learn to choose a good opinion and according to it once and not just watch.
Well this video and explanation has it's flaws but it's pretty good general explanation for those whom don't need or care to understand great recession better.
is it just me or anyboy who's around me in england are pretty safe with no crisis and i go to harrow's so i come from quite a posh background. but why here this shit saying 1000 jobs lost an hour when I JUST DON"T SEE IT HAPPENING AROUND ME!!! AM I DREAMING?????
I don't know, call me crazy...but maybe if the Gov't made it a priority to decrease the poverty level, work to end discriminatory hiring practices, loan lending etc...maybe more people would be able to have money to pay their bills. Seems at the end of the day bigotry, racism, sexism, homophobia doesn't only hurt the people it was designed to oppress, but also all of humanity...
CRAZY! Because there will always be poor. Esp. working poor. The world needs more people to flip burgers, empty trash cans, and do menial labor than it does CEOs. If everyone is rich, everyone is poor!
Actually the federal government mandated that certain people get loans no matter what their income. This has been a slow process over 30 years. Also take in account nixion abolishing the gold standard, clinton repealing glase-stegal act and greenspan changing the loan rules on from 10 to 1 to about 50 to 1 and you'll see why the money supply expanded so fast. If all the central banks of the world worked in concert as I think they did you can see how this easily became global.
UNCLE CHUCK IS RIGHT, THE GOVERNMENTAL PORTION IS MINIMISED, BANKS DON'T MAKE RISKY LOANS UNLESS PUSHED.
HONESTLY IF YOU HAVE A BUNCH OF MONEY, DID YOU GET IT WITH BAD INVESTMENTS, THIS SURLY IS NOT YOUR FIRST RODEO.
UNK POSTED
THIS IS NOT TRUE. The banks and secondary market investors (fanni and freddie) were the ones that relaxed the qualification guidelines and allowed mortgage brokers to offer loans to people with limited documentation or poor credit.
AbitaVets, I dont think you understood what I wrote. Although I do agree that the governments influence, or better said, lack of responsibility to regulate the financial markets were minimized, I fully point my finger at the private market. Sadly, their influence over the government was so thick, that seperating the public from the private sectors doesn't even make much sense.
Fani/Freddi are private - wikipedia does a good job of explaining their creation and roles in the market (101)
What It WIKI overlooks is the pressure placed by Barneys Frank and Maxine Waters to lower standards of loan qualifications, placing full blame on private markets.
Query
How did the democrats have such power over private enterprise entity?.
So... money flows like this? Those who wanna buy house -> Mortgage brokers -> Bank -> Wallstreet -> Investors? ... but how does it work? How do the $ from wall street go to investors? And from the bank to the wallstreet? Please explain... thanks!
very nice video, it helped a lot, but theres one thing in the cycle i dont get, i mean why did the banks broke, if mortgage brokers selled peoples loanes to the same bank, i mean if people didnt pay their bills banks still had the loans from the mortgage brokers.. i dont know if im explaining myself....can someone help me?
As pple start to buy more and more houses and as people start to invest more on construction,bth parties were hapy. IF subprime (those with bad credit history), can't able to pay back their loans, what bank does is, takeover his/her house as the prices of the house are really high that time and they thought that it would go all the way up. Unfortunately, as investment results takes years, when the result came, supply for houses was more than demand, house of price falls.
I was only making the point, originally, that mortgage brokers had very little to do with the problem - outside of blatant fraud etc. which, in my opinion, had very little (not even noticible) effect. That statement does not include fraudulent activities specifically related to stated or no documentation loans. They were a creation of the market.
You blamed the relaxed guidelines ( qualifications ) on the mortgage brokers. THIS IS NOT TRUE. The banks and secondary market investors (fanni and freddie) were the ones that relaxed the qualification guidelines and allowed mortgage brokers to offer loans to people with limited documentation or poor credit. Brokers are the little guys on the totem poles thats impact on the crisis was insignificant.
unclchunk: actually, the Federal Reserve found that lenders were already getting into the subprime market before Fannie/Freddie because it was a dynamic area of potential profit. F/F were a big part of the problem, but not the whole problem. The MBSs sold to F/F had a lower rate of failure than those purchased on the private market, particularly through "shadow banking" mechanisms, precisely *because* it was regulated, even if insufficiently. Money funds, monolines, and SIVs were not watched.
uhhhh. I don't know how you interpreted what I said but I dont see that we have contradicted eachother at all here. I realize that F/F were not the first get into "subprime mortgages", although, particularly towards the end, they were heavily invested in "Alt-A" (basically the same) and other shotty doc type mortgages - SISA, NINA, NISA etc. Towards the end they were also investing in the notorious "pay option arms" .... the regulations that did exist and the regulations coming out now
Look, if you're going to try to pin this solely on F/F, you're going to have to figure out why other countries were involved in supbrime lending to their own markets. The F/F explanation for the entire crisis is revealed to be especially weak when you consider the fact that the UK went through the same process we did. This idea that "gov't forced banks to be bad" is probably soft spin coming from the Libertarian Party and the GOP, as well as Cato etc.
Once again, You are not responding to ANYTHING that I wrote. Please copy and paste a quote from me where I had said anything that you are claiming I said.
Zombie - ""gov't forced banks to be bad" is probably soft spin coming from the Libertarian Party and the GOP"
Me - " I fully point my finger at the private market"
I do agree that the repeal of legislation like the glass steagal had a HUGE part to do with the problem. Where did I say otherwise?
I dont know if, perhaps, your retarded or something, but you dont seem to be reading what Im writing. These sorts of circular non-arguments do nothing for me.
"Retarded" ... nice. If you can't contribute anything, just stop posting.
Anyway, there are a lot of books out there on the crisis, including some by former traders, that are very interesting. Any attempt to reduce this to a gov't-generated disaster via F/F is a very myopic and, probably, partisan viewpoint. Cheap credit in a time when real wages can't keep up with inflation, shadow banking, and the rollbacks of regulations such as Glass-Steagall were as much to blame as F/F's bad accounting.
You forgot about the part where the US Government forced banks to carry a higher profile of high risk loans in 2006. Don't forget that the investors knew this was going to happen.
@ronpauldroolz: Who spoke about freely? Rather tons and tons of interest... It´s an investment in mortgage loans we´re talking about - making a LOT of money by buying bulks of loans. Kinda like the stock market of loans...
Should have re-named Scrooge McDuck to Scrooge McJew
MAADMO 3 days ago
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FUC-K AMERICAN SYSTEM AND AMERICAN RATING AGENCIES (RICH AND POWER GROUPS)
BLUESKYBLUE1990 3 weeks ago
It is quite puzzling how rating agencies can give triple-A rating to all these junk subprime loan backed bonds. And till today, investors are still paying so much attention to the ratings coming out from them. Can they still be trusted with their ratings?
ootnitsuj 1 month ago
Very nice explanation: thank you. Stronger at the beginning than at the end. We need better explanation of precisely how things came down. Also, I'd like a clearer definition of the term "sub-prime."
RichardKoenigsberg 2 months ago
@RichardKoenigsberg Subprime is kinda mean sub-class. Subprime loans are loans that are made to people without credit-worthiness. They totally skip pass the need to check if one is even able to repay the loan prior to the lending.
Kinda of layman explanation but hope you get what it means. ;)
ootnitsuj 1 month ago
"Dopah dopah dopah dooo. I'd like to take out a mortgage loan!" "Sure! Here you go!" Lol, yeah, that's pretty much how it went.
fluentinsilence 2 months ago
I like how the peons think it was the banks fault not congress who regulates them.
chronthc1 3 months ago
most people including Jonathan just gloss over the "borrower who took loans they knew they couldn't' afford". The borrowing class is just as culpable as everyone else in the chain.
michaelwilde 3 months ago
i also dont get how it goes from mortgage firm, to bank, to investment firm.. how is that making money? like if you originally bought it for 100, then sold it for 200, doesnt the person know that you are just selling it for double the price? who wants to buy that? idk i guess im just REALLY confused...
bauer18 3 months ago
@bauer18
The interest rates were high, meaning high returns for the companies. They would sell it on for a quick profit, whereas in the long run, it would be profitable for the end company because of the interest paid. It didn't matter if the people defaulted as well - that was desirable because house prices were rising so high that they would profit from acquiring and selling the house.
JimmyCheeseball 3 months ago
@bauer18 Subprime lenders (like Countryside) sold the loans to banks (non-depository banks, like Lehman Brothers) so that they could replenish their reserves (so mortgage lenders could keep lending). Investment banks like Lehman brothers took the crappy mortgages and paid rating agencies to AAA or BBB stamp them while hiding the really crappy mortgage loans off their books)=. These investment banks then bundled up these mortgages and sold them to investors (companies, commercial banks, etc)
iFullMetalJacket 3 months ago
im confused so when the person gets a mortgage, and the mortgage broker sells it to a bank, etc.... who is the payments going to? the original person you got it from or the current holder? and does the mortgage owner know this? like one day youll be paying salle mae or w.e then the next day your bill comes and it says chase bank (you got wtf?!) ???
bauer18 3 months ago
You forgot to mention that alot of the subprime mortgages had spiked interest rates (after the fixed rate period ended) called adjustable-rate mortgages (ARMs).
fullfrost 3 months ago
Man, after reading several papers on this subject, this really puts it down to the basics. I like this version better :) ty for the vid post
realmckay29 3 months ago
Really useful explanation. Two thumbs up!
calcularhipoteca 3 months ago
THis helped me understand more and pass on that stupid term paper in econ class, :D thanks man!
Lunadrako 5 months ago
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sha370z 6 months ago
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sha370z 6 months ago
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sha370z 6 months ago
This is very funny and very good, I can get my best friend to watch it and understand. God know's me telling him didn't work. Good job man.
catt3911 6 months ago
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I knew that the poor people will screw up the world some day !
zmolix 7 months ago
lol 5:00 - 6:00
louie540x 8 months ago
Idiot, McDuck was the Federal Reserve itself. What was invested wasn't savings but printed money. Dumbass, those bad investments were done purely because of the fact that the money came from the printing presses. Why don't you go and see who was pushing the subprime mortgages. You are an uneducated idiot. Government is the problem.
johammbass 8 months ago
@johammbass
Out fiat currencies are not backed by gold. McDuck hasn't got a pool of gold. He has a pool of worthless fiat money. The bank has a 'printing machine'. With the use of fractional reserve system, the banks printed most of the money out of thin air. They charged interest on non-existing money and diluting the value of money in circulation in the meantime.
gillianrichmond 7 months ago
@johammbass Well said. At least someone here has some sense. Whenever, the government gets involved in fixing prices of anything, they distort the market. Remove government guarantees from any transaction between two parties and even the most ignorant will use some rationality to make the decision that satisfies their interests or hire an agent who can do so. Decentralization of authority returns accountability to the locals. Washington D.C is still to problem.
creativepower213 3 months ago
0:26 - 0:34 What's that song called?
SpaceTime4D 8 months ago in playlist Financial Crisis 101
thank you
the crisis explained to idiots
nottinmatterz2day 9 months ago
OMG thanks a ton. This video just helped me a lot on my paper
PeaceLovePink08 9 months ago
dang yo it be complicated be stuff
defgill 10 months ago
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MoniRokse 11 months ago
Thank you very much! This was a great explanation of subprime mortgages, and helped me a lot for my Extended Essay!
You are my hero!
DRUNKandSKATE 1 year ago 2
This video makes out that there is an evil center figure called scrooge in the world. This is not true. The fact is that the pool of money is everyones money, and everyone wants more money. that is what caused it. Ever hear anyone say they wish they could earn less?
paulaelli 1 year ago
Scrooge Mcduck is the only one who wants to make money, BS!!! everyone wants to make more money, ever get anyone telling you they feel like they should earn less??
paulaelli 1 year ago
@paulaelli Umm.... The use of Scrooge is to show the average person a broad overview of what occured. Scrooge is EVERYONE,,The INVESTORS in so called high quality safe investments those CDO's the AAA or BBB securities. The investors are anyone or any town,big business,small business, a pool of investors that make up scrooge mcduck. The video is just a broad overview of what has nuked this country's financial system
jonnibuoy 9 months ago
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tarraorbisonopkl 1 year ago
I'm not the only one who noticed that Alan Greenspan had six fingers on that hand am I?
TheOceansaber 1 year ago
Thanks for the vid
creditandloansolutio 1 year ago
Watch the first 20 minutes of zeitgeist on youtube, this is is but only a scratch of what is really happening
iwatchfites 1 year ago
Thank you so much help me a lot on my paper but the "duck" was a little scary seeing it at 4am while I am trying to finish my paper
xxokiexxdokie 1 year ago
I just saw this, it helped me to better understand the subprime mortgage in order for me to participate in a forum critical for my diploma, Thanks alot, you're awesome in the way you make big ideas easy to understand
sathar91 1 year ago
Great insight! This is really informative.
spectrum0590 1 year ago
Amazing! The "Scrooge want more" monster is just THE best lol xD
cMaXeJIJIo 1 year ago
who's scrooge mc.duck in reality? :/
iheartdrseuss 1 year ago
I'm doing a 1000 word, six graphs, six citations, two sources, explaining bout the Economic Meltdown, and have to explain Federal Reserve, monetary Policy, intrest rates, ARM, Sub prime, mortgage back securities, inflation, deflation, selling and buying securities, finacial giants. ANd ur video is helping meh with the Sub prime, thank ya!
Lunadrako 1 year ago
thanks very useful
junaidkhan2010 1 year ago
This video fails to adress one key, and possibly most critical variable: THE JEWS.
bumzurvaj 1 year ago
@bumzurvaj hahaha
catrock123 1 year ago
@bumzurvaj
I'm sure that's what Scrooge is....lol
bajaninthesun 1 year ago
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In a society in which money has become the one and only measure of ALL things,
corruption will became the only lived religion!
TheDalien 1 year ago
"what do u think about credit unions? are credit unions better than banks?? i want to close my account with bank of america schwab and vanguard but i need a place to put my money
MrThatniggafred 1 year ago
thank you for making it even possible to start on my research assignment. THANK YOU.
tiffaniekyra 1 year ago
Thanks for this--I will be using it in my Consumer Education classes!
ctcassidy 1 year ago
thank you so much! love this!!
jungirliez 1 year ago
So was it Scrooge McDuck who screwed us, or was it Alan Greenspan?
digital0707neo 1 year ago
love it!
Fluessigseife 1 year ago
good video! nicely explained, good job!
ssae5 1 year ago
good video! nicely explained, good job!
ssae5 1 year ago
you were right right up until the end the you over generalised and over simplified
Donnie2020 1 year ago
dude how many friggin times do you want to say scrooge? bloody hell!
Donnie2020 1 year ago
6:32 seems like an oversimplification, without exact or even general details.
Truth. If lenders stuck with 65-75% ltv - as they do in Canada for instance - instead of the 80 or 90%+ ltv the fallout woud have been alot less and losses - even among foresclosures - would have been manageable.
GoodTimeTraveler 1 year ago
I love how Alan Greenspan has six fingers...
dentedup 1 year ago
Not surprisingly, this video ignores the Community Reinvestmen Act (Sounds sweet, doesn't it?) and it's cause of the banks being forced to make bad loans.
kettefu 1 year ago
@kettefu Very true! CRA targetted the low income, moderate income demographic. If subprime credit card loans failed ...gee. who would have thought subprime lending of mortgages would have been hugely successful!
DullardGuy 1 year ago
@DullardGuy It actually was successful its just when deregulation started where all these banks started to lend to anyone then that's when the problems started. Data actually shows that about 15% of CRA approved banks lent sub prime mortgages.So anyone with logic would be able to see CRA didn't cause this crisis. Maybe your not stupid but just uninformed so hope this helps.
111chicity 1 year ago
@111chicity Data? So maybe your not full of shit...and perhaps would quote your source rather than post a dog shit response!
DullardGuy 1 year ago
I think what is important and possibly what should be highlighted is the effect of the Basel II Accord of the mid 1990's. Without this regulation Asset Securitization, which is based on Asymmetric Information, would never have become so prevelant...
Saying that Blacks and Hispanics were to blame is very very naive. the default correlation was not properly simulated, by any of the rating or quasi-govermental agencies, in the event of a pervasive shock and that shock was mortgage delinquencies...
lornanicie 1 year ago
My econ professors went over this a little differently.The investors, or "scrooge" was lied to about what they were investing their money in.The government under the Community Reinvestment Act, essentially forced banks to give mortgages to people that couldn't afford them.Mortgage brokers get incentives based on how many people they give mortgages to so they were giving mortgages to everyone, unchecked and w/o restraint.Then bad mortgages were pooled with good mortgages and sold as if they were
JesusDisciple777 1 year ago
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Saudi Arabia is not a poor country. i suggest you do your research properly. Saudi Arabia's GDP growth Rate has always been at record high only falling down a little at 80’s. they have the world largest oil reserves and totally an oil based economy.
786alps 1 year ago
Saudi Arabia is not a poor country. i suggest you do your research properly. Saudi Arabia's GDP growth rate has always been at record high only falling down a little in 80’s. they have the world largest oil reserves and totally an oil based economy.
786alps 1 year ago
How about this: If you can't afford to hire a lawyer to look over a contract (like a mortgage contract) then you can't afford a home.
SexSteakSoda 1 year ago
I think I really liked this video. Not only you have used a very imaginative way to explain the credit crisis but also the caricatures and reference to Scrooge Mc Duck is brilliant. There are a lot of videos in youtube which I checked before I looked at yours and I wasnt quite sure whether I am wasting my time..but it was time well invested.
tweetantra 1 year ago
Are those testicles on those puppets?
Cerulean0987 1 year ago
A new financial reform bill titled "Inclusion of Minorities and Women; Diversity in Agency Workforce" requires each federal financial agency, the Fed Board of Governors and the 12 regional Fed banks to "establish an Office of Minority and Women Inclusion" with the purpose of ordering regulators to allocate credit by race and gender.
islandmuffin 1 year ago
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A new financial reform bill titled "Inclusion of Minorities and Women; Diversity in Agency Workforce" requires each federal financial agency, the Fed Board of Governors and the 12 regional Fed banks to "establish an Office of Minority and Women Inclusion" to allocate credit by race and gender ignoring the fact that our current recession’s catalyst was the “housing bubble.”
islandmuffin 1 year ago
You know, I dont get it ... instead of buying the "toxic assets" from the banks, why did the government buy the houses and pay the banks off and then hand them over to the people who were defaulting? then the people would not loose their houses and the banks would also get their money and the evictions would stop. all the bail out did was give money to the bank who are foreclosing on the property anyways ...
mintoo2cool 1 year ago
u know that the federal government and that piece of shit CUOMO is responsible for this? not to mention clinton? FUCK THE GOVERNMENT!!!
porchmonkey401k 1 year ago
@porchmonkey401k You can't blame politicians. If you were going to blame politicians you would blame Bush for deregulating facilitated junk loans that literally never existed before the Bush administration. Teaser rates, ARMs, credit default swaps, and securitization of AAA rated bonds with SUBPRIME loans were illegal under every president until Bush pulled the rule... Anyway, in the end, it came down to subprime borrowers defaulting on their loans because they are LOSERS.
SexSteakSoda 1 year ago
thanx..this video helped me loads...got an inclass assesment and was wondering what the hell was this was about...thanx...cheers!it gonna help me alot!
sweetrosh2003 1 year ago
I wrote the 3 previous comments, because first of all it was the truth, and second, I grew tired of hearing how the subprime was due to banks giving to minorities, mainly blacks. This is what kills me about people in general. They hear one thing without reading shit, and researching shit. I think I will start a rumor like, for example, Death Panels. Mine will be gum drops will fall from the heavens. I'll bet a few million will believe it if I say it constantly/.
WilliamHCarney 1 year ago
@WilliamHCarney
The financial crisis was caused by blacks and Hispanics. Other things played a role, but if you could remove the minority factor it wouldn't have happened.
Mortison77577 1 year ago
@Mortison77577 Yeah right. Your talking to an intelligent individual who gathered this information from far more intelligent people than you, and I combined. The truth is a bith isn't it? Also, since I've heard this for too long since your obvious racist. Look what race group is on welfare the most in America. Good luck with that racism in your blood. Sucks to be you.
WilliamHCarney 1 year ago
@WilliamHCarney
You just demonstrated how dumb you are by responding without saying anything of substance and just resorting to name-calling. Obviously a lot of whites took advantage of the crappy loans and played a role, but if there hadn't been an effort to increase home-ownership among blacks and Hispanics, the whites wouldn't have tried to take advantage of the new terms and conditions that they were offering.
Mortison77577 1 year ago
@Mortison77577 Good luck with your idiocy. The blacks, and latinos. Yeah right. I'm still laughing at that one. Like my father always said. "You never know a dummy until they open their mouth." Good luck with that. You have a good day.
WilliamHCarney 1 year ago
Mr. William H Carney:
You have a bad day.
Mortison77577 1 year ago
Due to no deposit insurance for institutional loans measured in hundreds of millions of dollars, counterparties demanded collateral to back overnight REPO loans that replaced demand deposits in the bankiing syste. Subprime began in Jan 07, and hit hard in Aug 07 which started the bank panic. Lenders began making collateral fire sales at discounted prices from borrowers that led to big banks being seriously under capatialized.
WilliamHCarney 1 year ago
The Renew Sales & Repurchase Industry is what keeps money flowing in the world. When Money Market funds, & Junk Bonds hit in the 80's, it took all the profit from being a traditional bank. So banks began securitizing loans to regain lost profits. The REPO market of interbank loans always existed, but grew dramatically in the 90's to support securitization.
WilliamHCarney 1 year ago
The true subprime came from the Renew Sales & Repurchase Industry (REPO) Something many have never heard of. It's a $20 trillion dollars unregulated, uninsured industry. Subprime caused only $1.2 trillion. Not nearly enough to cause such a debacle per the National Bureau of Economic Research, and Gary Gorton, Yale Economic Professor.
WilliamHCarney 1 year ago
generally good, but the whole scrooge gig was a little self righteous. The Global pool is everyone who invests at all. Every middle class person wanting to retire, every waitress looking to save some money- everyone that has any money to save over the long term. Essentially you said investment = greed and that's just false. Investors offer a service at market prices that entrepreneurs need to leverage it to make a profit themselves, through which they employ people. That is a good thing.
nagibson1 1 year ago
Wow! Who would have thought it was all an animated duck and an albino version of the cookie monster that brought the entire residential housing market to its knees! I have just one question, if it ends with "The Global Pool of Money" and "Scrooge McDuck" holding A PILE OF WORTHLESS MORTGAGES and losing all their gold and the United States walking away rich in the biggest international swindle ever!
XArchangelofsexX 1 year ago
you didn't mention the floating interest rate that began low and then rise like crazy.
bananian 1 year ago
Hilariously Excellent Video
-UT Finance Grad
clockmonster786 1 year ago
You dont have a clue about how money is created. Or why is it created
XAlejossX 1 year ago
so who is scrooge the duck in real life?
solidyahoo 1 year ago
America is FFFFD.
With teh nationa lDebt what it is we al lshould move to Europe and be part of teh European Union until the economies equalize 20 years from now.
Roadracer987654321 1 year ago
What about the ppl who can't even rent a fuckin apartment! These NYC landlords wount even let you in the fuckin door unless you show them. 5 fuchin pay stubs and your savings account. How are you supposed to even get a fuckin apartment to live in!!!
PAM2167 1 year ago
I'd say you're mostly right here. A couple points, brokers don't sell loans then sell them to the bank. They facillitate the loan to the bank. The banks did loosen guidelines but it also had a lot to do with Clinton wanting to make owning a house available to everyone and putting things in motion to make this happen this lead to a huge inflation of borrowers that has now severely constricted and here we are.
gtsmortgagedotcom 1 year ago
If I remember correctly. Even asshole Bush said everyone deserves to own a home. I agree. Home prices should be adjusted to an individuals income. I don't care how nice the home is. As long as that individual(s) are law abiding citizens, and works hard. These types of people should always be able to be sold a home. For example. If a home cost 300k, and a person makes 40k, then the loan should be fixed to where the person can afford the mortage comfortably.
WilliamHCarney 1 year ago
I agree with what you are saying for the most part but I think you have it a little backwards. I think if a person makes $40K a year they should buy a house that they can afford. Not take $300K and make it affordable for the $40K income.
gtsmortgagedotcom 1 year ago
@WilliamHCarney No one is entitled to own a home. If you drop out of high school and work a shitty job where you make 30k a year, then why should lenders drop their rates so you can get a home? That's not fair. You don't have the money yet you expect them to loan you 300k for a home? It would take a person 40 years to pay it off, lol. Not worth it to banks. You want a home, you have to earn it. Get and education and a good career, or work your ass off and save.
SexSteakSoda 1 year ago
Essentially, what you're saying is that because people who didn't have jobs were given mortgages and then defaulted they caused the subprime mortgage crisis? Hmm...Do you know what you're talking about? Waht are your qualifications besides you did a vid on youtube? This is exactly how ignorance is spread. You didn't even speak about mortgage rates going up unexpectedly! And NO broker ever gives out loans to people with no job. Funny as heck. But, insanely dangerous and ludicrous video.
Crownedson 1 year ago
When it comes down to it, yeah people didn't make their payments. They bit of fmore than they could chew. It had a LOT less to do with rates going up than it did with people not making payments, therefore the programs they could refi into weren't available then they were stuck. I'd say this video is 90% correct. Have you heard of No Doc loans? Yes people COULD get a loan with no job. I know a couple who did. Before you start telling people how ignorant they are you might look in the mirror.
gtsmortgagedotcom 1 year ago
Funny how you just signed up for youtube b4 commenting on me. Ever heard of loan sharks? predatory lenders? well, the legislator I worked for sponsored the law that regulated lending practices in NYS in 2006. It's very real. Either way, capitalism doesn't work, because if you need the gov't to bail out the richest companies (BANKS!!) then you have a failed CAPITAL system. btw, your company sucks. "GTS" = "GET THE SUCKERS". Yep.
Crownedson 1 year ago
I signed up a few weeks ago. You are further showing your ignorance with your reply. There are predatory lenders out there but that's only a small part of it. Bottom line in the vast majority of cases people bit off more than they could chew. The money was offered so they took it even though they knew they couldn't make the payments. Now go learn what you're talking about and grow up. Remember it's better to remain silent and be thought a fool than to speak out and remove all doubt.
gtsmortgagedotcom 1 year ago
shouldn't you be online working for GTS=Get the Suckers given you are under a professional title instead having a debate with someone who is using their free time informing you of something you should actually know? Paradoxical, huh? The interest rates of predatory lenders can go up w/out notice, even banks inform you that they can do the same. Anyone ever read that their bank can make changes WITHOUT NOTICE. Well, that includes interest rates. Those are predators. New profession!!!!
Crownedson 1 year ago
LOL! You're just to comical. You obviously have no clue what you are talking about and rather than be able to actually debate what I said with something intelligent you just bash me personally. You obviously have no idea what drives rates or why they change. Rates can go up OR DOWN at any given time. EVERY bank is like that. So does that mean EVERY bank is a predatory lender? Again learn what you are talking about before you remove all doubt that you don't know what you are talking about.
gtsmortgagedotcom 1 year ago
You haven't said one thing that shows you belong in that 2 week business you just began. All US banks are based on speculation. Which is why the US can run a country on trillions of dollars of debt. You speak as if banks can't just do what they want to and haven't been. For the most part banks are predatory lenders, but legally they're ok. Why should you be listened to when you are in conflict of interest because you are SELLING mortgages. A fool would agree w/ you. You predator! Hide ur house!
Crownedson 1 year ago
Well lets close all the banks and go back to everyone paying cash for their homes. That should make you happy. Still all you can come up with are insults and no valid rebuttal. Get an education before you speak. You sound like a disgruntled homeowner that didn't pay your mortgage and got foreclosed on. Sorry to hear that but if you were more responsible then it wouldn't have happened. I am certainly NOT a predatory lender and look out for my clients best interests.
gtsmortgagedotcom 1 year ago
Comment removed
dabazlegend 1 year ago
TOO MANY FINGERS ON ALAN GREENSPAN. That was creepy. This video does a great job of helping make sense of things though, and I enjoyed it.
Sunnygrrl99 2 years ago
this was awesome
babyyx5oul 2 years ago
And why did anybody get a mortgage they couldn't afford? Because the federal government removed the Risk by insuring the loans. Therefore all of these companies that give out loans did not have to deal with risky loans because they weren't on the hook when the loans went bad therefore they just gave out loans left and right. If the government meddle with the housing market, the bubbly wouldn't have been started.
breakinthebend 2 years ago
that wasn't you doing the puppet's voices was it?
Bobintheb0x 2 years ago
@Bobintheb0x yep.
therockcookiebottom 2 years ago
This guy is so wrong its not even funny. When the federal reserve lowered intrests after 911 to jump start the economy which sank into recession, the restriction on borrowing became lacked. As the money supply increased and interest rates dropped the commodity of money became easier to get through mortgages. Usually subprime mortgages required bigger down payments, higher interest rates as a way to protect the lender if the loan went bad. That wasn't the case this time around.
xpandergt 2 years ago
Very Well done. Thank you
/Ramin
pararamin 2 years ago
Global pool of money = Savings? You are full of nonsense. The global pool of money consists entirely of borrowed money. Savings is miniscule.
klard 2 years ago 3
@klard people borrow money from banks which get them in the form of savings from people..
yourdeadmother 1 year ago
@yourdeadmother : You can't be serious? That must be what they told you in school. Think about how there can be all that money in savings in a debtor nation where very few people have any savings. Here is how the Federal Reserve System creates money. The Federal Government borrows money and issues an instrument of indebtedness. The Federal Reserve Bank takes this debt instrument and gives the Federal Government a line of credit to spend. Loans are made in amts 20 or times this asset/debt
klard 1 year ago
I'm a senior in college sitting in front of a packet of powerpoint slides for my investment management class. The diagrams in this video with Scrooge McDuck and stick figures are almost identical to what I pay $20,000 a year to read. Bravo.
tophers402 2 years ago 14
@tophers402 best comment ever! and thank This American Life...
therockcookiebottom 2 years ago
I would like to second this comment. I am one year later than tophers in the exact same situation...a senior at Penn State. I learned more about the subprime mortgage crisis in 7 minutes and 44 seconds than I have all semester, or year, or longer. I'm not paying 20k a year but not far off and I want to cry now. I am going to download the This American Life podcast immediately. Thank you!
MrWjd5070 1 year ago
@MrWjd5070 ME TOO
PeaceLovePink08 9 months ago
@tophers402
yessss I was just about to basically say the exact same thing. This video just helped me get through a good portion of studying for my final tomorrow!
Heyyyyy718 8 months ago
I think this video is good but it's only telling half the story. What about how government through its failed policies was the primary source and accomadated the credit crises.
1czelaya 2 years ago
1:20, Scrooge McDuck is scary:O
MariusM1989 2 years ago
don't forget about jimmy cater then bill cilton they allowed all this or i think it was their idea
BruceIsSoCool 2 years ago
uh wrong - the greedy banks let this happen. They are PRIVATE business. They are responsible for giving loans to people THEY feel can pay them back - they didn't. They got f**ked. And so did we all.
insanecaine 2 years ago
youre a dumb ass yes they have control they open the gates so to speak. thats why they say it's everyones fault but really it's the people who open the gates. remember the zero down while that was bills idea.
BruceIsSoCool 2 years ago
uh wrong.. do some research. That idiot president Carter signed the community reinvestment act and Clinton issued heavy regulations that tracked sub prime loans and rated banks accordingly. Then congress passed laws mandating GSEs to buy up bad loans and the treasury dept established a fund to give banks tax dollars for more bad loans. The FED helped screw things up with bombing interest rates to almost nothing. Most of this mess was caused by GOVERNMENT.
libslayer12 2 years ago
This was a GREAT video! A very simplified explaination for a started and now I can go elsewhere to find more details. I started with the others but they were too detailed and confusing and now this really, really helps! Thanks sooooo much!! Very well done.
HatRatt 2 years ago
Sorry the content is very wrong. Didn't hear "Government" at core of incentives and distortions from conceited, central planning politicians causing this bubble and crisis. Greenspan was exactly the opposite, too accommodating in the money supply available to lend and inflate the housing bubble. Better info by Wikis for CRA, GSE, Too Big To Fail. Govt. prodded banks to create sub-prime time bombs, pulled them to Fannie, "guaranteed" them to Wall St. All rational within perverse Govt. construct!
YTpup 2 years ago
Can't stop watching this.
Fascinating yet funny.
Furthermore does'nt the guy in this kind of look like Sam Harris.
JONNOG88 2 years ago
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people would have had to realize that the opinion of a thing signifies choose between right and wrong opinion and when you learn to choose correctly and not to act as bulk reactions of people who chose wrong, simply learn to choose a good opinion and according to it once and not just watch.
After this financial crisis:)
antilower 2 years ago
Well this video and explanation has it's flaws but it's pretty good general explanation for those whom don't need or care to understand great recession better.
Dekonega 2 years ago
Hah I'm writing an essay on this YAY THIS WAS USEFUL!
keviokevio 2 years ago
hahaha i tot it's a pretty good video. well explained. thanks!
littleheartx 2 years ago 3
that monster on the video bothered me, waste of time.
discipulo123 2 years ago
Doopa doopa doo, oh look this could be the best place to have deep economy coversation!
thenandeye 2 years ago
subprime....subhuman
beastinblack 2 years ago
is it just me or anyboy who's around me in england are pretty safe with no crisis and i go to harrow's so i come from quite a posh background. but why here this shit saying 1000 jobs lost an hour when I JUST DON"T SEE IT HAPPENING AROUND ME!!! AM I DREAMING?????
kurdore2 2 years ago
And yet you were never schooled in the best schools how to properly punctuate your sentences. You got RIPPED OFF!
mikejackson4ever 2 years ago
that doesn't make any sense...
seriously everyone in my school's catering is safe every teacher's are safe even the chinese takeaway i go to is safe
i mean come on, where is the job lost???
kurdore2 2 years ago
no, just lucky
nihilistcat 2 years ago
I don't know, call me crazy...but maybe if the Gov't made it a priority to decrease the poverty level, work to end discriminatory hiring practices, loan lending etc...maybe more people would be able to have money to pay their bills. Seems at the end of the day bigotry, racism, sexism, homophobia doesn't only hurt the people it was designed to oppress, but also all of humanity...
Fawks121 2 years ago
CRAZY! Because there will always be poor. Esp. working poor. The world needs more people to flip burgers, empty trash cans, and do menial labor than it does CEOs. If everyone is rich, everyone is poor!
metamorphosis316 2 years ago
Actually the federal government mandated that certain people get loans no matter what their income. This has been a slow process over 30 years. Also take in account nixion abolishing the gold standard, clinton repealing glase-stegal act and greenspan changing the loan rules on from 10 to 1 to about 50 to 1 and you'll see why the money supply expanded so fast. If all the central banks of the world worked in concert as I think they did you can see how this easily became global.
Secretsofsociety 2 years ago
UNCLE CHUCK IS RIGHT, THE GOVERNMENTAL PORTION IS MINIMISED, BANKS DON'T MAKE RISKY LOANS UNLESS PUSHED.
HONESTLY IF YOU HAVE A BUNCH OF MONEY, DID YOU GET IT WITH BAD INVESTMENTS, THIS SURLY IS NOT YOUR FIRST RODEO.
UNK POSTED
THIS IS NOT TRUE. The banks and secondary market investors (fanni and freddie) were the ones that relaxed the qualification guidelines and allowed mortgage brokers to offer loans to people with limited documentation or poor credit.
AbitaVets 2 years ago
AbitaVets, I dont think you understood what I wrote. Although I do agree that the governments influence, or better said, lack of responsibility to regulate the financial markets were minimized, I fully point my finger at the private market. Sadly, their influence over the government was so thick, that seperating the public from the private sectors doesn't even make much sense.
Fani/Freddi are private - wikipedia does a good job of explaining their creation and roles in the market (101)
unclchunk 2 years ago
What It WIKI overlooks is the pressure placed by Barneys Frank and Maxine Waters to lower standards of loan qualifications, placing full blame on private markets.
Query
How did the democrats have such power over private enterprise entity?.
AbitaVets 2 years ago
Greenspan saw all this (the depression) coming. thats why he retired moments before it happened. Poor Bernankie.
paulyski 2 years ago
Relan Real Estate and Mortgage is greedy. Thus, these people should not be trusted.
greedisrootofevil 2 years ago
So... money flows like this? Those who wanna buy house -> Mortgage brokers -> Bank -> Wallstreet -> Investors? ... but how does it work? How do the $ from wall street go to investors? And from the bank to the wallstreet? Please explain... thanks!
Catchetat 2 years ago
Why does Greenspan have 6 fingers?
high5flyer 2 years ago
haha lol .. here in norway 12 old year kids can work if they want XD
knudiinliverpool 2 years ago
very nice video, it helped a lot, but theres one thing in the cycle i dont get, i mean why did the banks broke, if mortgage brokers selled peoples loanes to the same bank, i mean if people didnt pay their bills banks still had the loans from the mortgage brokers.. i dont know if im explaining myself....can someone help me?
alecin123 2 years ago
As pple start to buy more and more houses and as people start to invest more on construction,bth parties were hapy. IF subprime (those with bad credit history), can't able to pay back their loans, what bank does is, takeover his/her house as the prices of the house are really high that time and they thought that it would go all the way up. Unfortunately, as investment results takes years, when the result came, supply for houses was more than demand, house of price falls.
rainHansong 2 years ago
cont.
did very little to address the issues.
I was only making the point, originally, that mortgage brokers had very little to do with the problem - outside of blatant fraud etc. which, in my opinion, had very little (not even noticible) effect. That statement does not include fraudulent activities specifically related to stated or no documentation loans. They were a creation of the market.
unclchunk 2 years ago
One piece of major mis-information -
You blamed the relaxed guidelines ( qualifications ) on the mortgage brokers. THIS IS NOT TRUE. The banks and secondary market investors (fanni and freddie) were the ones that relaxed the qualification guidelines and allowed mortgage brokers to offer loans to people with limited documentation or poor credit. Brokers are the little guys on the totem poles thats impact on the crisis was insignificant.
unclchunk 2 years ago
unclchunk: actually, the Federal Reserve found that lenders were already getting into the subprime market before Fannie/Freddie because it was a dynamic area of potential profit. F/F were a big part of the problem, but not the whole problem. The MBSs sold to F/F had a lower rate of failure than those purchased on the private market, particularly through "shadow banking" mechanisms, precisely *because* it was regulated, even if insufficiently. Money funds, monolines, and SIVs were not watched.
zombiesoiree 2 years ago
uhhhh. I don't know how you interpreted what I said but I dont see that we have contradicted eachother at all here. I realize that F/F were not the first get into "subprime mortgages", although, particularly towards the end, they were heavily invested in "Alt-A" (basically the same) and other shotty doc type mortgages - SISA, NINA, NISA etc. Towards the end they were also investing in the notorious "pay option arms" .... the regulations that did exist and the regulations coming out now
unclchunk 2 years ago
Look, if you're going to try to pin this solely on F/F, you're going to have to figure out why other countries were involved in supbrime lending to their own markets. The F/F explanation for the entire crisis is revealed to be especially weak when you consider the fact that the UK went through the same process we did. This idea that "gov't forced banks to be bad" is probably soft spin coming from the Libertarian Party and the GOP, as well as Cato etc.
zombiesoiree 2 years ago
Once again, You are not responding to ANYTHING that I wrote. Please copy and paste a quote from me where I had said anything that you are claiming I said.
Zombie - ""gov't forced banks to be bad" is probably soft spin coming from the Libertarian Party and the GOP"
Me - " I fully point my finger at the private market"
I do agree that the repeal of legislation like the glass steagal had a HUGE part to do with the problem. Where did I say otherwise?
F/F are not the government.
unclchunk 2 years ago
I dont know if, perhaps, your retarded or something, but you dont seem to be reading what Im writing. These sorts of circular non-arguments do nothing for me.
unclchunk 2 years ago
"Retarded" ... nice. If you can't contribute anything, just stop posting.
Anyway, there are a lot of books out there on the crisis, including some by former traders, that are very interesting. Any attempt to reduce this to a gov't-generated disaster via F/F is a very myopic and, probably, partisan viewpoint. Cheap credit in a time when real wages can't keep up with inflation, shadow banking, and the rollbacks of regulations such as Glass-Steagall were as much to blame as F/F's bad accounting.
zombiesoiree 2 years ago
That monster reminds me more of the Cookie Monster than Scrooge McDuck. Oh well, it was a funny interlude, anyhow. :-p
datalal624 2 years ago
You forgot about the part where the US Government forced banks to carry a higher profile of high risk loans in 2006. Don't forget that the investors knew this was going to happen.
BrentonUnger 2 years ago
Excellent video. Amazing how you simplified the idea in a very interesting story.
abdulazizhj 2 years ago
Excellent Video.. yes the information is correct. Quite a funny video too..
ne1l007 2 years ago
yum yum yum mortgages - you are great Jonathan and I like the unbuttoned sleeves flopping around - sort of relaxes the whole presentation somehow.
yoch3 2 years ago
Comment removed
krazimuffin 2 years ago
MOAR!
ModusPonem 2 years ago
I thinks its MORE! as in more money.
middletown63 2 years ago
hmmm.... the whole Scrooge McDuck thing just doesn't fit... he was not a duck known for loaning out money freely
ronpauldroolz 2 years ago
@ronpauldroolz: Who spoke about freely? Rather tons and tons of interest... It´s an investment in mortgage loans we´re talking about - making a LOT of money by buying bulks of loans. Kinda like the stock market of loans...
oabrahamsson 2 years ago
Hmmm... you seem English impaired. "Freely" is not the same word as "free".
Here's a definition and synonyms ...
Of one's own free will: spontaneously, voluntarily, willfully, willingly. Idioms: of one's own accord, on one's own volition.
ronpauldroolz 2 years ago