Business and Adult Entertainer

Rules! Rules are good, so here they are. Minimum of THREE (3) pages. The pages MUST be full for full credit. Typed, double spaced. Times New Roman in 12 point font. One (1) inch margins top/bottom/left/right.







You must observe the rules above, and also complete the actual assignment. Please do not just write a short paper summarizing the story of The Big Short. That isn't the assignment.







For this entire assignment, DISREGARD everything in the movie dealing with investments. That is for an entirely different class. So, anything about “credit default swaps,” or “shorting the market,” disregard all of that. Focus only on the real estate industry, meaning home sales, mortgage lending, financing, consumers, FICO Scores, “loan to value” ratio (“LTV”), “bubble,” ARMs, teaser rates, fixed rate mortgages, multiple properties, standardizations, secondary mortgage market, etc.

First Part (MINIMUM One FULL Page):



For each of the below characters, a.) Identify their role in the real estate industry, ie. real estate broker, consumer, mortgage lender, etc; b.) Identify their function in the real estate industry, ie. what does their “role” do.; c.) Identify what people in this “role” did that contributed to the crash; and, d.) Identify what people in that role could have done to prevent the crash.







The “adult entertainer” who told Steve Carell that she owned 5 houses and a condo.





The two guys in Miami that discussed loan approvals with Steve Carell and his investment company (they introduced Steve Carell to the “adult entertainer”). If you have trouble identifying them, the one guy stated “She better like me, I sent that b***h to Cabo.” And the other guy made the statement that “I used to be a bartender, now I own a boat.”





The “bank” (its NOT NAMED), that the one Miami guy dressed in all black identified that he worked for that offered “NINJA loans = no income, no job.” You can just imagine that is Bank of America, or BB&T or name any other bank or financial institution. Hint, they loan money for consumer to buy property.









Second Part (MINIMUM One FULL Page):



First, tell me how and why the bonds (he identified them as “private label MBS”) that Lewis Raneiri invented were much more stable that the bonds (MBSs) that collapsed during the crash (refer to the Margo Robbie scene). Focus on the difference in the TYPE of mortgages that were held in Raneiri’s original invention, versus the type of mortgages that were in them in the collapse. Also consider the breakdowns in safeguards for loan approvals (think about the scene with the 2 Miami guys and how they got people approved for loans). Lastly, consider how the ARM (adjustable rate mortgage) and “teaser rate” played into the collapse.





Second, tell me what can be done to prevent the collapse from happening again by making sure the mortgages that are included in the bonds are more stable and reliable from default by the borrower (homeowner). Think about Chapter 16, the secondary mortgage market and standardizations.





Third Part (MINIMUM One FULL Page)



In your opinion, who holds the most responsibility for the crash? Choose one and explain your opinion?



Consumers because they got into obligations (bought houses, borrowed money) that they ultimately could not afford?

Banks/Mortgage Lenders because they loaned money to consumers that could not afford those houses/loans without following safeguards to find out whether they could or not, and/or loaned money to consumers that they actually KNEW could not ultimately afford those houses/loans.

It could not have happened with just one or the other.