"The Big Short" - A Cause Of The Financial Crisis

‘The Big Short’ Reflection Student’s Name Institution Affiliation Reflection The movie, ‘The Big Short' identifies unethical rating of securities as the major cause of the financial crisis. The rating agencies that were supposed to regulate the SEC (Securities and Exchange Commission) seemed to be unaware of the crisis and gave top ratings for securities that were not performing well in the market. The higher valuation resulted from the fact that rating agencies were paid in form of commissions from brokers. As a result, they had to offer higher rating in the bid to keep investors from shifting to other rating agencies thereby loosing on commission. As a result, many people invested in the securities without knowing that they were riskier than it looked on the face value. The securities were regarded as safe investments because homeowners had never failed to pay back their loans. It even becomes riskier when the mortgage bankers advanced loans to people that were not financially sound to purchase homes. As the risks became more apparent, people that had taken loans were unable to pay their loans making the investors make significant losses that led the crumbling of the economy. Unethical valuation of securities could be avoided by changing the commission system of the rating agencies. In this regard, t...