It does miss out on a few details, like how shady mortgage brokers would push even prime borrowers into subprime mortgages because the fees were better. Or how BBB rated CDOs would also get split into their own tranches, with the top one getting a AAA rating just like the one the BBB was derived from. But you have to streamline some of the information to make a compelling 11-minute information, and whatever is lost in fine-grain is made up for in lucidness.
Go to the video on Vimeo to see the really nice HD version.
The Crisis Of Credit Visualized [jdjarvis via Boing Boing]
]]>Go to the video on Vimeo to see the really nice HD version.
The Crisis Of Credit Visualized [jdjarvis via Boing Boing]
]]>If you watch just one video, make it this one. If you really want to understand the economic meltdown, watch the Whiteboard videos.
]]>It would be helpful to have a better definition of "subprime". I'm sure plenty of people would rather leave the "irresponsible smoking daddy" in there but at some points during the crisis, the foreclosures on non-owner-occupied properties (such as summer homes, house-flippers' investment properties and rental units) were neck and neck with the foreclosures on men with beer guts and lots of kids. Because part of "primeness" is a reasonable debt-to-income ratio, the investors with four or five interest-only Option ARMs were all deep in subprime territory.
]]>....it is vimeo. And yes, we are much MUCH better than youtube (content wise)
Go and have a look!
]]>@jrizos:
How do you solve everyone being broke?*
The wrong question.
"How do you convince everyone they're safe and wealthy again?"
The right question.
A question which varys from person to person. But in essence what we have to do is just convince people that they aren't going to lose their job and spend like there is no tommorow.
Tax cuts work great for this when people already feel happy and safe. Not so great when they think they should "weather the storm." Give someone money now and they start shoring up their defenses.
Everyone needs to be irresponsible. It's the only way to get us out an irresponsibility hole. What cruel irony is that?
]]>That said, there are lots of design principles involved in something like this that teachers could use without a lot of capital.
]]>In any case, it's a handy reference phrase to distinguish between loans that are more favorable to a borrower over time (like a 5.25%, 30yr fixed rate) and less favorable to a borrower over time (like a 1% 1/1 Option ARM that will readjust to 1yr LIBOR +8 after the introductory period ends).
]]>@TheRedSeven: Hardly, the champagne analogy in Hirsch's CDO piece was much better than liquid flowing from box to box. That being said, I enjoyed this one as well. I guess it's a "do I prefer Richard Burton or manga" sort of a preference.
]]>GOD DAMN WE'RE FUCKED!!1!
]]>@chazon64: haha! i know, i love the sub-prime family.
this was a great video, very educational and entertaining!
]]>YES. AMEN TO THAT.
]]>My one criticism is that you mentioned CDSes earlier in the presentation but you never touch on it again. You could have spent another minute or two to exlpain how CDSes greatly amplified the damage by increasing the liabilities that banks had on these unregulated "insurance policies."
Overall, a very well-done presentation! Kudos!
]]>Personally I LOVED the graphic change of the family from the 2 parents with one kid and a dog to the welfare parents with 4 kids who smoke. LOL.
]]>The only problem I had with the video is that it didn't get into the risk management that the lenders got into for the subprime markets that accelerated the process: the ARMs, interest only's. It's one thing to loan to sub-prime people, it's another to give them a mortgage that they will not be able to afford. (I never understood the concept of making someone riskier pay more for something than someone safer...it seems like you're setting yourself up for failure if you make someone pay 9% instead of 5% because they couldn't pay something back. Either loan the money at a good rate, or don't loan them the money)
Also I didn't like that they even mentioned that people were bailing on their mortgages because their houses dropped in value. I don't think that happened very often...often enough to dedication the amount of time that it did to it.
]]>@Corydon: What's not to love about a cigarette smoking, overweight, tatoo'ed family with a bunch of kids??? Octomom anybody?
]]>Word of the Day: Tranche, n. A piece, portion or slice of a deal or structured financing. This portion is one of several related securities that are offered at the same time, but have different risks, rewards and/or maturities. "Tranche" is the French word for "slice".
I didn't think I would turn to Consumerist for improved vocabulary.
]]>And there was a recent PBS Frontline episode that looks at the rest of the chain from wall street to our government's reaction and beyond. You can watch that here:
http://www.pbs.org/wgbh/pages/frontline/meltdown/
Exactly, that was freakin' hilarious!
]]>@Corydon: I liked the cigs and super size coke in the guys hand
]]>Again, if it is ACCURATE (I know details may be missing, but as a general overview, correct) , then this is hella informative and should be seen by as many Americans as possible.
]]>I have to agree, a good 10 minutes spent understanding the situation. I knew slightly what was going on beforehand, but now have a better understanding of how the risky borrowers and investments banks worked.
]]>