Harro, just finished watching it, I can make it simple, I think. I know you weren't talking to me, but I want to give it a shot anyway.
Okay, so the banks loaned people money for houses who ultimately wouldn't be able to afford these houses once their monthly payment doubled (or possibly tripled in some cases), due to the fact that they's signed off (likely unknowingly, in many cases (as the movie suggests), on what's called,"Adjustable Rate Mortgages (ARM for short). Which is akin to getting an introductory interest rate on a credit card that suddenly balloons to 29% after the first year...except of course for a 30 year mortgage.
The banks took these high-risk loans, bundled them up with a bunch of other high-risk loans and sold them as packages to investment firms. They called them "Mortgage-backed securities", and they were given a AAA credit rating by the fed, despite being anything but, right?
And a few years later, people's intro-rate to their mortgages expired, their house payments shot through the roof (pardon the pun) and they began defaulting on their loans. They couldn't make their house payments. So these mortgage backed securities became worthless...and worse? These securities were invested in by other companies...and those companies were invested in by other companies, all of which depended on...no, COUNTED on the integrity of these mortgage backed securities and their resulting profitability.
And when people began defaulting on their house payments, the MBSs were found to be shit. And a domino effect took place where everyone who had invested in them, and those peoples' investors and their investors' investors (come to find out, a single 10 million dollar MBS bundle could have a billion+ dollars riding on it), suddenly had zero in the form of secured assets.
All this money built on top of these packaged mortgages came tumbling down when people couldn't pay their newly adjusted "adjustable rate mortgage". Come to find out, a lot of people didn't even know what the hell an ARM was, let alone have any idea that they eventually wouldn't be able to afford to pay it.
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harro (473)
5 years ago
Well that certainly seems like a very good explanation of it all. Although I imagine that being pre-armed with your detailed explanation, many would still get lost with much of the jargon in the film. Still, In the end I bet your information was much more than atalanta88 actually knew.
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Jehosaphet (1055)
5 years ago
You're probably spot on there...he sure seemed pretty vague in the "I know what you don't" department, huh?
"Ya'all are super slow. You'll just have to take my word for it. That is all."
Lol
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