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Word Count: 963
Joel A Barker a businessman and futurist once stated When you drop any new idea in the pond of the world you get a ripple effect You have to be aware that you will be creating a cascade of change This is exactly what happened during the 2008 financial crisis As the economy became burdened with greed and corruption it began to tumble echoing through some of the largest investment banks and even some commercial banks This essay analyzes the causes of the economic crisis of 2008 and uses the movie Too Big to Fail as an example of the crisis events Both of these topics convey the immoral decisions that plagued the economy Credit default swaps and mortgage defaults are only a few causes but the real cause of the 2008 financial crisis can be blamed on ethics or a lack thereof A credit default swap is a type of investment where you pay someone so that they will pay you back if a company ceases to pay its bonds or defaults They are like debt insurance policies on a bond During the crisis these defaults were being unfairly priced The underpricing of credit default swaps created a credit bubble as investors avoided regulation with the default swap insurance and reduced their risk at a cheap cost while driving up debt prices The most reasonable explanations for the bonds being mispriced are bribes or the lack of ethics Those choices created a ripple in the pond that was the economic crisis In finance making loans to people with possible difficulty sticking to the repayment plan is called subprime lending These loans have higher interest rates and poorer collateral but these were the loans people were using to pay their mortgages In 2007 subprime mortgages began to exceed expected default losses Ignorance in the housing market led many people to buy houses
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