The Big Short

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The banking industry, challenged by risk and regulation, has progressed into an industry threatened by corruption. This corruption led America straight into the 2008 financial crisis, now known as one of the greatest crashes within the financial industry. The movie, The Big Short, successfully portrays this corruption by capturing the truth behind the big banks along with the lies told to the American people. A primary factor in the collapse of the financial market deals with predatory lending. Predatory lending is the process of placing unfair loan terms against the borrower. These unfair practices take full advantage of the borrower’s ignorance on the terms of the loan and the complexity of financing. Leading up to the collapse, big banks …show more content…
Throughout the years leading up to 2008, many individuals were involved in ponzi schemes, and clients lost faith of those in charge of handling their money (Morrison and Foerster). To save the financial industry, congress passed the Dodd-Frank Act. Before 2008 many different agencies regulated the financial industry. This led to different rules and standards for each entity and leaving some entities completely unregulated (Morrison and Foerster). The Dodd-Frank act aimed to put the US under one regulation and oversight system. This act resulted in many fundamental changes to the US financial system; holding eight components that make it difficult for a repeat of the financial crisis. Some of these components are things such as overseeing wall street, regulating risky derivatives, registering of hedge funds, overseeing credit rating agencies, and regulating of mortgages (Amadeo). The Dodd-Frank act has effectively put laws into place to prevent some of the largest factors that created the financial crisis such as predatory lending and the lack of regulation. These laws can be identified most clearly by understanding the ways in which banks were taking advantage of adjustable rate mortgages, CDO’s, credit rating agencies, investors, and credit default …show more content…
The corruption that occurred amongst the banks had to be stopped and the flaws that existed needed to be regulated. By executing the Dodd-Frank act, Congress now has regulations amongst the different structures of the financial system. Having regulations implemented in several different areas of the financial system, allows the system to have their own set of internal controls. Therefore, if one aspect of the system fails, another law or regulation will prevent the action from continuing. With rules and regulations having a stronger grasp around America’s financial system, congress aims to prevent a second crash of the financial industry from

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