The film “The Big Short” is a film showing three separate yet parallel stories that are loosely tied to one another. Each story is about a group of people and their actions leading up to the house market crash in 2007 and 2008.

In one case, actor Christian Bale plays the Michael Burry, an eccentric hedge fund manager. He discovers that the housing market in the United States is extremely unstable based on high-risk subprime loans. Burry is expecting the collapse of the market, as interest rates rise from adjustable rate mortgages, he proposes the idea to create a credit default swap, which would allow him to bet against the market-based mortgage-backed securities for profit. Burry’s long term bet amounted to over $1 billion and was easily accepted by major investment and commercial banks. This bet required hefty monthly payments which began to anger his clients and they vocalized the fact that they thought Burry was wasting capital. They pushed him to reverse and sell but Burry was persistent and extremely confident with his decisions. Later, because of tremendous pressure, Burry chooses to restrict withdrawals which upsets investors. Finally, the market collapses. Burry’s risky decision paid off and his fund value increases by 489% with an overall profit of over $2.69 billion.

Another case, with Deutsche salesman Jared Vennett, the decision-maker in charge of global asset-backed securities trading at Deutsche Bank, is one of the first to actually understand Burry’s inquiry. After realizing that Burry is on to something and is correct he also decides to enter the market. This causes him to earn a fee on selling the swaps to firms who will then profit when the underlying bonds nose-dive. Then, a mistaken phone call leads to Frontpoint Partners hedge fund manager, Mark Baum. Baum is eager to buy swaps from Vennet because of his low regard for America’s business models and banks’ ethics in general. Vennett explains how the market will eventually collapse due to the packaging of subprime loans in collateralized debt obligations rated at AAA. When the Frontpoint team then decides to conduct a study in South Florida, they discover that mortgage brokers are actually profiting by selling their mortgage deals to Wall Street banks. This is because Wall Street banks pay higher margins for the chancier mortgages, which creates a bubble, which then prompts them to buy swaps from Vennett. In early 2007, as the loans begin to slowly default, collateralized debt obligation prices begin to rise somehow, and the ratings agencies decline to reduce the bond ratings. Baum notices conflicts of interest and fraudulence amongst the credit rating agencies. Baum realizes that the fraud will fully collapse the global economy and he is horrified by this. He decides then to purchase as much as possible, profiting at the banks’ expense and waits until the very last minute to sell. Eventually, Baum’s fund makes a profit of $1 billion, but banks do not accept the blame for this economy crisis.

The final storyline within this film is about two young investors, Charlie Geller and Jamie Shipley, searching for cheap insurance that has big potential payouts. Below the capital edge for an ISDA Master Agreement is required to enter into trades like Burry’s and Baum’s. Geller and Jamie enroll the assistance of retired securities trader Ben Rickert. When the bond values and CDOs increase despite sdefaults, Geller believes the banks are committing fraud. This trio decided to also visit the Forum in South Florida and learn that the U.S Securities and Exchange Commission does not have regulations to supervise mortgage-backed security activity. Successfully, they make even more profit than other hedge funds by deciding to short the higher-rated AA mortgage securities, as they were considered extremely stable and conceded a much higher payout.

Due to the financial and economic crisis during this time, eight million people lost their jobs, six million people lost their homes, and trillions of dollars in consumer wealth was lost in the U.S alone (Mary Gotschall, Learning English News). The financial crisis spread across the world. The unemployment rate rose, economies around the world slowed down, and international trade declined.

Throughout the film, it is clear that different firms were not being objective or ethical. Fraudulent activity is defined as activity that is deliberately deceitful, dishonest, or untrue. Wall Street firms were being unethical by not making sure that people would be able to afford their mortgage payments. This is obvious through the fact that the firms gave high ratings to different securities that deserved a lower rating. Rating agencies were in competition with each other and therefore gave better ratings to the investment banks than they should have because they were worried of their business declining if they did not. This is considered fraud, as they are acting dishonest and careless. Wall street firms put thousands of home mortgages into one basket of securities then sold them to different investors and commercial banks. These home mortgages are considered safe investments considering historically, homeowners rarely failed to pay back their home mortgage. Since mortgage bankers were lending out too much money to people who were not financially sound enough to be able to afford their mortgage, and because of this, too many risky mortgage loans were put into the securities basket. This shows the fraudulent activity of the Wall Street firms and the greediness of different mortgage bankers and people within the real estate agency. These firms were very quick to offer loans that without checking if the people could afford to pay it.

Unintentional torts are based around negligence, which although can be accidental, can still be punishable under civil law. There are also intentional torts such as: battery, assault, false imprisonment, trespass to land, trespass to chattels, and intentional infliction of emotional distress. In this film, the mortgage brokers could be considered as acting negligent with their actions of granting loans without making sure the people could afford to pay back their mortgage loans. Negligent is defined as failing to take proper care in doing something. The mortgage brokers were displayed in the film as acting careless, yet confident in their actions of granting these loans.

In my opinion, there should not be more regulations to prevent this, but companies should always be communicating ethics, morals, and their values to their employees so that the government does not need to be as involved as they already are. Although I don’t think there should be more regulations passed, companies and rating agencies should be more careful when they are giving loans to people and make sure they can afford to pay the loan back. The government regulation is what initially started the collapse in the market because they pushed mortgage brokers to lend loans to people who were not able to afford them. When there is more government involvement, processes take longer and are more expensive. On the other hand, when there is government regulation, behavior is more likely to remain ethical because the competition between firms is more limited.

Ultimately, I think that there should not be more regulations or government involvement within this industry. When the government is involved too much it is easy for things to be more expensive, complicated, and possibly take longer. Instead, employees should be made aware of what is ethical and what will benefit the society and people as a whole, so they are able to have a goal in mind when lending loans.