• konodas@feddit.de
    link
    fedilink
    arrow-up
    3
    ·
    1 year ago

    He did not claim that shorting caused the 08 crash, or am i missing something?

    According to “the big short”, the reason was that banks gave loans to people who could not really afford them in case of an unexpected drop in the housingmarket (mortage backed, as you say), bundled the loans into packages, went to rating agencies who gave best ratings for the packages, sold them to other institutions and then shorted them when they noticed that the market unexpectedly dropped, knowing people would not be able to pay back the loans in the packages. Which was completely reasonable, just somewhat unethical.

    So, i think you could say it was an error of the rating agencies, as they underestimated the risk of a drop in the housing market when giving out the rating.

    • OneCardboardBox@lemmy.sdf.org
      link
      fedilink
      arrow-up
      3
      ·
      edit-2
      1 year ago

      You don’t have to trust banks to not shortsell the housing market with your own money (causing a recession for the entire world)

      The way I read this, it suggests that banks shorting the housing market with my deposits caused a global recession.

      You’re right about the ratings agencies (as far as I know, also from The Big Short), I was skipping over that for brevity.

      • ComradeKhoumrag@infosec.pub
        link
        fedilink
        arrow-up
        1
        ·
        1 year ago

        At the very least it compounded it. But didn’t the banks that short it know the crash was going to happen? Why would an institution that large bet again the housing market, when the stigma was