Money Archives

Synthetic CDO: What It Is (And Why It’s Controversial)

What is a synthetic CDO, or synthetic collateralized debt obligation? A synthetic CDO is a type of CDO that bundles credit default swaps into a new financial product. While a traditional CDO is valued based on cash assets like mortgage payments, the value of synthetic CDOs comes from the premiums paid on bets that certain bundles of securities (like mortgages) will default. We’ll cover what synthetic CDOs are, why they’re so confusing, and how their involvement in the 2008 financial crisis makes them controversial.

Howie Hubler: The Blunder That Cost Morgan Stanley $9 Billion

Who is Howie Hubler, of The Big Short fame? Was he a villain of the 2008 financial crisis or just another big shot banker unfortunate enough to get caught? Howie Hubler is the former Morgan Stanely bond trader infamous for his role in the second-largest trading loss in history. We’ll cover how Howie Hubler tried to game the financial system and lost…badly.

2 Credit Default Swap Examples: Bet Against the Market

You may have heard of credit default swaps, but the underlying concept can be hard to understand. What’s a good credit-default-swap example? A credit default swap is an insurance policy on a bond. We’ll cover two credit-default-swap examples that show how these policies work and the role they played in the 2008 financial crisis.

Shorting the Housing Market: How It Works and the 2008 Payoff

What does it mean to “short” the housing market? How did investors who shorted the housing market in the early 2000s benefit from the events leading up to the 2008 financial crisis? Shorting the housing market is a way of placing a bet against the market. If homes fall in value and the housing market declines, people who have shorted the housing market benefit. Learn how shorting the housing market works and how investors who did it predicted (and benefited from) the 2008 financial crisis.

Charlie Ledley and Jamie Mai: Bit Players to Millionaires (Cornwall Capital)

Who are Charlie Ledley and Jamie Mai? And how did they turn $110,000 into $80 million? Charlie Ledley and Jamie Mai are the founders of Cornwall Capital, a New York City investment corporation. They shorted the housing market before the 2008 financial crisis and were featured in the book and movie The Big Short. We’ll cover how Charlie Ledley and Jamie Mai got their start in investing and how they went from second-class citizens in the financial world to major Wall Street players.

What Is a Subprime Mortgage? How It Works, Who It’s For

Suburban Flight and The Role of The Government

What is a subprime mortgage? How did subprime lending contribute to the 2008 financial crisis? A subprime mortgage is a home loan given to someone with a low credit score, indicating there’s a higher risk the borrower might default on the loan. Learn why subprime mortgages are risky and how subprime loans contributed to the 2008 financial crisis.

Dr. Michael Burry: From Early Struggles to The Big Short

Who is The Big Short‘s Dr. Michale Burry? How did he predict the 2008 financial crisis, and what did he get out of it? Dr. Michael Burry of The Big Short fame is a medical doctor by training and an investor and hedge fund manager who predicted and profited from the 2008 subprime mortgage crisis. We’ll cover Dr. Michael Burry’s background, the background of the financial crisis, and how Dr. Burry shorted the housing market.

2008 Bank Bailout: Its True Cost, and Who Paid It

What events led up to the 2008 bank bailout? Did Wall Street deserve to be bailed out? What was the true bank-bailout cost? Who paid it? We’ll cover the events leading up to the 2008 bank bailout (also known as the Troubled Asset Relief Program, part of the Emergency Economic Stabilization Act) and how it hurt the American taxpayer.

What Are Mortgage-Backed Securities? The Simple Definition

Racial Predatory Mortgage Lending and The 2008 Crisis

Maybe you’ve heard of mortgage-backed securities in relation to the 2008 financial crisis. But what are mortgage-backed securities? How do they differ from other investments? A mortgage-backed security (MBS) is essentially a bond, or debt instrument, that’s comprised of a bundle of home mortgages (often running into the thousands) that have been packaged together into a tradable asset. Learn the history of mortgage-backed securities and how they infiltrated Wall Street, becoming one of the main contributors to the 2008 financial crisis.

Ben Hockett: How a Berkeley Recluse Shorted the Housing Market

Who is Ben Hockett? How was he involved in the “big short” that profited from the 2008 financial crisis? Ben Hockett is a former Deutsche Bank trader who left Wall Street behind to trade derivatives from his home in Berkeley Hills. In 2006 he worked with investment company Cornwall Capital to short the housing market and profit from the 2007-2008 subprime mortgage crisis. In the movie The Big Short, Brad Pitt’s character Ben Rickert is based on Ben Hockett. We’ll cover Ben Hockett’s background, his major role in getting Cornwall Capital the recognition it needed to be a player on