Szk5211 Week 5 post

This week we watched a video clip in class called, “House of Cards”. It was refreshing to watch a video instead of reading articles as we usually do. This video was about the housing crisis, people’s homes being foreclosed. It was the governments/Wall Streets, and the people who sold the houses fault as they lied about their client’s incomes in order to place them into houses knowing they could not afford them. I felt it was sad to watch a scandal happening to people and ruining their lives completely.

The video started by expanding that middle class income people were in upper class homes and they simply could not afford them anymore so they would get evicted. The house would be on foreclosure. Homes that have been evicted for long can increase crime rate and have a public health impact, as they are not being taken care of.

The credit crisis began and the interest rates where lowered to make it easier for people to borrow money. This, in turn, would make people go out, shop and put money back in the economy, as the cost of borrowing money was cheaper. As the mortgage rates declined, prices of houses rose higher than income. If fewer people can buy the homes then the prices would drop.

Fannie Mae and Freddie Mac were to top two companies who would lend money (loans).  The companies would do a very through background check and be very selective—California wanted to change this. The dominating companies lost their power with scandals Wall Street took over to replace them. Countries like China and India were becoming richer and decided to invest to American borrowers. Companies such as Quick Loan Funding emerged providing money to those with bad credit, also known as ‘nasty loans’ or ‘sub prime borrows’. All people needed to do was state their income and did not have to prove it.  People could lie about how much money they made and how much assets they had. As stated in the movie, loan officers were not licensed or trained (they were trained to close the loan) some were previously pizza deliverymen. People trusted their brokers who said that all you need to do is buy this house then you can refinance it. It moved people into wealthier neighborhoods thinking they would be able to afford the place and not knowing their broker had placed them into a ‘liar loan’. One of the brokers in the movie had put that her client made triple the amount she actually made and had arranged two loans in her name.

Brokers only cared about making money for themselves and didn’t care where these people would end up knowing they could not afford these homes they were placed in.

This movie really showed how far our government would go just to make money. If you were a broker would you knowing be able to put someone into a ‘liar loan’ for the money? I know I wouldn’t be able to sleep at night knowing that I may have destroyed a family or a persons home/life.

Week5: House of Cards (clip) pij5030

The clip ‘House of Cards’ was slightly hard to understand and follow because of the economic terms and the way the system functions, but at the same time was very interesting and essential to understand even a tiny part of how the system works-based on “cheating” on those who don’t have as much money , power, or knowledge-and why it is important to dig in these issues. There were several aspects to scrutinize on which all somehow lead to the question: who is it to blame, whose fault is it?
I don’t necessarily think there is a right or wrong answer to that question but I still think it is something worth thinking about. One could possibly argue that the banks are responsible for this all because on the outer surface it seems like they are the ones who are taking over the foreclosed houses. Another could argue that the people at Wall Street and the government, perhaps, are responsible because they are the main people who control the system and circulate the flow of the money. Others would argue that everybody, including ourselves, are responsible and that we should know enough and therefore take care of our issues in a “smart” way. Whichever the case does it really matter who it is to blame and who started this “ugly” system? Wouldn’t it be more efficient and important to figure out what the problem is and how to fix it rather than just sitting down, whining about the unfortunate and unlucky outcomes? If I had to say whose fault it is I would argue that everybody had some responsibility, whether is be taking advantage or not reading the paper work thoroughly; like I said before, rather than finding the one major cause of this “unfortunateness” to blame of, when it comes to fixing the problem we should ALL be a part of it and take responsibility in trying to mend things. I think taking responsibility whether being influenced or not is  being the true “good” American. I believe Becky mentioned being a good American is part of a necessity of the American Dream: “If you’re American, don’t take advantage of what our country has to offer, but instead be grateful of what you have.  As an immigrant, understand that you are a part of a new culture and must therefore adapt to their routines and norms,” and I think she hit a hard and crucial point that seems all too simple yet too hard to follow.

Interestingly, I saw that many people mentioned the American Dream: what it meant, what it means nowadays, and what significance or impact does it have on us or those from other countries? But I think the most important thing we should keep in mind is that whatever title, American Dream, it is given, the dream that we each have and hope for is the true American Dream. Having the word ‘dream’ in the term should mean that it has no limits in terms of the dream itself and for the person or people who dream of it. Going back to the clip, ‘House of Cards’ makes us rethink what the American Dream might be, but also shows the sad side of powerful people using the concept dream in order to maintain their power over the powerless.

week 5

In 2000, the United States faced an economic crisis in addition to many serious issues, including the IT bubble collapse, 9/11 terrorist attacks, and the Afghan-Iraq war, so the government started to lower interest rates. This led to the lower mortgage rate and raised housing prices. As housing prices increased, housing demand increased as well, and lower mortgage rates encouraged people to buy houses with loaned money. However, in 2004, the United States stopped lowering interest rates—this was the first page of the economic crisis. Then, mortgage rates were raised, so low-income individuals could not pay back their loans; their houses were subsequently put up for auction. The problem did not impact only low-income people; banks faced bankruptcy because they could not collect on their loans. As a result, banks suffered significant losses, many companies filed for bankruptcy. This led to the bankruptcy of large securities and finance corporations.

In April 2007, the United States’ second–largest subprime mortgage company, New Century Financial, filled for bankruptcy. At around the same time, HSBC lost $10.7 million, and AIG lost $5 million because of the subprime mortgage crisis. This is the background of the film House of Cards. I remember when this economic crisis damaged the world economy. The film features a scene in which housing created by a pile of cards collapses, directly reflecting what happened in the U.S. economy because of the subprime mortgage crisis. I cannot imagine how low-income people felt when they lost their houses; this kind of problem hurts low-income people dramatically. For example, let’s say Amy is a low-income person and Ben is a wealthy individual. When the housing crisis occurred, both needed money to support themselves. Ben could wait out the crisis without selling his house, but Amy needed money more immediately. Therefore, Amy sold her house at a cheaper price, thus damaging her wealth, whereas Ben was able to keep his house until the economic situation improved, so his wealth was not damaged.

Throughout the crisis, news headlines seemed to be dominated by the subprime mortgage issue, all day and every day. Furthermore, the subprime mortgage crisis caused a butterfly effect that rippled across the world, affecting even my family. When the U.S. economy faced the crisis, exchange rates increased, so my parents had to send more money to support me. Major Korean broadcast networks treated the subprime mortgage as priority news, and the Korean government was concerned about the same issues in Korea as the U.S. government was in the United States. Even today, the world’s economy is not that strong, but people learned from the previous crisis that high risk does not always yield high returns.

ktc5054: week 5 post

I am glad that this class allowed me the opportunity to see House of Cards because it really opened my eyes to just how awful the economic crisis.  The movie reminded me of a car accident that you cannot look away from.  It made me realize just how privileged I am to have never been effected by the financial and housing crisis that affected so much of the United States.  I have lived in my house for almost my whole life and my parents have paid off the mortgage.  There area I live in does not have many signs of the economic crisis, with the exception of a few unfinished housing developments, so it was very surprising to see just how bad the financial and housing crisis is.  The movie was touching and kept my interest by including personal stories of people who fell victim to what could almost be considered a scam.  It has certainly taught me to read things much more carefully and to ask questions if I do not understand what I am signing.

I found the parts about Narvik, Norway to be among some of the most fascinating pieces of the movie by showing just how far the devastation reached.  I also found it disturbing that the CDO’s were targeted at people, including those overseas, who did not understand what they were investing in.  They were too busy making sure everyone got their “American Dream” to worry about whether or not these people could actually afford it.  No one seemed to care about what would happen when/if the people who were completely unqualified for loans defaulted.

What I questioned the most was, how Daniel Sadek was able to start up Quick Loan Funding and emerge as such a large player in the subprime lending market without anyone looking into his background and realizing he had no college degree.  He was able to convince Wall Street to back his loans with no questions asked.  How did so people ignore the warning signs and numbers not adding up?  Even the calculations used did not account for realistic dips in the housing market, or most other markets for that matter.  I truly believe that if there were some regulations in place this would not have happened.  The lack of checks and balances is probably what allowed Daniel Sadek to get away with passing off subprime loans as much better investment opportunities.