Reading Response 1 / Julia Bova

Wall Street and the Financial Crisis: Anatomy of a Financial Collapse by the US Senate Permanent Subcommittee on Investigations describes the four main reasons for the financial crisis through a series of case studies. These case studies outline the issues with high risk lending, regulatory failures, inflated credit ratings and investment bank abuses. The four key points include a variety of parties, from US financial institutions to investment banking. Through these, “this Report is intended to help analysts, market participants, policymakers, and the public gain a deeper understanding of the origins of the crisis and take the steps needed to prevent excessive risk taking and conflicts of interest from causing similar damage in the future”, identifying a key point, explaining the facts thoroughly via specific case studies and giving recommendations through a definitive and unbiased Senate decision.

The 2008 Housing Crisis by Colin McArthur and Sarah Edelman described one main idea that contributed to the Housing Crisis, “the rise of predatory lending and products with exotic features marketed to consumers without adequate information or preparation and sometimes using fraudulent information”, and steered more towards an idea of blame and wrong of the fault of Wall Street and not the Federal Housing Administration. This article stated, “Instead of too much government, it was the lack of sufficient government oversight in key areas… that transformed a housing bubble into a global financial crisis.”

It is clear that one article was written with more bias than the other, as the Center for American Progress’s article focuses on a more singular issue, clearly pushing the idea that the true problem was not the government but the lack of responsibility by Wall Street. This article lists through organizations that “did not cause the crisis”, leading up to this main idea of who did, “the primary driver of this lending was demand from Wall Street investors for mortgages”.

The US Senate reports lays out succinct information for readers to understand what they identify as the four main issues, and gather their own opinion based upon this unbiased analysis via specific case studies. These two articles both describe that a cause was driven by the investors of Wall Street via power and greed within this banking system.

As a more visual learned, I turned to YouTube for a visual representation of the information written throughout these two articles. One I found helpful for understanding the basics was The Causes and Effects of the 2008 Financial Crisis. This video was successful at laying out these same facts and truly connecting them all together, through the housing market, mortgages and investors. The simple examples used to describe this big issue were easier to wrap my mind around (as someone who is coming to the table with no background knowledge of this event). I found it useful to literally ‘see’ where the housing market fit into things more with Wall Street, the connections between the housing market, investors and government, via the idea of treasury bills, rather than relying on my new knowledge to place that into the scenario. A clearly defined ‘turning point’ of the creation and implementation of sub-prime mortgages really helped put all the information on a clear timeline and push the information from these two articles together.