Reading Response 2 / Leah Bailey

Can Jokes Bring Down Governments provided a unique insight into the true power of humor. I believe the true core of memes and humor is that they can provide power to the powerless, regardless of social or financial status.  Metahaven even states “jokes are low budget. They are among the cheapest goods we all have access to; they don’t cost anything, and they work.” Due to the instantaneousness of our society I think jokes are still a relevant and “powerful weapon” today.

I think that this can be seen clearly by where the public is now getting their news. Social media outlets and comedy television are now reporting on the what’s going on in the world politically. The lines between ‘news’ and ‘entertainment’ are truly blurred. They are exhibiting the confidence to “perform what everybody knew but couldn’t say.” I feel like this is rallying up more people to get involved in their government. Bland facts are now funny and honest and relatable.

An example of this is Jimmy Kimmel’s episode about the Healthcare bill. He deliberately shaped his show to be funny, but honest. It has been shared all over Facebook and has sparked conversation on a variety of digital platforms.

http://money.cnn.com/2017/09/22/media/jimmy-kimmel-health-care-bill/index.html

So maybe jokes cannot take down the government, but they can definitely educate and spark passion in the public. Those who are not information-seekers now have easy access and are almost forced to take some action. Obviously, this comes with some pros and cons, as joke information can be honest or skewed. However, I am excited that jokes and getting more people involved to make an impact.

History: What Caused it? / Secondary Research

Overall, we found that the widespread proliferation of subprime and predatory loans, failings of various forms of oversight and transparency, and a lack of individual responsibility all contributed to the creation of the housing bubble and the scale of the market crash.

 

Katy Koetting, Samantha Wells, Leah Bailey, Katie Morrin, Gaby Vinales

History_SecondaryResearch

Secondary Research // Leah Bailey

  1. “The Financial Crisis of 2008”

Rimkus, Ron. “The Financial Crisis of 2008.” Financial Scandals, Scoundrels & Crises, 8 Dec. 2016, www.econcrises.org/2016/08/17/the-financial-crisis-of-2008/.

Econcrises.org is run by the CFA Institute. The goal of the institute is to promote ethics, education and professional excellence in the investment profession.

Data Points

  • Between 1996 and 2006, the cumulative current account deficit was about $6.1 trillion, with about $1 trillion of that comprising incremental foreign demand for U.S. Treasuries.
  • According to Federal Reserve data, low-quality loans (subprime and Alt-A combined) went from 5.6% of the mortgage market in 2000 to 50.5% of the market in 2005.
  • Delinquency rates on single-family residential mortgages averaged about 2.0% from 1995 through 2005; then began to spike in 2006, reaching 11.3% by the first quarter of 2010 (and plateaued there as the various bailout programs began to take effect).
  • According to the S&P/Case-Shiller National Home Price Index, the San Francisco home price index went from 100 in January 2000 to a peak of 218.12 in June 2006 (up 118% in 5.5 years). Similarly, the Phoenix home price index escalated from 100 in January 2000 to a peak of 227.42 in June 2006 (up 127% in 5.5 years).
  • Gramm-Leach-Bliley Act in 1999 removed barriers between investment and commercial banking.
  • U.S. deficit from 0.5% in 1995 to 6% in 2006
    • Foreign countries began to invest in US Treasuries to maintain their our country’s currency value.
    • U.S. Fed was worried about deflation (1% federal funds rate) so slowly raised the rates up until 2007 (goal of 6.5%).

Thesis

In the “Financial Crisis of 2008,” Rimkus explains that the crisis was caused by four major issues: U.S. government push for housing and mortgages, account deficits, the lowering of Federal interest rates, and the securitization of loans.

  1. “The Causes of the Financial Crisis and its Consequences”

Wallison, Peter J. The Causes of the Financial Crisis and Its Consequences. 18 June 2010, www.ipaa.org/meetings/ppt/2010Midyear/201006Midyear-PeterWallison.pdf.

Presentation powerpoint given by Peter J. Wallison to The Independent Petroleum Association of America (IPAA).

Data Points

  • Bernanke and Paulson ask Congress for $770 billion in TARP funds
  • DOW falls 700 pts in a single day (week of Sept. 15)
  • Housing bubble contained 27 million subprime and Alt-A loans
    • 50% of single family mortgages
    • $4 Trillion
  • 1992: Affordable Housing Act stated that 30% of purchases must be loans to borrowers at 100% of median income or below (LMI borrowers)
  • 2005: HUD requires 55% of purchases to be LMI, with 25% low income
  • 5% home ownership increase from 1995-2005

Thesis

According to Wallison in “The Causes of the Financial Crisis and its Consequences,” an increase of subprime loans linked to government mandates, weak loan defaults, market collapse and the ultimate failure of Bear and Lehman Brothers—which cut credit availability–caused the 2008 Financial Crisis.

  1. “The Causes of the Financial Crisis and its Consequences”

Irwin, Neil. “What ‘The Big Short’ Gets Right, and Wrong, About the Housing Bubble.” The New York Times, The New York Times, 22 Dec. 2015, www.nytimes.com/2015/12/23/upshot/what-the-big-short-gets-right-and-wrong-about-the-housing-bubble.html?mcubz=1.

The New York Times is an American daily newspaper published in New York City since 1851.

Data Points

  • August 2005, Google Trends show a peak search for “Housing Bubble,” showing that the U.S. was not completely blind to the situation
  • Also in 2005, there were 1,628 articles in major world publications that had the words “housing bubble” in them.
  • Just because you could see the crisis coming, did not necessarily mean you could guess correctly which ones to bet on.
  • Must understand complexity not just the pieces.

Thesis

Neil Irwin of the New York Times analyzes the credibility of “The Big Short” — its successes and shortcomings in explaining the U.S. Housing Bubble.

 

Reading Response 1 // Leah Bailey

In the article “Wall Street and the Financial Crisis: Anatomy of a Financial Collapse,” the U.S. Senate attempts to summarize the causes of the 2008 Financial Crisis. Using a group of case studies, the Senate explains that high-risk lending, unsuccessful regulation and inflated credit ratings were the primary causes of the crisis. The Senate argues that banks and other lenders were too caught up in making money. Instead of ensuring that mortgages and other loans were of good quality, they were betting on them failing for their own profit. This deceitful behavior led to paranoia, withdrawals, decline of securities and a total financial collapse.

In the article “The 2008 Housing Crisis,” the authors, Colin McArthur and Sarah Edelman, defend the government, stating that government housing initiatives were not the cause of the 2008 Housing Crisis. Their opposition disputes that the government funding encouraged investment bank to provide risky loans, due to its large insurance policy. McArthur and Edelman referred to the 1930s, and post Great Depression times, to support their argument that the Federal Housing Administration is a positive asset to the country and not a cause of failure. They believe that the government should have been more involved with financial institutions before the downfall. Without government oversight, the businesses were too greedy, and this was the primary cause of disaster. The article also brought up the ideas that the housing market was not fair in regards to race and income. This brings up the fact that minority groups were also not the primary problem. Again, McArthur and Edelman place the blame on predatory lending and lack of government oversight.

The two articles agree on the criticism of predatory lending. However, it is stated in different tones. The Senate phrases it as a financially-minded situation, or greed. McArthur and Edelman state it as a very personal attack on the people who are borrowers. Despite their agreement on the predatory lending issue, the two do not share the same thoughts about government intervention. Obviously, the government is not going to openly admit fault. However, it is interesting to me that the government defends all its counterparts despite differing political views. In 2011, when this article was written, the Democratic party was in majority. However, they still did not critique the decisions, actions or lack of actions that the previous Republican jurisdiction took. This makes me question the front that the government puts up. Are they actually always publishing the truth? Or does it have a positive spin on it, to ensure the confidence of the American people in the government?

While I appreciate the argument from McArthur and Edelman and their support of government funding, I wish they provided more evidence of a preferred resolution. Simply stating that the United States had “poor regulation” is not a solution to a problem. I would have been slightly more convinced if the answer was more specific and detailed. I felt that the article had too much of a defensive approach without a thought-out counterargument.

While looking into this topic further, I found an infographic that really helped me: http://awesome.good.is.s3.amazonaws.com/transparency/usersubmissions/financialcrisis/jarvis/part2.html

I am by no means a financial guru, so this simplified the timeline of events and the who is who of the story.