Financial Crisis Explained

By now most of us already know the root cause of the Financial crisis which has gripped this world. The other day, i was explaining the cause of this crisis to a fellow colleague and how CDO’s or collateralized debt obligations have landed us into this trouble. Later, this video came as a add on to my explanation for this colleague of mine.

In this video, Paddy Hirsch gives a bubbly explanation of the intricacies of collateralized debt obligations those financial instruments that got us into this financial mess.

Also read: Randy Pausch Last Lecture: Achieving Your Childhood Dreams

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This entry was posted on Sunday, October 12th, 2008 at 3:11 pm and is filed under Video. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

6 Responses to “Financial Crisis Explained”

» Financial Crisis Explained on October 12th, 2008 at 3:27 pm

[...] Pay Less Per Month wrote an interesting post today onHere’s a quick excerpt By now most of us already know the root cause of the Financial crisis which has gripped this world. The other day, i was explaining the cause of this crisis to a fellow colleague and how CDO’s or collateralized debt obligations have landed us into this trouble. Later, this video came as a add on to my explanation for this colleague of mine. In this video, Paddy Hirsch gives a bubbly explanation of the intricacies of collateralized debt obligations those financial instruments that got us in [...]
Jo on October 12th, 2008 at 3:51 pm

Fantastic – what a good explanation. Everything on this website is a real gem. I am so glad I subscribe to you!

(and follow you on twitter!) @vaibhav1981 for anyone else who wants to follow this genius blogger
Vaibhav Pandey on October 12th, 2008 at 8:57 pm

Thanks a lot Jo for your words. Am honored.

Thanks and best regards
Vabhav
[Video] Interesting Yahoo Messenger India Commercial « Technofriends on October 16th, 2008 at 11:59 am

[...] check out the other video posts, i had earlier posted about Financial Crisis Explained: Interesting video post which explains the genesis of the current financial [...]
[Cartoon Strip] The Current IT State | Technofriends on January 17th, 2009 at 9:11 am

[...] If you are trying to understand the root cause of this Financial Meltdown, do check out this post. [...]
MasterServer on May 3rd, 2010 at 8:17 am

He failed to explain the root cause of the problem – the reason why 1/3 of home owners failed to pay their mortgages!

Those were the sub-prime mortgages. Those mortgages were obtained by people with no collateral, no down payment, and no income.

Normally banks do not lend to these people. They were obtained by pressure from “community organizers” (like ACORN) on mortgage lenders to give loans even though the people could not pay for them. ACORN and others accused them of RED LINING certain areas where people had no collateral, no down payment, and no income. This was “unfair” to buyers. ACORN threatened lenders with law suits and protests and boycotts. This is extortion.

The lending institutions gave in to the extortion rather than fight costly lawsuits and claims that could hurt their reputations.

The lending institutions “bundled” their bad mortgages with mostly good ones and sold them at a discount to other investors. These were also known as Credit Default Swaps (CDO’s).

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