Question

The Big Short - In 2008, Wall Street guru Michael Burry realizes that a number of subprime home loans are in danger of defaulting. Burry bets against the housing market by throwing more than $1 billion of his investors' money into credit default swaps. His actions attract the attention of banker Jared Vennett, hedge-fund specialist Mark Baum and other greedy opportunists. Together, these men make a fortune by taking full advantage of the impending economic collapse in America.

• Who’s to blame for this crisis, in your opinion? Lenders? The government (lack of regulation)? Homeowners? Investment banks (Wall Street)? Credit-ratings agencies (Moody’s)?
• Can we prevent something like this from happening again? If so, how?
• What can we do, as individuals, to protect ourselves?

Answer 1

Answer:-

• In my opinion, the Government is responsible for this crisis as the government has a lack of regulation in terms of regulating the policies and framework of the financial institution.
• Yes, We can Prevent Something like this from happening again for that Government have to make Strong Regulatory bodies and control over the framework and policies of the financial institutions and shall make guidelines for safe working of Credit Default Swap (CDS), Financial Derivatives and Leverages, etc
• One who has invested/trade in CDS can avoid the consequences of a default by selling the CDS before the default take place.