The Big Short and the Future of Finance, Essay Example

The video mainly talks about how the government stepped into the financial markets by introducing new rules and regulations to govern the securities markets. By the government doing this, it led to the creation of a perception in traders and potential traders that the securities market is safe and they can conduct transactions and trades with minimal to no risk at all. However, this is false as the securities markets are governed by the market forces that sway according to changes human tastes and perceptions towards securities being traded in the market.

I believe that in the government stepping into the market and altering the rules, they caused the illusion of minimal to no risk and in the end led to the increase in the sale of derivatives that were backed with the bailouts. The speaker claims, “Financial reform should be removed from the grasp of voters and politicians”. I believe this to be very important because in doing so, it guarantees the safety of peoples, or investors’’ money from Wall Street Banks. This will allow for the banks to only gamble with funds and finances that belong to the bank and not the funds and finances belonging to investors who stand a lot to lose. This tight regulation will curb the uncouth business strategies that is employed by Wall Street banks.

However, in the author asking for deregulation, it will lead to another increase in risk for the tax payer. This is because in deregulation, every time the banks buy toxic assets that lead to losses for the banks, bailout packages will have to be issued to save the banks from going under. These funds required for the bailout come from tax payers’ pockets.

References

Lewis, M. (2010, September 29). Author Michael Lewis discusses The Big Short and the future of finance. (UCBerkleyHaas, Interviewer)

Lewis, M. (2010). The big short: Inside the doomsday machine. New York: W.W. Norton.