House Of Cards Analysis
House Of Cards Analysis
The House of cards was a global economic crisis. The documentary house of cards highlights on how the program which at once seemed wise and infuriating was indeed a tale of deception and greed which was unprecedented in the history of America. It gives a presentation of the basic percepts which led to the occurrence of the current crisis of the program. The documentary uses a clear-eyed and balanced approach to show this. The correspondent of the documentary gathered a lot of information of those who took part and went ahead to provoke the whole financial nosedive. Personal stories were gathered from key participants; home buyers, investment bankers, mortgage brokers and investors. This documentary is about a financial house of cards which was slowly being built after September 11 attacks (Dauble, 2009). The U.S government was trying to bring a revive to the economy through dropping the interest rates that saw many families embracing this opportunity in order to refinance their mortgages. However this was not very successful as presumed it would be rather it became one of the most controversial issues in time.
As indicated the crisis seemed as if it was glaringly preordained and it casts the mortgage lenders as being the greediest salesmen of the 21st century. This is because they had agreed to loans for the people who had credit ratings going below 500 points, they asked for no documents and going ahead filing forms that listed the incomes as being three or even four times more than they are in reality.in the documentary it is stated that the federal reserve chairman was the one to blame for the collapse of the house of cards due to persistently reducing the prime rates.
There are various issues which are seen to be emerging from the documentary. These issues can be looked at from a business point of view. The house of cards documentary can be analyzed looking at different topics these can be such as strategy. The strategy used in the program was not good. The Federal Reserve chairman had encouraged the mortgage industry to come up with different types of loans in order to enable more people purchase homes. He went ahead to say that new mortgage arrangement would really be beneficial for American consumers if the lenders if the lenders would offer a wider range of mortgage alternatives as opposed to the fixed –rate mortgages which were in existence. This was very amusing to bankers since their business was to pool mortgages and for investors to purchase who in turn would get monthly payments produced by the mortgages. This means that the more mortgages lenders would have to offer for homebuyers the more the bankers would sell. Unfortunately this was a very poor strategy for mortgage lenders. This is because this program was very inappropriate for the majority of those who took it (Richmond, 2009).
This program only favored bankers since there was a pay option of negative amortization an adjustable rate to mortgages.it was actually put in place in order to encourage those who wanted to buy houses for the first time and they could not afford the cost of the loan. Those buyers would get the option of paying only part of the interest which they owed the lenders each month. The interest that had not been paid would be added to the total amount of the mortgages. This would lead to the balance of the mortgage being increased instead of the mortgage which had been paid to decrease it only grew bigger and bigger. This was not a strategy since eventually there were people who would loose out on the program while others won. This was an unfair strategy to the buyers since they would in the long run have to pay a higher amount of money for the mortgages (Bark, 2009).
The planning of the entire program was not well done. This is because initially the idea of granting home loans to the people who were not able to raise a down payment for a house but really wanted to live the American dream of owning a home. There was low credit requirements in that just about anyone could be legible for a loan. Refinancing in order to meet the adjustable rate mortgages payments which were ever increasing was very easy and fun provided the value of homes went on the rise. However there was a euphoria on the part of buyers, loan guarantees and lenders that occurred. Everything tumbled down when the prices of houses went up and then they began going down. This clearly shows that there was no proper plan that was put in place which could deal with such issues incase they occurred. This means that the buyers, lenders and loan guarantees were not cushioned against such an occurrence and hence they were hit hard by the drop in the prices of houses (Jacoby & Landes, 2009
The issue of ethical and moral awareness also arises in the documentary. Those who gave mortgages were quite unethical in their operations. This is because even though they made the loans available to virtually anyone there was a high price to pay for this. There was no full disclosure of the payments.in fact they made it look so easy to pay but at the end of the day the borrowers ended up suffering as they were forced to pay a higher amount of money than they ought to have paid. There was no moral awareness in the program since it was only meant to benefit a few people. The so called negative amortization just continued be accepted by investors as long as the prices of homes continued rising. This means that they were gaining while the borrowers were at a loss (Bark, 2009).
Despite this incidence there are chances that other similar occurrences will still happen in future. This is due to the fact that there is a free market system and with the existence of such a system such incidences are quite inevitable.
References
Dauble, J. (2009). CNBC original documentary “house of cards” uncovers the reasons behind the greatest financial collapse since the great depression. Retrieved June 2, 2013 from http://www.cnbc.com/id/28984151Jacoby, J., & Landes, J. (2009).CNBC Special Report: House of Cards. Retrieved June 2, 2013 from http://www.nbcnews.com/id/29163182/ns/business-cnbc_tv/t/cnbc-special-report-house-cards/Bark, E. (2009). CNBC’s House of Cards shows how greed hit home and left the economy humbled. Retrieved June 2, 2013 from http://www.unclebarky.com/reviews_files/38c8823c4b71c835671f944608981da0-568.htmlRichmond, R. (2009). CNBC probes financial crisis in “House of Cards”. Retrieved June 2, 2013 from http://www.reuters.com/article/2009/02/11/us-television-cnbc-idUSTRE51A8NF20090211
