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She has to do this in English
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I hate to do this right now, but I'm going to have to have a press call first thing, and I...

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Michele Davis: I hate to do this right now, but I'm going to have to have a press call first thing, and I don't know what I'm going to tell them. Neel Kashkari: Tell them Lehman exacerbated AIG. The simultaneous payouts of CDOs and credit default swaps put catastrophic pressure... Henry Paulson: Go back further. Neel Kashkari: The global pool of investment capital... Henry Paulson: She has to do this in English! Start with the homeowners. Jim Wilkinson: Okay, okay, here's how you explain it. [clears throat] Jim Wilkinson: Wall Street started bundling home loans together - mortgage-backed securities - and selling slices of those bundles to investors, and they were making big money. So they started pushing the lenders saying, "come on, we need more loans." Henry Paulson: The lenders had already given loans to borrowers with good credit, so they go bottom-feeding, they lower their criteria. Neel Kashkari: Before, you needed a credit score of 620 and a down payment of 20%; now they'll settle for 500, no money down. Jim Wilkinson: And the buyer, the regular guy on the street assumes that the experts know what they're doing. He's saying to himself, "if the bank's willing to loan me money, I must be able to afford it." So he reaches for the American Dream, he buys that house. Neel Kashkari: The banks knew securities based on shitbag mortgages were risky... Henry Paulson: You'll work on "shitbag"... Neel Kashkari: ...So to control their downside, the banks started buying a kind of insurance. If mortgages default, insurance company pays. Default swap. The banks insure their potential losses to move the risk off their books, so they can invest more, make more money. Henry Paulson: And while a lot of companies insured their stuff, one was dumb enough to take on an almost unbelievable amount of risk. Michele Davis: AIG. Jim Wilkinson: And you'll work on "dumb." Michele Davis: And when they ask me why they did that? Jim Wilkinson: Fees! Neel Kashkari: Hundreds of millions in fees. Henry Paulson: AIG figures the housing market would just keep going up. But then the unexpected happens. Jim Wilkinson: Housing prices go down. Neel Kashkari: The poor bastard who bought his dream house? The teaser rate on his mortgage runs out, his payments go up, he defaults. Henry Paulson: Mortgage-backed securities tank. AIG has to pay off the swaps. All of them. All over the world. At the same time. Neel Kashkari: AIG can't pay. AIG goes under. Every bank they insure books massive losses on the same day. And then they all go under. It all comes down. Michele Davis: [horrified] The *whole* financial system? [Wilkinson nods] Michele Davis: And what do I say when they ask me why it wasn't regulated? Henry Paulson: No one wanted to. We were making too much money. [Paulson gets up and goes into the washroom] Jim Wilkinson: You'll work on, "we were making too much money."


Transcript

00:00:01.000 --> 00:00:03.101
she has to do this in English
00:00:03.135 --> 00:00:05.236
Start with the homeowners
00:00:05.027 --> 00:00:08.205
Okay okay here's how you explain it
00:00:08.239 --> 00:00:12.775
Wall Street started bundling
00:00:12.081 --> 00:00:14.911
home loans together mortgage backed securities
00:00:14.945 --> 00:00:18.214
and selling slices of those bundles to investors
00:00:18.249 --> 00:00:20.484
And they were making big money
00:00:20.518 --> 00:00:22.753
so they started pushing the lenders saying
00:00:22.787 --> 00:00:24.822
come on we need more loans
00:00:24.856 --> 00:00:26.825
The lenders had already given loans
00:00:26.086 --> 00:00:28.829
to borrowers with good credit
00:00:28.864 --> 00:00:31.399
so they go bottom feeding They lower their criteria
00:00:31.434 --> 00:00:34.103
Before you needed a credit score of 620
00:00:34.137 --> 00:00:36.305
and a downpayment of 20
00:00:36.034 --> 00:00:38.841
Now they'll settle for 500 no money down
00:00:38.876 --> 00:00:41.998
And the buyer the regular guy on the street
00:00:41.111 --> 00:00:42.879
assumes that the experts know what they're doing
00:00:42.913 --> 00:00:45.481
He's saying to himself if the bank's willing to loan me money
00:00:45.515 --> 00:00:47.249
I must be able to afford it
00:00:47.283 --> 00:00:49.585
So he reaches for the American dream
00:00:49.619 --> 00:00:51.153
He buys that house
00:00:51.187 --> 00:00:54.389
The banks knew securities based on shitbag mortgages were risky
00:00:54.423 --> 00:00:55.857
You'll work on shitbag
00:00:55.892 --> 00:00:57.425
So to control their downside
00:00:57.046 --> 00:00:59.261
the banks started buying a kind of insurance
00:00:59.295 --> 00:01:02.397
If mortgages default insurance company pays
00:01:02.432 --> 00:01:04.199
default swap
00:01:04.233 --> 00:01:06.999
The banks insure their potential losses
00:01:06.402 --> 00:01:08.017
to move the risk off their books
00:01:08.999 --> 00:01:10.505
so they can invest more make more money

Clip duration: 73 seconds
Views: 148
Timestamp in movie: 00h 57m 12s
Uploaded: 25 November, 2022
Genres: biography, drama, history
Summary: Chronicles the financial meltdown of 2008 and centers on Treasury Secretary Henry Paulson.


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