Financial Management and Ethics in Crisis

The assignment content discusses financial management, specifically the housing bubble and credit crisis in the US. It refers to a movie 'The Big Short' which depicts the story of male investors who anticipated the housing bubble and made huge profits during the crisis. The content also analyzes the ethical implications of the banks' actions, concluding that they acted out of self-interest. Finally, it suggests ways to prevent such crises in the future.

Running head: FINANCIAL MANAGEMENT
Financial Management
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1FINANCIAL MANAGEMENT
Table of Contents
Answer to Question 1:.....................................................................................................................2
Answer to Question 2:.....................................................................................................................2
Answer to Question 3:.....................................................................................................................2
References:......................................................................................................................................3

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Answer to Question 1:
The Big Short is a drama or comedy movie and it depicts the actual story of the financial
crisis with the help of a number of male investors in finance world; they anticipated the housing
bubble and credit in becoming filthy rich. During this period, the banks have started to fie bonds
consisting of riskier mortgages. Such risky mortgages are considered as subprime mortgages due
to which the housing market had popped up on such bad loans. This had been evident in terms of
disappearance of $5 trillion related to pension money and value of real estate, $401,000 related
to savings. Along with this, 8 million individuals had lost their jobs, while 6 million had lost
their houses (Cheng, Raina and Xiong 2014).
Answer to Question 2:
In this movie, it has been found that the banks had wrapped up along with selling the
mortgages, since they had been solid investments. They had assumed that no loan default would
take place on the loans provided in buying the houses. At the time of bundling of the bankers and
selling of subprime mortgages, they had acted in accordance with their best interest. Thus, this
could be adjudged as an ethical egoism, which is an action of increasing self-interest. In this
case, acting greedy is good, instead of trying to be balanced or prevent anything (Lewis 2015).
Answer to Question 3:
In order to prevent such credit crunch and housing bubble in US, it is necessary to depict
the actual risk and return without the provision of any governmental support. This would reduce
the pressure regarding the fickle regulators lacking ability to stop the growing bubble. This

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would help the investors and the American individuals to avoid over-excitement about the
market.
References:
Cheng, I.H., Raina, S. and Xiong, W., 2014. Wall Street and the housing bubble. The American
Economic Review, 104(9), pp.2797-2829.
Lewis, M., 2015. The big short: Inside the doomsday machine (movie tie-in). WW Norton &
Company.