Ethics of the Hedge Funds

Document Type:Essay

Subject Area:Finance

Document 1

The films outline the actions of three hedge funds that is the Front Paper Partners, Brownfield Capital, and the Scion Capital before the financial crisis. This paper reviews the ethics of hedge funds actions which led to a short in the housing market. It also shows the effect of hedge funds when it served as a check on bank speculation. It also indicates if the hedge funds were profiting from on the despair of the collapse of the financial system of the world. This film develops three storylines. When banks and the creditors said that housing was stable, and the market keeps on rising and falling, the clients of Burry became angry as he continued his short plays (Lewis, 2010). When the clients demanded their money back, he suspended all withdrawals.

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Adam McKay tries to enlighten the public with his picture of those who made the profit from the financial collapse of 2008. When people become aware of an upcoming crisis, decent human beings raise the alarm and not profit from the catastrophe. However, such rational human beings are few in this world of competition, greed, fraud, and profits. The film shows that before Baum and the other two investors accept to invest on the credit-default swaps, and he thoroughly did a background check on the housing market to make sure that the housing and credit were going to bubble (The Big Shot, 2015). The bubble idea clearly shows that they were confident that the situation is going to occur but decided to sit down and enjoy their corrupt and greedy acts.

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The Big Short promotes the idea that bankers at financial institutions were manipulating poor Americans whereas Burry and Baum are outsiders who have been deceived by someone of higher power than them. However, this is not true because the two main characters are the main antagonists who believed that they could make profits from the collapse. They are the ones who discovered that bond agencies overrated most mortgages with the AAA packages Crotty, 2009). The U. S securities regulators and the exchange commissions were also not aware of the situation. All this is the reason the four outsiders took advantage of the crisis since they were the only ones who foresee the situation and made a great fortune from it. “The Big Short” shows fraud of Wall Street Firms.

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It also reveals greed nature of the mortgage bankers and the entire real estate industry. Americans, however, forgot their mass consumption and many household debts but instead put the whole blame on the financial institutions. “The Big Short” exploits on the new idea of greed and corruption and further provide its audience images of those working in financial institutions who portrays the power-hungry behaviors that only focus on their own pockets at the expense of the American citizens. This film, however, describes the actions of self-biased individuals who are their selves successful but they attribute to failures in the economy (Haldane, 2009). From the film, it is evident that hedge funds participated in the crisis because they acted as an intermediary between investors who were seeking yields from the situation and the large bank that created the collateralized debt obligations.

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The wealthy individuals had no required expertise to participate in the CDO market. She comes up with a proposal of political theory care that highlights an ontology of rational and independent human beings (Crotty, 2007). However, her liberal global justice has been unreliable because of the emergence of global political economy established on the international theory of care. According to Tronto (2013), the meaning of the word home was shifted from a personal place to reside in a profitable investment. The Caring Democracy (2013) of George Bush emphasized on encouraging people to make calculations, get easy money, and live in places of speculation. Thus, the 2008 crisis increased the number of homeless people due to poverty and increase in cases of unemployment. This situation led to a serious and an extreme problem among the American public and the financial sector regulations.

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However, from the film, there are chances that individuals use large financial institutions because of the powerful mechanisms of the market efficiency. “The Big Short”, depicts that when the main characters predicted a financial bubble, they bet against financial institutions (Betz, 2013). These characters feature as deceptive and manipulative which shows the unethical behaviors in the film. They also did more in persuading policymakers and voters to keep markets as a secret. Do not destroy the essential catalyst of risk, Financial Times, 2009. Bookstabber, Richard. A Demon of Our Own Design: Markets. Hedge Funds, and the Perils of Financial Innovation, New Jersey John Wiley & Sons, 2008. The Big Short. Crotty, Joseph. Structural causes of global crisis: A critical assessment of the new financial architecture, Political Economy Research Institute, 2008.

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