The credit crisis — visualized

Over at Vimeo, Jonathan Jarvis has created a ten-minute film that offers an overview of the credit crisis. If you've been struggling to understand what went wrong with the American economy, this will give you some of the basics:

If you'd like more information, I encourage you to carve out time to listen to two radio broadcasts, both from NPR's This American Life:

More about...Economics, Banking

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LOL Finance :D
LOL Finance :D
11 years ago

Videos like that should be aired during commercials on TV – that way the average joe would understand what’s going on as well!

Do You Dave Ramsey?
Do You Dave Ramsey?
11 years ago

FANTASTIC!! This should be required viewing! Thanks for sharing.

DollarDream$
DollarDream$
11 years ago

I saw this few days ago on a blog. Loveed this video. Very creative and simplified version of what’s going on today!

Adam
Adam
11 years ago

They seem to complete ignore the implications of fractional reserve lending.

wheaton4prez
wheaton4prez
11 years ago

Very well done design-wise. But, I think that, by leaving out some key factors, it perpetuates the falsehood that the cause of the crisis was simply “wallstreet greed.” In fact, I would say that it borders on being a lie to say that sub-prime lending was just “an idea” that brokers and lenders came up with to get rich. Fannie and Freddie held nearly half of all US mortgages. A fact that many had been warning about for years. They accomplished this by receiving all kinds of advantages against other lenders from the government and thus were able to have… Read more »

stefanie
stefanie
11 years ago

As an art historian, I love the idea of the crisis being visualized for two reasons: 1 – the majority of people in this world are visual learners, so having a visual explanation rather than just an an auditory one makes a lot of sense. 2- the implications of the images themselves, here, particularly, what struck me (and sort of connects with wheaton4prez’s comment about wall street investor greed, is that the investors are depicted as fat while the family members who own mortgages are depicted as thin. As we all know, or should know, by know, fatness and thinness… Read more »

mahalie
mahalie
11 years ago

@Adam, well there’s only so much you can do in a short time span…there’s all sorts of details they could have gone into.

I enjoyed the TIA podcast immensely, listened to them several times.

Rich Lykyu
Rich Lykyu
11 years ago

Great Video, thanks for posting this. I read your blog regularly but have never seen vimeo.

Aman@BullsBattleBears
11 years ago

saw this video earlier and admit its a good visualization for those that understand better this way. Its a great tool to help people out there become better aware of the situations surrounding them. Kudos to the producer!

sherry
sherry
11 years ago

No doc mortgages exists a long time before 9/11. I worked in the mortgage industry in the early 90s and we had them THEN.
Also – the federal government were pushing making mortgages easier to less than desirable people (as in couldn’t really afford to own a house) again well before the time period this discusses.

I agree, that it is visually very very good. However, it misses a lot of very important parts of history.

mhb
mhb
11 years ago

I listened to those two episodes of TAL recently, and I think I probably missed some details because I was too busy shouting, or gasping, or muttering… should listen to them again. They’re definitely worth the time – and except that I nearly broke a couple of plates, they help pass dish washing time. 🙂

Peter
Peter
11 years ago

The video was well polished, but I also believe it is missing some key facts. Fannie and Freddie played a huge role in this meltdown by encouraging the risky lending behavior, which is riddled with conflicts of interest because they were GSEs (Government Sponsored Enterprises). Subprime loans were not invented out of wall st. greed, they came out of the the Community Reinvestment Act of the 1970s and are basically Affirmative Action. Finally it should be noted that on several occasions over the last decade the risk that Fannie and Freddie posed to our economy was brought before congress, and… Read more »

Mike K.
Mike K.
11 years ago

Sigh…I guess I get to come to another website to debunk the urban myth that the CRA had anything to do with the meltdown. Sheila Bair, head of the FDIC and Randall Kroszner, a member of the Federal Reserve System’s Board of Governors, have both separately come out with studies that show that the CRA had nothing to do with the subprime loans. Most of the foreclosures in Cali and Miami are in high-income areas where the CRA wouldn’t come into play. I keep hearing all this stuff about the CRA and its connection to the housing problem, but I… Read more »

Sujit
Sujit
11 years ago

Interesting video, what are your thoughts on this NYT link Published: September 30, 1999,

http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260

Here are some quotes
——–
“Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.”

“If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

john
john
11 years ago

Good video! And some of the comments about adding details have some validity. But My humble opinion would suggest adding; 1. How money is created from OUR Signatures. and 2. How the banks use fractional banking. I feel these two facts are real important. Then throw in a little, “The federal reserve is a private corporation” and you might have something! LOL
Or maybe a little about how they make Mortgage Back Security’s out of State and Federal Prison Numbers. Now that’s a cartoon I could get into.

Peter
Peter
11 years ago

In my comment I didn’t claim the CRA caused the crisis, I only stated that the CRA is the genesis of sub-prime lending. The video stated that wall street investors invented sub- prime lending which is not the case. While the actual CRA loans themselves may not have been as risky as other less regulated sub-prime loans and did not directly cause the meltdown, I contend that the CRA gave legitimacy to sub-prime lending that may have been a contributing factor to the explosion of risky lending that caused the crisis.

Strabo
Strabo
11 years ago

It’s a good movie but misses two things/doesn’t stress them enough: – the fraudulent rating the rating agencies doled out to nearly everything, making it appear as AAA instead of sub-prime or risky. – the gigantic (55 trillion dollars gigantic) card house the CDOs have created – a reason why many companies like AIG have to be bailed out or the 5 trillion in real assets would balloon into the 55 trillion of obligations. Concerning the CRA: The CRA was only a anti-discrimination tool – before it banks didn’t even give you an offer if you came from a “non… Read more »

wheaton4prez
wheaton4prez
11 years ago

Yes. CRA had nothing to do with changing lending trends. All it did was make it so that banks could be sued and/or would not receive permits to build in new areas if they could not show compliance with quotas and whatever hack analysis groups like ACORN could come up with.

Nah. That couldn’t possibly affect the types of loans banks would offer. Could it?

Anelly
Anelly
11 years ago

Finally a good and easy to understand video created regarding the financial crisis.

Mr Plasectomy
Mr Plasectomy
11 years ago

Another great series to listen also by NPR is Planet Money. I listen to their podcasts every M,W,F when the are distributed. They are extremely informative and they often carry over to This American Life.

Rob Paige
Rob Paige
11 years ago

This is very inaccurate to put it mildly. The truth of the matter is that PEOPLE racked up debt due to over spending on credit cards, mortgage and such. Who are these people? Ones that can afford it? No. Enter the politically correct disease. Because of PC, everyone was allowed to borrow at will, whether they were capable of repaying or not. When the economy slowed, those who purchased responsibly and managed or did not accumulate debt were and are fine. Those who wanted but really could not afford are in trouble. At what point do we stop bailing out… Read more »

Chad @ Sentient Money
Chad @ Sentient Money
11 years ago

This is far too simplistic to provide a real explanation. As usual, everyone is looking for shortcuts, which got us in this mess to begin with, and not trully understanding the situation. Bascially, the video says:

Investment Bankers = Pure Evil and fat
Lenders = bad people and only moderately fat
Mortgage brokers = kind of bad and average weight
Home Owners = A beacon of pure good and really really in shape

I’m not saying the bankers weren’t evil or stupid, just that many of these homeowners were to.

Anne
Anne
11 years ago

I thought the second round of homeowners were fat people who were smoking and had lots of kids. As in the irresponsible people who shouldn’t be buying a house.

Jeff
Jeff
11 years ago

Good video… I enjoyed it a lot.

Alex
Alex
11 years ago

Your might also like a couple of videos Enspire Learning produced last fall:

Understanding the Financial Crisis
http://www.youtube.com/watch?v=gF6LbFDjvW0

The Mortgage Banking Meltdown
http://www.youtube.com/watch?v=HSjEyOp2dEM

AmericanCliche
AmericanCliche
11 years ago

I think a lot of people have over analyzed this video. The point of the video is to give a BASIC explanation of what’s happening. Second, the bankers reminded me of Rich Uncle Pennybags from monopoly. I didn’t see them as gluttonous monsters just because they were fat in the video. I laughed out loud when the sub-prime family came on screen (smoking with a bunch of crying kids). Last point, I agree that the role of the government in the current crisis needs to be shown to the public. It wasn’t just a bunch of bankers that caused this… Read more »

Paul
Paul
11 years ago

Mike K.,

The “CRAs caused it!” response seems knee-jerk and unrealistic to me, but unfortunately I don’t have any information to back that up. Can you point us to some sources about CRAs vs. what actually caused the rise in defaults? The video was great, and now I want to keep learning.

Peter
Peter
11 years ago

The CRA’s involvment in the housing crisis is definately a controversy. I don’t really see much evidence from either side. However, the other poster who shot down my post as an “Urban Myth” quoted Sheila Bair and Randall Kroszner from the FED and the FDIC. I am not sure that I would trust their studies because both of those organizations have some responsibilities in overseeing the CRA and would most likely be biased.

Roger
Roger
11 years ago

Interesting video, it does clarify some of the issues with this crisis (although, as others have mentioned, covering up or pushing aside some others). I could toss out two other factors, the ending of the Glass-Steagall Act (which separated investment and commercial banks, preventing the sort of selling mortgages to other bankers to be packaged that the video depicts) and the Commodity Futures Modernization Act (which exempted credit default swaps from federal regulation). Are either of these the sole cause of this crisis? No. Are they contributing factors? Yes. Will there be politically motivated arguments about the contributions of these… Read more »

Krystal
Krystal
11 years ago

I also shouted a lot when listening to This American Life’s episode, but enjoyed it immensely and listened to it 3 times! Also, Planet Money from NPR (podcast) also has little tidbits every now and then. Highly recommended the TAL episode!

Alan
Alan
11 years ago

Jon, I’m a credit trader (please don’t hate me) who’s been struggling to explain the credit crisis in layman’s terms to my family. This video is great. I agree with other comments, it SHOULD be aired during commercials so that the public can get facts and not partisan views.

R
R
11 years ago

Very informative, and well presented.

Jac
Jac
11 years ago
annmariemarie
annmariemarie
11 years ago

Thanks for sharing this! I have shared this to my family as well. We’ve learned a lot.

kitty
kitty
11 years ago

I thought it’s a good basic explanation. It did ignore a number of issues: 1. 2004 SEC decision to exempt 5 major investment firms from the leveraging limits that resulted in firms like Lehman brothers being leveraged 40 to 1. 2. As someone mentioned above – the role of rating agencies and the fact that so-called AAA-rated CDOs weren’t as “safe” as AAA securities should be. In fact, some of those AAA securities were laced with sub-prime mortgages, and the only way the math models they were built on worked was if the real estate market could grow by 7%… Read more »

SHY
SHY
6 years ago

Absolutely great video, very useful. thanks.

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