(10 points) According to the documentary Inside Job, de-regu…
(10 points) According to the documentary Inside Job, de-regulation was responsible for a great deal of the blame for the 2008 Financial Crisis (aka Great Recession). Question detail and grading rubric: 1 point: What does it mean to say that home mortgages are “securitized” in a CDO? Explain what makes a mortgage backed security “secure”. 3 points: Explain the links and relationships between mortgage brokers, commercial banks, investment banks, ratings agencies, and bond insurers (selling CDS’s) in the Securitization Food Chain introduced in Inside Job. 2 points: How did the Graham-Leach-Bliley Act allow risk to spread back and forth along the securitization food chain? Explain what the Act did for 1 point, and its impact on risk for another. 2 points: How did the Commodity Futures Modernization Act allow risk to spread back and forth along the securitization food chain? Explain what the Act did for 1 point, and its impact on risk for another. 2 points: Give an anecdote (story) or set of anecdotes from The Big Short that illustrates the types of instability you describe above, making sure to talk about the how the different parts of the securitization food chain connected and fed back on each other in a way that destabilized Morgan Stanley (the bank where the main characters worked). The example must relate to the movie’s characterization of destabilization of Morgan Stanley.