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The pay option negative amortization adjustable rate mortgage is a term commonly associated with “House of Cards” documentary. This documentary highlights the plight of America during the Housing Boom. < Click Essay Writer to order your essay >

In 2004, George W. Bush announced that the economy was growing exponentially and thus was the housing market. Although correct, this announcement spelled doom from the moment it was mentioned. According to different bankers at the time, it was the best moment in banking as it gave them a chance to come up with new products to fit new and potential homeowners. [Need an essay writing service? Find help here.

In the documentary, the economic meltdown is explained through first-hand experiences and interviews. CNBC’s David Faber investigates the origins of the global financial crisis. He interviews different personalities from bankers, mortgage brokers, home buyers as well as investors who turned a blind eye due to greed, leading to the greatest financial collapse since the great depression.
The problem presented in the “House of Cards” is that people who generally could not qualify for loans were suddenly approved to buy their dream homes with the adjustable rate mortgages that came ballooning later. When the house prices inflated, more people started borrowing against the equity.
The major influences on the financial crisis, according to the documentary, were the rising homes market due to easy credit which had led to a boom in house prices. David Faber seeks to find the answer to the question on everyone’s mind; “How did we get here?” The period that followed saw an influx of credit and leveraged loans. Risk premiums hit an all-time low, and more leveraged loans became the norm in the Wall Street. Investors became greedy and chased high yields. One of the aforementioned investors Kyle Bass was able to grow his hedge fund 600% in a period of only 18 months. The savvy investor who represents just a drop in the ocean of the number of people who contributed heavily to the financial crisis was known to leverage highly on the leveraged mortgages which had become common in that lax regulatory oversight period.

Another significant influence of the financial crisis was the global outburst of the dot-com which saw a very high increase in population in 2001. The emergence of the do-tcom was an underlying baseline for the financial crisis. This, in turn, led to the rapid growth of China. The growth saw capital flow from Asia to the do-tcom US stock markets which further drove the price of equity. The disparities between the surplus savings and investment in China and deficit in the US led to a large difference in the imports and exports. These broad imbalances had the most impact on the economy, hence the global financial crisis.

The influences mentioned could have been avoided in time was the government more vigilant. The US government reportedly told its people to go shopping, and shop they did. However, they were profoundly blinded by the boom; they did not think about the consequences of their actions. The human greed had everyone clamoring for deals. The greedy mortgage brokers giving anyone mortgage; the gluttonous would be homeowners living beyond their means and of course the insatiable Wall Street investors and bankers counting outrageously high rewards without paying attention to the long-run systemic failure.

The best part about this whole scenario was Greenspan. He might have seen it coming, but did not see how big it would be. In “House of Cards”, Greenspan admits that although he knows what there is to know about math, he did not fully comprehend the most complex instruments of the market and particularly collateralized debt obligations. [“Write my essay for me?” Get help here.]

The influences that led to the financial crisis could have been circumvented by the use of stringent measures to curb the lax authority insights that were there during the housing boom. The government would have had an advantageous edge had it done away with the collateral debt obligations arising from the amortization adjustable rate mortgage. The boom would have been nipped in its bud, thus reducing the effects that are still felt to this day.

In the “House of Cards,” David Faber further divulges that the key people involved in this ruckus are mortgage brokers who continued to offer products, the bankers who facilitated borrowing, investors who kept soaring and seeing opportunity in every crack, and the homeowners. The deal was just too good for these parties; they did not even smell the smoke to this gun. The government also encouraged its citizens to go shopping, particularly with the reassurance from the president himself.

The initial equity risk premium was high in different situations. At the beginning of the crisis, various institutions though it wise to expect dire consequences just like in the great depression. The equity risk premium saw many governments come up with different financial policy responses to bring things back to normal. Which further affected future earnings, the rise in household risk also saw many families discount their future earnings and spending decisions. The financial crisis also led to an easing of monetary policies. Major developed economies reduced their rates to near zero almost immediately. The relaxation of fiscal policies by different economies was done as a way of stimulating the fiscal deficit and cutting government spending significantly.

The global financial crisis brought with it a huge adjustment problem. There have been concerns about the stock market. Stocks around the world plunged to sinking levels. The market seemed as if it could not be resuscitated. Also, China’s market volatility further worsened the situation.

According to McKibbin and Stoeckel (2009), rising protectionism through fiscal policies and massive contractions in global trade might be potentially worse regarding consequences of the global financial crisis. I would, however, keep away from policy responses as they tend to be dramatic. It would be executed through stimulating the effects of the global crisis which included a boom in the housing market and imbalances in trade. The adverse trade effects in the US needed to be offset by positive effects of capital reappraisal and global relocation of capital. Assuming that only the US was affected, this would have been a definite idea to help balance trade. When there is a reprisal of risk on one economy, the other can reallocate funds towards capital hence less adverse effects on business (McKibbin & Stoeckel, 2009). The bursting of the housing bubble meant falling consumption and imports. I would counter this by introducing competition between the government and the private sector. Consequently, it would lead to a decline in interest rates hence more investment which would otherwise stabilize the economy.


Faber, D. (Director/Actor). (2009). House Of Cards [Documentary]. (2009). USA: CNBC Original Production.
McKibbin, W. & Stoeckel, A. (2009). The Global Financial Crisis: Causes and Consequences(Papers in International Economics, No.2.09). Canberra: ANU Press.

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By Hanna Robinson

Hanna has won numerous writing awards. She specializes in academic writing, copywriting, business plans and resumes. After graduating from the Comosun College's journalism program, she went on to work at community newspapers throughout Atlantic Canada, before embarking on her freelancing journey.

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