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The Big Short

In: Business and Management

Submitted By Teeza978
Words 1305
Pages 6
“The Big Short” Report

One of the topics I found most interesting in this book was the differences between the stock market and the bond market that Michael Lewis to some extent explains in the beginning of chapter three. While the stock market was intensely regulated and mostly transparent, the bond market consisted of primarily large institutions and escaped serious regulation. This lack of legislative control played a great part in allowing the credit default swaps on subprime mortgage bonds, CDO’s, and the eventual collapse of the subprime market. Following the subprime mortgage crisis, the Department of the Treasury released a new regulatory plan, The Department of the Treasury Blueprint for a Modernized Financial Regulatory Structure, which is referred to as “the Paulson Plan.” The Paulson Plan was completed in March 2008 and consisted of a series of short-term and intermediate-term recommendations that were meant to immediately improve and reform the U.S. regulatory structure. The short term recommendations included: modernization of the current President’s Working Group on Financial Markets Executive Order, the creation of a new federal commission, the Mortgage Origination Commission, whose purpose is to evaluate, rate, and report on the adequacy of each state’s system for licensing and regulating participants in the mortgage origination process, and the Federal Reserve provide liquidity to the financial system. These short term recommendations were intended to improve regulatory coordination and oversight to avoid a financial crisis, while the intermediate recommendations focused on modernizing the regulatory structure. The intermediate recommendations included: phasing out the federal thrift charter and transitioning to a national bank charter, direct federal supervision of state-chartered banks, creating a federal charter for systemically…...

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