In this movie CNBC investigates what caused the 2007 financial crisis. They do this by examining the roles played by financial institutions. Emphasis is being laid on the role mortgage lenders and Wall Street financiers played on the disaster. The main characters in this movie are David Faber, Barbara Dunkley, Lou Pacific, Bill Dallas, Michael Francis and Joe Dunkley. They play different roles in the movie which are roles of a reporter, home buyer, quick loan funding, mortgage lender, Wall Street broker and home buyer respectively. The main plot points in this movie is events that lead to the gradual unfolding of the crisis that faces the housing industry in America. It also aspects at the part taken by banks and the credit system that contribute to this disaster. Interestingly though, the 2007 crisis was expected and the movie even starts with the statement that hopes they will be wealthy and retired so that they don’t get affected when the ‘House of Cards’ comes crumbling down.

The problem goes back to 2004 when there was a bloom in the housing industry. The president of USA during that time, George W. Bush, even bragged that the economy was strong and experiencing high housing constructions that had never been seen in almost 20 years. Home ownership during that time was at the highest rate ever. After this speech the Federal Research chairman encouraged the mortgage industry to be creative and come up with novice ideas that could facilitate more people to own homes. This was to be in the form of loans to be awarded to people so as to motivate them to want to own their own homes. The chairman during that time was Allan Greenspan.

This was very good news to Wall Street bankers like Michael Francis. They used the platform of their business to group mortgages and sell them to those who were willing to invest. The investors would then benefit by receiving monthly payments on the mortgages. The more expensive the mortgage the more it had to be sold. The negative thing about this idea was that it led to a very inappropriate loan program. Bankers loved the idea as it involved negative amortization and adjustable mortgage rate. This meant that interests on the mortgage could be adjusted according to the markets prevailing interest rate which kept on increasing.

The design was appropriate for first time home owners. This was in an attempt to make it easy for them to afford and successfully pay the loan in the long run. They had the option of paying only part of interest they owed each month. It was therefore left to the homeowner to decide to pay what they felt they could afford. The unpaid interest was to be added to the total amount of the mortgage which was still earning a monthly interest to bankers. Instead of the mortgage balance reducing it kept on increasing since the payment schedule was not properly organized. Banks and financial institutions were more concerned about getting business and profits but overlooked the importance of risk evaluation and putting proper systems in place that could guarantee they got returns.

Previously when there was a boom in housing, there were no reported cases of default on mortgage payment. This led to the mortgage industry being ranked highly even being given the grade of a triple A rated investment. The investors in the business felt they stood a higher chance of success if they invested more in the business. But the revenues didn’t flow as expected due to homeowners defaulting on their payments. This steered to the downfall of the housing market due to credit overabundance. This credit is still overdue thus playing a major part in the current recession being faced globally.