California-based real estate investing platform PeerStreet, Inc. and 14 affiliated debtors filed for protection under Chapter 11 of the U.S. Bankruptcy Code in a court in Delaware on Monday, citing a challenging mortgage market and struggles to raise capital with venture capital funds.
“Through its bankruptcy filing, PeerStreet will seek to sell substantially all of its assets, including, but not limited to, its mortgage loan assets and technology platform, in a series of transactions intended to maximize value for all of Peer Street’s stakeholders,” the firm said in a statement.
Founded in 2013 by Brew Johnson, Brett Crosby and Alex Perelman, PeerStreet developed a marketplace connecting lenders and borrowers seeking capital to investors looking for real estate-related debt. The business attracted investor Michael Burry, one of the featured players in “The Big Short.”
The company sources loans for private lenders and brokers, which are offered for sale to institutional investors or posted on the company’s online platform. In addition, PeerStreet acts as a master servicer and manages loans on behalf of investors.
David Dunn of advisory firm Province, the chief restructuring officer for PeerStreet, cited in court filings that surging rates, reduced demand for mortgages, and declining institutional buyers’ appetite for below-current-market-rate loans led to the Chapter 11 case.
PeerStreet, which has a subsidiary mortgage lender and servicer, has originated only $5.4 million in mortgage loans in 2023, compared to $385 million in 2022 and $695.8 million in 2021, Dunn wrote. For the 12 months ending December 2022, PeerStreet and the other debtors had total revenue of approximately $37.4 million, down 23.2% from the year prior.
“In addition, in 2022, one of PeerStreet’s historic sources of funding – venture capital – declined markedly. As a result, PeerStreet was not able to access material funding to mitigate the loss of revenue caused by market conditions,” Dunn stated in court filings.
HousingWire reported that PeerStreet raised $30 million in 2018 and $60 million in 2019.
The company attracted big names among its investors, including Silicon Valley venture capital firm Andreessen Horowitz, which ledits Series A funding round of $15 million in 2016. Burry was one of PeerStreet’s first investors in 2015.
PeerStreet and the other debtors had 28 employees when it filed for Chapter 11 on Monday, compared to 281 at the end of May 2022. Its workforce was reduced through four rounds of furloughs and layoffs – May 2022, July 2022, October 2022 and February 2023.
The company asked the court to authorize the payment of $130,000 in unpaid wages and $100,000 to critical vendors, among other requests.
According to the court filings, PeerStreet has an estimated 100-199 creditors, and its assets and liabilities are between $50 million and $100 million. However, as of Monday, the group had $4.4 million in cash – in addition to $18.5 million in its mortgage business.
Piper Sandler will be the broker responsible for selling PeerStreet’s assets.
California-based real estate investing platform PeerStreet, Inc. and 14 affiliated debtors filed for protection under Chapter 11 of the U.S. Bankruptcy Code in a court in Delaware on Monday, citing a challenging mortgage market and struggles to raise capital with venture capital funds.
“Through its bankruptcy filing, PeerStreet will seek to sell substantially all of its assets, including, but not limited to, its mortgage loan assets and technology platform, in a series of transactions intended to maximize value for all of Peer Street’s stakeholders,” the firm said in a statement.
Founded in 2013 by Brew Johnson, Brett Crosby and Alex Perelman, PeerStreet developed a marketplace connecting lenders and borrowers seeking capital to investors looking for real estate-related debt. The business attracted investor Michael Burry, one of the featured players in “The Big Short.”
The company sources loans for private lenders and brokers, which are offered for sale to institutional investors or posted on the company’s online platform. In addition, PeerStreet acts as a master servicer and manages loans on behalf of investors.
David Dunn of advisory firm Province, the chief restructuring officer for PeerStreet, cited in court filings that surging rates, reduced demand for mortgages, and declining institutional buyers’ appetite for below-current-market-rate loans led to the Chapter 11 case.
PeerStreet, which has a subsidiary mortgage lender and servicer, has originated only $5.4 million in mortgage loans in 2023, compared to $385 million in 2022 and $695.8 million in 2021, Dunn wrote. For the 12 months ending December 2022, PeerStreet and the other debtors had total revenue of approximately $37.4 million, down 23.2% from the year prior.
“In addition, in 2022, one of PeerStreet’s historic sources of funding – venture capital – declined markedly. As a result, PeerStreet was not able to access material funding to mitigate the loss of revenue caused by market conditions,” Dunn stated in court filings.
HousingWire reported that PeerStreet raised $30 million in 2018 and $60 million in 2019.
The company attracted big names among its investors, including Silicon Valley venture capital firm Andreessen Horowitz, which ledits Series A funding round of $15 million in 2016. Burry was one of PeerStreet’s first investors in 2015.
PeerStreet and the other debtors had 28 employees when it filed for Chapter 11 on Monday, compared to 281 at the end of May 2022. Its workforce was reduced through four rounds of furloughs and layoffs – May 2022, July 2022, October 2022 and February 2023.
The company asked the court to authorize the payment of $130,000 in unpaid wages and $100,000 to critical vendors, among other requests.
According to the court filings, PeerStreet has an estimated 100-199 creditors, and its assets and liabilities are between $50 million and $100 million. However, as of Monday, the group had $4.4 million in cash – in addition to $18.5 million in its mortgage business.
Piper Sandler will be the broker responsible for selling PeerStreet’s assets.
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Wall Street is a place that people love to hate.
The Wall Street of today, however, could not be further from the one we know and fear: it’s a trillion-dollar industry with innovation brewing in every corner. You may have heard about these innovations on The Big Short or Moneyball but you might want to broaden your horizons when it comes to movies that feature this major American institution.
While learning about money, finances, and the stock market may or may not be your thing, there is plenty to learn while being classically entertained.
When you’re studying for the MCAT, going through a financial audit, or watching skyrocketing inflation happening before you, it can be hard to find films that accurately portray modern finance.
But Wall Street is full of memorable characters and interesting situations with plenty of twists and turns to keep your attention.
Whether you’re looking for movies about trading on Wall Street or movies about money itself, here are 25 classics worth watching over and over again!
Followed by a list of the best documentaries on stock market trading.
Best Movies About Wall Street
Plenty of movies have been made about Wall Street over the years. There is a fascination with the life of a trader and how it intersects with business.
The order dated from the oldest movie to the most recent film.
Here are 25 of the best films set at the intersection between finance and our culture:
1. “Edison, the Man” (1940)
The movie is about the life of Thomas Edison, one of the most famous inventors in history.
The main character is played by Spencer Tracy, who does a great job portraying businessman Thomas A. Edison. The story follows Edison’s journey from being a stockbroker on Wall Street to becoming one of the most famous inventors in history.
Most of the film’s script is fictionalized or exaggerated, it should be viewed as such.
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2. “Citizen Kane” (1941)
Citizen Kane is a 1941 American drama film directed by, produced by, and starring Orson Welles. The picture was Welles’s first feature film. The screenplay, written by Herman J. Mankiewicz and Welles, was based on the life of William Randolph Hearst.
Citizen Kane helped form the idea that there should be a cultural shift in how we view Wall Street. It is considered to be one of the greatest movies ever made because it’s highly innovative, artistic, and technical with many different themes being explored throughout its runtime.
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3. “It’s A Wonderful Life” (1946)
“It’s A Wonderful Life” is a classic movie for the generations.
The protagonist of the movie is George Bailey. The movie revolves around the idea that if George Bailey never existed, life would be much worse off. This film is a classic and a must-watch for anyone interested in finance or business.
Ultimately, he learns some valuable lessons about life and himself.
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4. “Trading Places” (1983)
“Trading Places” is the funniest movie about Wall Street. The plot revolves around how one man’s fall from Wall Street is another man’s blessing.
It’s a classic movie about Wall Street that is still relevant today. The film follows the story of two men whose lives are drastically changed when they’re made the subject of a bet on Wall Street. It stars Dan Aykroyd, Eddie Murphy, Ralph Bellamy, Don Ameche, Denholm Elliott, and Jamie Lee Curtis.
Released in 1983, Trading Places was a box-office success. Earning over $90 million, the film became the fourth-highest-grossing film of that year in the United States and Canada. Furthermore, it was critically acclaimed for its humor and cast.
John Landis directed “Trading Places” and it is an absolute classic. Watching Murphy talk about futures and markets is hilarious.
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5. “Working Girl” (1988)
“Working Girl” is a 1986 romantic comedy-drama film directed by Mike Nichols and written by Kevin Wade. The film stars Melanie Griffith, Harrison Ford, Sigourney Weaver, Alec Baldwin, and Joan Cusack. It received many Academy Award nominations in 1989, including Best Picture and Best Actress (for Griffith).
The story follows Tess McGill (Griffith), an ambitious secretary who pitches a profitable idea to her boss only to have her boss take credit. After her boss (Weaver) is out with a medical injury, Tess teams up with investment banker Jack Trainer (Ford) to make a big deal. Things get complicated when her boss comes back and discovers what Tess has been up to.
“Working Girl” was praised by critics upon release and became a box office success. It grossed over $96 million worldwide against its $13 million budget.
The idea for Working Girl came when writer Kevin Wade and producer Douglas Wick were in New York City together in 1984 and noticed throngs of career women walking to work while carrying their high heels (source).
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6. “Wall Street” (1987)
“Wall Street” is a 1987 American drama film directed by Oliver Stone and starring Michael Douglas, Charlie Sheen, and Daryl Hannah. The film tells the story of Bud Fox (Sheen), a young stockbroker who wants to make it big in the world of finance.
An eager and inexperienced stockbroker is willing to do anything to get ahead, including going through an unscrupulous shady corporate raider who takes the young-in-awe under his wing.
The movie was nominated for seven Academy Awards, including Best Picture and Best Actor (Michael Douglas).
A sequel titled “Wall Street: Money Never Sleeps” was released 23 years later.
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7. “Bonfire of the Vanities” (1990)
“Bonfire of the Vanities” is a movie that captures the class-consciousness of 1980s New York.
The film focuses on Wall Street and New York City’s stratification issues. In particular, it focuses on the Manhattan elite and how they are separated from other social classes in the city.
The film is based on a book by Tom Wolfe, who was inspired by his own experiences living in Manhattan during that time period.
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8. “Other People’s Money” (1991)
Other People’s Money is a 1991 American comedy-drama film directed by Norman Jewison and starring Danny DeVito, Gregory Peck, and Penelope Ann Miller. DeVito plays a ruthless businessman who buys companies and sells off their assets to make him rich.
Along the way, this corporate raider falls in love with the wife’s daughter, who is a lawyer. An avid lover of this woman, the corporate raider attempts to win her heart through legal maneuvering.
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9. “Glengarry Glen Ross” (1992)
Glengarry Glen Ross is a 1992 American drama film adapted by David Mamet from his 1984 Pulitzer Prize-winning play Glengarry Glen Ross. The film was directed by James Foley and stars Al Pacino, Jack Lemmon, Alec Baldwin, Alan Arkin, and Kevin Spacey.
“Glengarry Glen Ross” is a movie about the incentives of real estate salesman. This drama-filled movie shows what people will do to close a sale.
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10. “Barbarians at the Gate” (1993)
Barbarians at the Gate is a 1993 American drama made-for-TV movie based on the book of the same name by Bryan Burrough and John Helyar. The film was directed by Glenn Jordan and stars James Garner as H. Ross Perot, Peter Riegert as Henry Kravis, and Swoosie Kurtz as Ruth Harkness.
The film tells the story of a leveraged buyout between two Wall Street insiders who battle for control over a company. It is considered one of the best movies about Wall Street because it provides an inside look at how these deals are made.
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11. “The Associate” (1996)
The Associate is an American comedy movie released in 1996.
Investment banker Laurel Ayres (Whoopi Goldberg) is an associate for an investment firm who has great advice but doesn’t get the respect she deserves because she is a black woman.
Money is power, so she uses a white man as her partner. The protagonist has great advice but no one will take it seriously because she’s a woman of color with an African American sounding name. To prove her worth, the protagonist creates a fictional white male figure to be her business partner to make people listen to her more than they would otherwise.
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12. “Rogue Trader” (1999)
Rogue Trader is a 1999 British drama film directed by James Dearden and starring Ewan McGregor and Anna Friel. It is based on the true story of Nick Leeson, a British trader who caused £800 million or about $1 billion in losses through unauthorized trades in 1987, and his attempt to cover up his losses by falsifying account documents.
Nick reads in the newspaper that the company went bankrupt and then realizes the severity of his losses. Him and his wife then decided to go back to London, but Nick is arrested en route from Frankfurt. Finally, Nick is extradited to Singapore where he is sentenced to six and a half years in prison.
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13. “American Psycho” (2000)
American Psycho is a satirical psychological horror film that was released in 2000 and is based on the novel of the same name by Bret Easton Ellis.
The film stars Christian Bale, Willem Dafoe, Jared Leto, Josh Lucas, Chloë Sevigny, Samantha Mathis, Cara Seymour, Justin Theroux, and Reese Witherspoon. It debuted at the Sundance Film Festival on January 21, 2000, and was released theatrically on April 14, 2000.
American Psycho is a movie about Patrick Bateman, a successful Wall Street executive with an inner darkness that leads him to commit heinous crimes. The film has developed a cult following over the years and is now considered a classic. Additionally, it has made a strong presence in contemporary meme culture.
A direct-to-video sequel, “American Psycho 2” was released in 2002.
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14. “Boiler Room” (2000)
Boiler Room is a movie about Wall Street corruption. It stars Giovanni Ribisi, Vin Diesel, Nia Long, Ben Affleck, Nicky Katt, and Jamie Kennedy.
This movie is about a young man, played by Giovanni Ribisi, who ran an unlicensed casino, but wasn’t making the living his father, a New York City judge wanted. So, with the promise of being a millionaire, he becomes a stockbroker in a brokerage firm.
In fact, the brokerage firm was running Pump and Dump schemes – investment scams that involve artificially inflating the price of stocks before dumping them onto uninformed investors.
The movie was met with mixed reviews by critics but audiences seemed to enjoy it more. I mean it did star Ben Affleck.
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15. “The Bank” (2001)
This Australian movie “The Bank” is about finance software that predicts stock market trends.
This drama-thriller heist film was directed by Frank Oz and written by Paul Schrader. The critical response was mixed but praised its acting performances, particularly from Al Pacino and Jennifer Wright Penn.
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16. “The Pursuit of Happyness” (2006)
“The Pursuit of Happyness” is a 2006 American biographical drama film based on the life of Chris Gardner. It tells the story of how he rose from homelessness to Wall Street success. The movie was directed by Gabriele Muccino and stars Will Smith in the leading role. It grossed over $307 million worldwide, making it one of Smith’s highest-grossing movies. In 2006, Will Smith was nominated for the Academy Award for Best Actor for his portrayal of Gardner.
The movie is set in San Francisco, California, and follows Gardner’s trials and tribulations as he strives to become a successful stockbroker. Despite being homeless with a young son, he never gives up on his dream. The film finishes with him landing a job at Dean Witter Reynolds and becoming a millionaire five years later.
Although “The Pursuit of Happyness” is not technically about Wall Street, it is an excellent depiction of what it takes to be successful in this field – grit, determination, and perseverance in the face of adversity.
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17. “Wall Street: Money Never Sleeps” (2010)
Wall Street: Money Never Sleeps is a 2010 American drama film directed by Oliver Stone. It is a sequel to Wall Street (1987), which was also directed by Stone. The film stars Michael Douglas, Shia LaBeouf, and Carey Mulligan.
The movie begins with the release of Gordon Gekko (Michael Douglas) from prison, where he has been for eight years for insider trading and securities fraud. He immediately goes to see his future son-in-law, Jacob (Shia LaBeouf), who is now working on Wall Street. Gordon helps Jacob get back at the man who screwed his mentor’s firm over.
The movie covers the events leading up to the financial crisis of 2008 and explores how it affects individuals, society, and culture. The firm was highly successful at the box office earning more than $134 million worldwide.
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18. “Margin Call” (2011)
Margin Call is a movie about Wall Street and bankers. It is considered a classic, and it was released in 2011. The banker in the movie has created a financial model that shows the firm will be completely underwater, but before he can show anyone else, he gets fired. He hands his model off to a junior banker who then has to save everything from this one data point on his laptop in the middle of the night while everyone is asleep.
Everyone wonders if “Margin Call” is a true story. While there is no specific person or company name, it rings true of what happened in the 2007-2008 financial crisis.
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19. “Too Big To Fail” (2011)
“Too Big To Fail” is a 2011 HBO adaptation of the book by Andrew Ross Sorkin. The movie covers the 2008 financial crisis and follows bankers who meet behind closed doors with regulators to negotiate the federal bailout of the financial industry.
The film was able to feature a parade of stars who played different bank and investment bigwigs. While it’s based on true events, there are some dramatizations in order to make for a more compelling film.
It’s an interesting look at how Wall Street operates and what happens when things go wrong.
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20. “Cosmopolis” (2012)
“Cosmopolis” is a movie starring Robert Pattinson about an incident involving currency speculation. The plot of the movie is quite complicated and may leave viewers scratching their heads as to what just happened.
The protagonist, Eric Packer, is a Wall Street investor who finds himself in the middle of an unexpected incident while in New York City. His wife and lover are introduced throughout the story but it doesn’t make sense why they would be in New York City together.
This movie has a lot of intrigues that will keep you on your toes as you weave through his personal life and the emotional rollercoaster of trading!
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21. “Arbitrage” (2012)
“Arbitrage” is a movie about an ambitious hedge fund manager who tries to sell his company before anyone finds out he’s cooked the books. The plot involves a mistress accidentally dying in a car accident and its cover-up, with help from an unlikely source.
The movie is well acted and suspenseful and provides great insight into the world of high finance.
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22. “The Wolf of Wall Street” (2013)
The Wolf of Wall Street is a 2013 American biographical black comedy crime film directed by Martin Scorsese and written by Terence Winter, based on the memoir of the same name by Jordan Belfort. The film stars Leonardo DiCaprio as Belfort, Margot Robbie as his wife Naomi Lapaglia, Jonah Hill as Donnie Azoff, and Kyle Chandler as Patrick Denham.
This true story of Jordan Belfort, who starts his own company in the early 1990s and quickly grows their company – more importantly their status in the trading community on Wall Street. At the same time, so do their substance abuse and lies. Belfort is named the Wolf of Wall Street by Forbes Magazine. Soon after, the FBI look into Belfort’s trading schemes…
Now, you will have to finish the movie to see what happens.
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23. “The Big Short” (2015)
The Big Short is a movie about the 2008 financial crisis and Michael Burry’s role in it. It was directed by Adam McKay and stars the brilliant ensemble cast in this movie of Christian Bale, Steve Carell, Ryan Gosling, Brad Pitt, and Marisa Tomei. The film was nominated for five Academy Awards, including Best Picture and Best Director (source).
Viewers praise the film for being entertaining and broad. It is among the top Wall Street movies.
Not many people are brave enough to go against the market trends and big banks except for Michael Burry. Who came out ahead on the big short in the housing market?
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24. “Money Monster” (2016)
George Clooney and Julia Roberts team up in this financial thriller as TV show hosts who are taken hostage at gunpoint due to an irate investor. There is a tense standoff taking place on live television.
The film was directed by Jodie Foster and received mixed reviews, but still did well at the box office.
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25. “The Wizard Of Lies” (2017)
The Wizard of Lies is a 2017 American biographical drama film about the fall of Bernie Madoff. Madoff’s Ponzi scheme was highly watched across the world as it was the largest spam in US history as he robbed at least $65 billion from unknowning victims. The film stars Robert De Niro as Bernie Madoff, Michelle Pfeiffer as Ruth Madoff, Alessandro Nivola as Mark Madoff, Nathan Darrow as Andrew Madoff, and Kristen Connolly as Catherine Hooper.
The film shows how the family of Bernie Madoff falls apart amidst the scandal.
“Bernie Madoff” is a biopic about the infamous Ponzi schemer who was jailed for orchestrating one of history’s largest financial pyramids. The film utilizes Robert DeNiro as Bernie Madoff, and tells the story from his perspective. Critics praised the film for being powerful.
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What movies are about Wall Street?
There are a lot of great movies about Wall Street, but it can be hard to pick the best ones.
Some of our favorites include “Too Big to Fail,” “Boiler Room,” and “The Wolf of Wall Street.”
Which movie is based on stock market? Much Watch Ones
There are many movies based on the stock market. Some of the most popular ones include “The Wolf of Wall Street,” “The Big Short,” and “Margin Call.”
These movies tell the story of people who have made or lost a lot of money trading stocks and other investments. They offer a fascinating look at what happens behind the scenes on Wall Street, and they can be very educational for anyone interested in investing.
What Are the Top 3 Hedge Funds Movies to Watch?
There are a number of great movies about Wall Street and the hedge fund industry. Some of the most popular ones include “The Big Short“, “Boiler Room“, and “Arbitrage.”
These movies offer a fascinating look into the world of high finance and provide an interesting perspective on the industry. Hedge funds can be very profitable, but they can also be risky. Watch these films to learn more about the risks involved in this kind of investing, as well as the rewards.
Best Finance Documentaries
Ever since the 2008 financial crisis, film buffs have been obsessed with anything related to Wall Street.
From the “Trader” to the “Inside Job”, Hollywood seems ready to take on the global financial sector.
We’ve compiled a list of some of the best finance-related documentaries available to watch.
1. “Trader” (1987)
In the 1987 film “TRADER,” Paul Tudor Jones II offers a highly charged look at what it takes to make it as a Wall Street trader. The film was shot before the October 1987 crash, so it is an interesting historical artifact.
It delivers a rarely seen view of this marketplace and explains the workings of this frantic, highly charged area. This film is important because it captures America as it nears the end of its 200-year bull market.
“Trader” is a fascinating look into the minds of traders and their thought processes. It provides an inside look at the strategies that traders use to make money and how they think about the markets. If you are interested in learning about trading or want to get a better understanding of how it works, then Trader is a must-read documentary.
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2. “The Trillion Dollar Bet” (2000)
The Trillion Dollar Bet is a documentary about a magic formula, specifically the Black–Scholes–Merton formula, which was dreamed to reduce risk in the stock market.
It is an interesting film because it portrays Wall Street in a way that many people have never seen before. As they started to use this “dream” formula, they started losing huge amounts of investments each day. The movie focuses on the rise and fall of hedge funds, with a specific focus on the 1994-1998 period when one of them went bankrupt.
The documentary will interest many people who are interested in finance, economics, and investing.
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3. The Corporation (2003)
“The Corporation” is a documentary film written by Joel Bakan, and directed by Mark Achbar and Jennifer Abbott.
Released in 2003, the film examines the nature of the modern corporation, considering its legal status as a “person”, and how this affects different aspects of corporate behavior. The film won numerous awards including at the Sundance Film Festival (source).
And check out the latest… The New Corporation: The Unfortunately Necessary Sequel
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4. Enron – The Smartest Guys in the Room (2005)
The film “Enron – The Smartest Guys in the Room” tells the story of Enron, a company that was involved in accounting fraud and created $30 billion worth of debts. Enron is often seen as an example of corporate corruption and the Enron incident is often considered the best example of that.
This documentary tells the story of how Enron became one of the largest companies in America before its collapse.
Critics reviewed the film positively and it also received good ratings from audiences.
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5. Wall Street Warriors (Season 1-3 | 2006)
If you’re looking for a reality TV series that will take you inside the fascinating and high-pressure world of Wall Street, look no further than “Wall Street Warriors”.
The show follows the lives of those working on Wall Street – from traders to investment bankers to hedge fund managers.
There are 3 seasons, with each season consisting of 26 episodes. So whether you’re looking for an hour of entertainment or you want to learn more about the financial industry, “Wall Street Warriors” has something for you.
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6. The Ascent of Money (2008)
The documentary traces the origins of money, credit, and banking throughout history.
The title is interesting because it provides a comprehensive overview of how money has evolved over time. The documentary also interviews experts from various financial backgrounds, which makes it an insightful watch for anyone looking to gain a better understanding of finance.
The Ascent of Money is a 2008 documentary film written and directed by Michael Lewis and won an International Emmy Award.
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7. Floored (2009)
The documentary focuses on the futures exchange in Chicago, and how digitization and computerization are changing trading floor practices. It features interviews with various traders who offer their insights into this rapidly-changing industry.
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8. Million Dollar Traders (2009) – Mini Series
These ordinary traders did better than the pros. Some of the best traders included a student, a soldier, and a single mother of 2 children. They may have lacked experience, but they made up for it with guts and determination.
The reality mini-series happens during the recession of 2008 – also known as not a great time to be a trader. As the market falls, the story becomes personal for many of these non-traditional traders.
In fact, this is similar to what Teri Ijeoma is doing today.
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9. Capitalism: A Love Story (2009)
Capitalism: A Love Story is a 2009 documentary film written and directed by Michael Moore. The film examines the financial crisis of 2007-2008 and the subsequent economic recession.
The criticism in Capitalism: A Love Story is clearly pointed at businesses that take risks for profit-led motives, with public funds ultimately securing the risk. For example, Moore interviews former Merrill Lynch CEO John Thain, asking how much money he made while his company was losing $8 billion per quarter.
Moore interviews many too financial gurus to ask the question – What is America’s cost for its love of capitalism?
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10. “Inside Job” (2010)
Inside Job is a made-for-television documentary about the Fall 2008 financial crisis.
This documentary tackles the 2008 financial collapse in a way that is easily digestible, featuring interviews with experts in the field of finance. The film takes a look at some of the factors which led to the Great Recession, such as deregulation and Wall Street executives going unpunished.
The film walks viewers through topics such as extreme consolidated power on Wall Street, questionable banking practices which helped create the housing bubble, and federal regulators’ bailout that kept most big banks afloat after the 2008 financial collapse.
The movie was directed by Charles Ferguson, and it won an Academy Award for Best Documentary in 2011.
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Most Acclaimed Wall Street Movies
Many people ask, is there any movie on stock market? In fact, there are plenty!
In fact, there is probably a new flourish of movies being made about the economic effects from 2020 onward.
These are the top Wall Street Movies you must watch!
What is your favorite movie about wall street?
Everyone will have their favorite pick!
Start a movie club and discuss which Wall Street movies. This is a great way to understand the impact of what is going on in the financial markets.
Which Must Watch Stock Market Movies are on Your List?
These movies and documentaries are incredibly informative to find out what is happening on Wall Street and how things are handled.
They offer great insights into what can happen when things go wrong on Wall Street. If you’re interested in finance or investment banking, I highly recommend watching these movies!
More Resources for You…
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This article will explain the Big Short and the 2008 subprime mortgage collapse in simple terms.
This post is a little longer than usual–maybe give yourself 20 minutes to sift through it. But I promise you’ll leave feeling like you can tranche (that’s a verb, right?!) the whole financial system!
Key Players
First, I want to introduce the players in the financial crisis, as they might not make sense at first blush. One of the worst parts about the financial industry is how they use deliberately obtuse language to explain relatively simple ideas. Their financial acronyms are hard to keep track of. In order to explain the Big Short, these players–and their roles–are key.
Individuals, a.k.a. regular people who take out mortgages to buy houses; for example, you and me!
Mortgage lenders, like a local bank or a mortgage lending specialty shop, who give out mortgages to individuals. Either way, they’re probably local people that the individual home-buyer would meet in person.
Bigbanks, such as Goldman Sachs and Morgan Stanley, who buy lots of mortgages from lenders. After this transaction, the homeowner would owe money to the big bank instead of the lender.
Collateralized debt obligations (CDOs)—deep breath!—who take mortgages from big banks and bundle them all together into a bond (see below). And just like before, this step means that the home-buyer now owes money to the CDO. Why is this done?! I’ll explain, I promise.
Ratings agencies,
whose job is to determine the risk of a CDO—is it filled with safe mortgages,
or risky mortgages?
Investors, who buy part of a CDO and get repaid as the individual homeowners start paying back their mortgage.
Feel lost already? I’m going to be a good jungle guide and get you through this. Stick with me.
Quick definition: Bonds
A bond can be
thought of as a loan. When you buy a bond, you are loaning your money. The issuer of the bond is borrowing your money. In exchange for borrowing your money, the
issuer promises to pay you back, plus interest, in a certain amount of time.
Sometimes, the borrower cannot pay the investor back, and the bond defaults, or fails. Defaults are not
good for the investor.
The CDO—which is a bond—could hold thousands of mortgages in it. It’s a mortgage-backed bond, and therefore a type of mortgage-backed security. If you bought 1% of a CDO, you were loaning money equivalent to 1% of all the mortgage principal, with the hope of collecting 1% of the principal plus interest as the mortgages got repaid.
There’s one more key player, but I’ll wait to introduce it.
First…
The Whys, Explained
Why does an individual take out a mortgage? Because they want a home. Can you blame them?! A healthy housing market involves people buying and selling houses.
How about the lender;
why do they lend? It used to be
so they would slowly make interest money as the mortgage got repaid. But
nowadays, the lender takes a fee (from the homeowner) for creating (or originating) the mortgage, and then
immediately sells to mortgage to…
A big bank. Why do
they buy mortgages from lenders? Starting in the 1970s, Wall St. started
buying up groups of loans, tying them all together into one bond—the CDO—and
selling slices of that collection to investors. When people buy and sell those
slices, the big banks get a cut of the action—a commission.
Why would an investor
want a slice of a mortgage CDO? Because, like any other investment, the big
banks promised that the investor would make their money back plus interest once the homeowners began
repaying their mortgages.
You can almost trace the flow of money and risk from player to player.
At the end of the day, the investor needs to get repaid, and that money comes from homeowners.
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CDOs are empty buckets
Homeowners and mortgage lenders are easy to understand. But a big question mark swirls around Wall Street’s CDOs.
I like to think of the CDO as a football field full of empty buckets—one bucket per mortgage. As an investor, you don’t purchase one single bucket, or one mortgage. Instead, you purchase a thin horizontal slice across all the buckets—say, a half-inch slice right around the 1-gallon mark.
As the mortgages are repaid, it starts raining. The repayments—or rain—from Mortgage A doesn’t go solely into Bucket A, but rather is distributed across all the buckets, and all the buckets slowly get re-filled.
As long as your horizontal slice of the bucket is eventually surpassed, you get your money back plus interest. You don’t need every mortgage to be repaid. You just need enough mortgages to get to your slice.
It makes sense, then, that the tippy top of the bucket—which
gets filled up last—is the highest risk. If too many of the mortgages in the
CDO fail and aren’t repaid, then the tippy top of the bucket will never get
filled up, and those investors won’t get their money back.
These horizontal slices are called tranches, which might
sound familiar if you’ve read the book or watched the movie.
So far, there’s nothing too wrong about this practice. It’s simply moving the risk from the mortgage lender to other investors. Sure, the middle-men (banks, lenders, CDOs) are all taking a cut out of all the buy and sell transactions. But that’s no different than buying lettuce at grocery store prices vs. buying straight from the farmer. Middle-men take a cut. It happens.
But now, our final player enters the stage…
Credit Default Swaps: The
Lynchpin of the Big Short
Screw you, Wall Street nomenclature! A credit default swap sounds complicated, but it’s just insurance. Very simple, but they have a key role to explain the Big Short.
Investors thought, “Well, since I’m buying this risky tranche of a CDO, I might want to hedge my bets a bit and buy insurance in case it fails.” That’s what a credit default swap did. It’s insurance against something failing. But, there is a vital difference between a credit default swap and normal insurance.
I can’t buy an insurance policy on your house, on your car, or on your life. Only you can buy those policies. But, I could buy insurance on a CDO mortgage bond, even if I didn’t own that bond!
Not only that, but I could buy billions of dollars of insurance on a CDO that only contained millions of dollars of mortgages.
It’s like taking out a $1 million auto policy on a Honda Civic. No insurance company would allow you to do this, but it was happening all over Wall Street before 2008. This scenario essentially is “the big short” (see below)—making huge insurance bets that CDOs will fail—and many of the big banks were on the wrong side of this bet!
Credit default swaps involved the largest amounts of money in the subprime mortgage crisis. This is where the big Wall Street bets were taking place.
Quick definition: Short
A short is a bet that something will fail, get worse, or go down. When most people invest, they buy long (“I want this stock price to go up!”). A short is the opposite of that.
Certain individuals—like main characters Steve Eisman (aka Mark Baum in the movie, played by Steve Carrell) and Michael Burry (played by Christian Bale) in the 2015 Oscar-nominated film The Big Short—realized that tons of mortgages were being made to people who would never be able to pay them back.
If enough mortgages failed, then tranches of CDOs start to fail—no mortgage repayment means no rain, and no rain means the buckets stay empty. If CDOs fail, then the credit default swap insurance gets paid out. So what to do? Buy credit default swaps! That’s the quick and dirty way to explain the Big Short.
Why buy Dog Shit?
Wait a second. Why did people originally invest in these CDO bonds if they were full of “dog shit mortgages” (direct quote from the book) in the first place? Since The Big Short protagonists knew what was happening, shouldn’t the investors also have realized that the buckets would never get refilled?
For one, the prospectus—a fancy word for “owner’s manual”—of a CDO was very difficult to parse through. It was hard to understand exactly which mortgages were in the CDO. This is a skeevy big bank/CDO practice. And even if you knew which mortgages were in a CDO, it was nearly impossible to realize that many of those mortgages were made fraudulently.
The mortgage lenders were knowingly creating bad mortgages. They were giving loans to people with no hopes of repaying them. Why? Because the lenders knew they could immediately sell that mortgage—that risk—to a big bank, which would then securitize the mortgage into a CDO, and then sell that CDO to investors. Any risk that the lender took by creating a bad mortgage was quickly transferred to the investor.
So…because you can’t decipher the prospectus to tell which mortgages are in a CDO, it was easier to rely on the CDO’s rating than to evaluate each of the underlying mortgages. It’s the same reason why you don’t have to understand how engines work when you buy a car; you just look at Car & Driver or Consumer Reports for their opinions, their ratings.
The Ratings Agencies
Investors often relied on ratings to determine which bonds
to buy. The two most well-known ratings agencies from 2008 were Moody’s and
Standard & Poor’s (heard of the S&P
500?). The ratings agency’s job was to look at a CDO that a big bank created,
understand the underlying assets (in this case, the mortgages), and give the
CDO a rating to determine how safe it was. A good rating is “AAA”—so nice, it
got ‘A’ thrice.
So, were the ratings agencies doing their jobs? No! There are a few explanations for
this:
Even they—the experts in charge of grading the
bonds—didn’t understand what was going on inside a CDO. The owner’s manual
descriptions (prospectuses) were too complicated. In fact, ratings agencies
often relied on big banks to teach
seminars about how to rate CDOs, which is like a teacher learning how to
grade tests from Timmy, who still pees his pants. Timmy just wants an A.
Ratings agencies are profit-driven companies.
When they give a rating, they charge a fee. But if the agency hands out too
many bad grades, then their customers—the big banks—will take their requests
elsewhere in hopes of higher grades. The ratings agencies weren’t objective, but instead were biased by
their need for profits.
Remember those fraudulent mortgages that the
lenders were making? Unless you did some boots-on-the-ground research, it was
tough to uncover this fact. It’s hard to blame the ratings agencies for not
catching this.
Who’s to blame?
Everyone? Let’s play devil’s advocate…
Individuals: some people point the finger at homeowners, saying, “You should know better than to buy a $1 million house on a teacher’s salary.” I find this hard to swallow. These people, surrounded by the American home-ownership dream, were sold the idea that they would be fine. The mortgage lender had no incentive to sell a good mortgage, they only had an incentive to sell a mortgage. So, it’s hard for me to put too much blame on the homeowners.
Mortgage lenders: someone knew. I’m not saying that all the mortgage lenders were fully aware of the implications of their actions, but some people knew that fraudulent loans were being made, and chose to ignore that fact. For example, check out whistleblower Eileen Foster.
Big banks: Yes sir! There’s certainly blame here. Rather than get into all of the various money-grubbing, I want to call out one specific anecdote. Back in 2010, Goldman Sachs CEO Lloyd Blankfein testified in front of Congress. Here it is:
To explain further, there are two things going on
here.
First, Goldman Sachs bankers were selling CDOs to investors. They wanted to make a commission on the sale.
At the same time, other bankers ALSO AT GOLDMAN SACHS were buying credit default swaps, a.k.a. betting against the same CDOs that the first Goldman Sachs bankers were selling.
This is like selling someone a racehorse with cancer, and then immediately going to the track to bet against that horse. Blankfein’s defense in this video is, “But the horse seller and the bettor weren’t the same people!” And the Congressmen responds, “But they worked for the same stable, and collected the same paychecks!”
So do the big banks deserve blame? You tell me.
Inspecting Goldman Sachs
One reason Goldman Sachs survived 2008 is that they began buying credit default swaps (insurance) just in time before the housing market crashed. They were still on the bad side of some bets, but mostly on the good side. They were net profitable.
Unfortunately for them, the banks that owed Goldman money were going bankrupt from their own debt, and then Goldman never would have been able to collect on their insurance. Goldman would’ve had to payout on their “bad” bets, while not collecting on their “good” bets. In their own words, they were “toast.”
This is significant. Even banks in “good” positions would’ve gone bankrupt, because the people who owed the most money weren’t able to repay all their debts. Imagine a chain; Bank A owes money to Bank B, and B owes money to Bank C. If Bank A fails, then B can’t collect their debt, and B can’t pay C. Bank C made “good” bets, but aren’t able to collect on them, and then they go out of business.
These failures would’ve rippled throughout the world. This explains why the US government felt it necessary to bail-out the banks. That federal money allowed banks in “good” positions to collect their profits and “stop the ripple” from tearing apart the world economy. While CDOs and credit default swap explain the Big Short starting, this ripple of failure is the mechanism that affected the entire world.
Betting more than you have
But if someone made a bad bet—sold bad insurance—why didn’t they have money to cover that bet? It all depends on risk. If you sell a $100 million insurance policy, and you think there’s a 1% chance of paying out that policy, what’s your exposure? It’s the potential loss multiplied by the probability = 1% times $100 million, or $1 million.
These banks sold billions of dollars of insurance under the assumption that there was a 5%, or 3%, or 1% chance of the housing market failing. So they had 20x, or 30x, or 100x less money on hand then they needed to cover these bets.
Turns out, there was a 100% chance that the market would fail…oops!
Blame, expounded
Ratings agencies—they should be unbiased. But they sold themselves off for profit. They invited the wolves—big banks—into their homes to teach them how to grade CDOs. Maybe they should read a blog to explain the Big Short to them. Of course they deserve blame. Here’s another anecdote of terrible judgment from the ratings agencies:
Think back to my analogy of the buckets and the rain. Sometimes, a ratings agency would look at a CDO and say, “You’re never going to fill up these buckets all the way. Those final tranches—the ones that won’t get filled—they’re really risky. So we’re going to give them a bad grade.” There were “Dog Shit” tranches, and Dog Shit gets a bad grade.
But then the CDO managers would go back to their offices and cut off the top of the buckets. And they’d do this for all their CDOs—cutting off all the bucket-top rings from all the different CDO buckets. And then they’d super-glue the bucket-top rings together to create a field full of Frankenstein buckets, officially called a CDO squared. Because the Frankenstein buckets were originally part of other CDOs, the Frankenstein buckets could only start filling up once the original buckets (which now had the tops cut off) were filled. In other words, the CDO managers decided to concentrate all their Dog Shit in one place, and super glue it together.
A reasonable person would look at the Frankenstein Dog Shit field of buckets and say, “That’s turrible, Kenny.”
BUT THE RATINGS AGENCIES GAVE CDO-SQUAREDs HIGH GRADES!!! Oh I’m sorry, was I yelling?!
“It’s diversified,” they would claim, as if Poodle shit mixed with Labrador shit is better than pure Poodle shit.
Again, you tell me. Do the ratings agencies deserve blame?!
Does the government deserve blame?
Yes and no.
For example, part of the Housing and Community Development Act of 1992 mandated that the government mortgage finance firms (Freddie Mac and Fannie Mae) purchase a certain number of sub-prime mortgages.
On its surface, this seems like a good thing: it’s giving money to potential home-buyers who wouldn’t otherwise qualify for a mortgage. It’s providing the American Dream.
But as we’ve already covered today, it does nobody any good to provide a bad mortgage to someone who can’t repay it. That’s what caused this whole calamity. Freddie and Fannie and HUD were pumping money into the machine, helping to enable it. Good intentions, but they weren’t paying attention to the unintended outcomes.
And what about the Securities & Exchange Commission (SEC), the watchdogs of Wall Street. Do they have a role to explain the Big Short? Shouldn’t they have been aware of the Big Banks, the CDOs, the ratings agencies?
Yes, they deserve blame too. They’re supposed to do things like ensure that Big Banks have enough money on hand to cover their risky bets. This is called proper “risk management,” and it was severely lacking. The SEC also had the power to dig into the CDOs and ferret out the fraudulent mortgages that were creating them. Why didn’t they do that?
Perhaps the issue is that the SEC was/is simply too close to Wall Street, similar to the ratings agencies getting advice from the big banks. Watchdogs shouldn’t get treats from those they’re watching. Or maybe it’s that the CDOs and credit default swaps were too hard for the SEC to understand.
Either way, the SEC doesn’t have a good excuse. If you’re in bed with the people you’re regulating, then you’re doing a bad job. If you’re rubber stamping things you don’t understand, then you’re doing a bad job.
Explain the Big Short, shortly
You’re about 2500 words into my “short summary.” But the important things to remember:
Financial acronyms suck.
Money flowed from the investors down to the mortgage lenders, and the risk flowed from the mortgage lenders up to the investors. In between, the big banks and CDOs acted as middle men and intermediaries.
When someone feels like their actions have no risk, or no consequences, they’ll behave poorly (big banks, mortgage lenders) When someone is given what seems like an amazing deal, they’ll take it (individual home owners).
CDOs are like empty buckets. Mortgage payments are like rain, filling the buckets. Investors buy tranches, or slices, across all the buckets. If mortgages fail, then the buckets might not fill up, and the investors won’t get their money back.
CDOs are intentionally complex. So complex, that not even the people grading them understood what was going on (ratings agencies).
Buying insurance on something your do not own is a behavior with potential for abuse (big banks)
Buying insurance on something for more than it’s worth is a behavior with potential for abuse (big banks). This is where most of the money in the financial crisis switched hands.
And with that, I’d like to announce the opening of the Best Interest CDO. Rather than invest in mortgages, I’ll be investing in race horses. Don’t ask my why, but the current top stallion is named ‘Dog Shit.’ He’ll take Wall Street by storm.
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-Jesse
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