Take me home…Moral roads…

All humans have a moral compass, but when guided away from it, moral hazards occur, which can wrongly affect other people. For example, the moral hazards among the biggest Wall Street firms like Merrill Lynch, Citigroup, Deutsche Bank, Lehman Brothers, etc., assisted in expelling Americans from their homes during the 2008 housing crisis. While not the only force that led to Americans losing their homes in 2008, the moral misgivings of Wall Street firms perpetuated the process. The definition of moral hazards is important to understand before delving deeper into how it pertains to Wall Street firms during the house market crash. Investopedia defines moral hazard as “the risk that a party has not entered into a contract in good faith or has provided misleading information about its assets, liabilities, or credit capacity”. Investopedia also addresses the fact that moral hazards could lead a party to take unusual risks in a desperate attempt to earn a profit. In an unusual move, several Wall Street firms took the risk of buying mortgage bonds in an attempt to earn profit, while not possessing the tools to fully understand the validity of the loans. In fact, the bankers, analysts, investors, etc. weren’t 100% sure how to interpret these bonds, contributing to the cloud of confusion surrounding the 2008 housing crisis and making it a generally difficult affair to understand. This expulsion as a result of moral hazard is also seen in Toni Morrison’s historical fiction novel A Mercy, the parallels of which will be discussed further in this essay. 

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Large-scale vs. Small-scale Perspectives – 2008 Housing Crisis

The crash of the United States stock market in 2008 led to a severe housing crisis across America. Trying to understand why the stock market crashed is a difficult task. As I read The Big Short by Michael Lewis to familiarize myself with the crashing of the stock market in 2008, I realized that the process of subprime mortgage loans, credit default swaps, and artificial securities was confusing to me. However, I realized that the professional businessmen who created them didn’t know what they consisted of; in fact, nobody knew exactly what the loans consisted of. The complexity of the financial crisis wasn’t just big scale, but also small scale. After reading The Big Short and trying to gain a financial perspective of what happened on the business side of the financial crisis, I then read The Turner House by Angela Flournoy, which gave a smaller scale perspective of how the Turner Family in Detroit was affected by the mishandling of mortgage loans on Wall Street. 

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The Effect of Immorality on Expulsion

Throughout reading King Lear by William Shakespeare, the concept of expulsion evidently reoccurs. The expulsion of King Lear initiated by his two daughters leads to a corrupt system along with the downfall of inheritance between another father, Gloucester, and his children, Edmund and Edgar. While reading through the play and understanding the reason for expulsion of family members, in what was once a close-knit family, the terms swap and liquidity come to mind. According to Investopedia, a source for financial information, swap is “an exchange of liabilities from two different financial instruments”. In the case of King Lear, swapping of liabilities is persistent between family members. Additionally, Investopedia defines liquidity as “the degree to which an asset can be quickly bought or sold at a price reflecting its intrinsic value”. Lear’s property is a liquid asset to himself that will be given in exchange for the love expressed by his three daughters, Goneril, Regan, and Cordelia. There are other forms of intangible swapping of liabilities that lead to expulsion, such as swapping of loyalty and trust. Immoral swaps and liquidity interplay with each other throughout the play leading to banishment and rejection. 

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