Author: Nathan Walz

By:Nathan Walz

                  In class I have been reading Parable of the Sower by Octavia Butler. As I’ve been reading, I have noticed that there are parts of the book that connect really well with our study of the 2008 housing/financial crisis. Along with this there are parts of the book that relate to what we did in class throughout the semester.

The first thing that I noticed was the events that took place. In Parable of the Sower, I observed a doomsday-like event where basically everything was in ruins. There is tons of crime and there is a big housing crisis because there are so many people without homes. “I heard on the news today that more water peddlers are being killed” (17) Water peddlers are people who sell water to the ultra-poor and homeless. In the book water is now far more expensive than gasoline. This shows just how bad things are that people are people getting killed while selling water which is now a luxury item. Lauren in this case would say that the change that caused this violence is God. Earthseed; Lauren’s newfound religion is based around the notion that God is change.  This relates heavily to what happened as the 2008 crisis unfolded. What was previously standard at the time; having a home was now a lot more rare and luxurious because of the horrible sub- prime mortgages and the actions taken in bad faith by the mortgage lenders and rating agencies. A lot of this can be seen in The Big Short. This stood out to me personally because there was change. When I see change, I immediately default to thinking about how and why it took place. There were huge changes in both the fictional world of Parable of the Sower and in 2008 when the housing/financial crash happened. The changes do relate but they are seen in a different light. One was portrayed as God, and one was portrayed as something done by giant/evil companies. 

                  The next thing that I noticed was the sharing taking place both in the book and during the 2008 housing crisis. In the book Lauren has a disease called hyperempathy. When Lauren is close to someone, she feels the physical feeling they have. So, if they are being hurt by something she will feel their pain and same thing if someone is feeling some other kind of physical stimulus. “The sharing isn’t real after all. It isn’t some magic or ESP that allows me to share the pain or pleasure with other people” (11) This ultimately makes her vulnerable in case she needs to defend herself. When she hurts someone, she feels exactly what the other person feels. “Then I was lost, no more good for anything. I died with someone” (297) When Lauren’s group got into a shootout someone got shot and died. Lauren was close enough that when they were dying so was she. She ended up passing out due to her hyperempathy. There is also the other side of Lauren’s hyperempathy. “I got caught up in their lovemaking, and had all I could do to lie still and keep quiet. I couldn’t escape their sensation.” (200) This highlights the other side of Lauren’s hyperempathy. When people are feeling pleasure, she also feels it. Lauren’s sharing goes both ways. This relates to the big banks that ended up failing during the 2008 housing crisis. 

Before the housing crisis the banks had brought up a bunch of CDO’s. These are collateralized debt obligations. In this case the debt is people’s mortgages. A CDO contains tons of people’s mortgages, it’s like bundling up a bunch of mortgages into one big package. The banks were buying these mortgages because they looked like really good investments. There were even rating agencies that would give each CDO a rating based on how likely the people paying the mortgages were to actually pay. This all sounds really great however the rating agencies lied about how good these mortgages were. Some of this had to do with what kind of mortgages were in the CDOs. There are fixed rate mortgages and there are variable rate mortgages. At the time the housing market was booming so a lot of people wanted to buy homes because of how good an investment it was. This includes people that couldn’t afford homes and people with horrible credit ratings. As said in The Big Short “Mortgage borrowers typically repaid their loans when interest rates fell, and they could finance more cheaply” (7) However with this new type of adjustable-rate mortgage it was made super difficult to pay the mortgage after the first few years. These were called subprime mortgages. There would be a super low interest rate (a teaser rate) for the first few years then the interest rate would skyrocket, and it would become super expensive to pay for the mortgage. The subprime mortgage was made available to just about everybody even if they had a really bad credit score and or couldn’t afford the house without the teaser interest rate. The mortgage lenders that supplied these super risky subprime mortgages would take a few low-risk mortgages and group them into a CDO with tons of risky subprime mortgages. The lenders would then pay to have them rated and the rating agencies gave these CDOs super high ratings even when the real rating should have been trash. These false ratings made it so that banks wanted to and did buy these horrible CDOs. After a few years when the interest rates skyrocketed, and the mortgages failed the big banks struggled and some of them even failed as a whole. This made people lose their jobs, lose their savings and lose some of their investments. In other words, the banks were sharing their financial pain with everybody. However, before this when the banks were doing well, they didn’t share any of their profits with regular people. They kept it all to themselves and gave their executives enormous bonuses. Even when the government came to bail out some of the banks, they still kept it to themselves and gave their executives more money. So, there was really only one side to this sharing. It would be like if Lauren (regular people) only felt others'(banks) pains instead of feeling both pleasure and pain. This really stood out to me because there was sharing in both worlds but one of them only shared one side of what they felt. 

                  The last thing I noticed was the foresight into what happened in both 2008 and in the book. In the book Lauren is constantly preparing for an event that would leave her with no protection from the wall. “I’ve finally assembled a small survival pack for myself–a grab-and- run pack” (80) Lauren can clearly feel that something is going to happen that causes her to need what is in the survival pack. Lauren feels this but nobody else around her does. None of her family/neighbors are getting survival packs ready. They have confidence in the wall. Lauren proved to be right to prepare because it wasn’t too much longer before she was forced to leave her home and have no protection from the wall. There was a similar situation before the 2008 housing crisis. In The Big Short Dr Michael Burry sees that there is a housing bubble and that it’s going to pop. He also sees how bad the CDOs are. So, he finds a way to bet against the success of the CDOs/subprime mortgages. ““If I bought a credit default swap, my downside was defined and certain, and the upside was many multiples of it”” Credit default swaps are basically insurance policies on, in this case CDOs. If the banks were to lose money on the CDOs/subprime mortgages Burry would make however much they lost even if he only bought a fraction of that in credit default swaps. When the crisis happened, Burry made tons of money because he basically bet that the subprime mortgages/CDOs would fail. In both the book and in the housing crisis someone had foresight into what was going to happen. Because of this both Burry and Lauren prepared to be successful when the event they predicted happened. The only difference is that Lauren prepared for something that would be bad for her whereas Burry prepared for something that would make him and his fund a lot of money.

                  These things that I noticed portray my journey through the semester. At first, I really struggled with the concepts and major points of the course. The first thing that I did to improve that was noticing that change needed to happen so that I could be successful. Noticing this really helped me start thinking about what needed to change and what needed to be done. One thing that I noticed needed to be changed was my preparation for class. I wanted to ensure that I could understand and interpret what was happening when discussing books and other topics. The next part of my journey through the semester was sharing. By this I mean sharing my ideas and thoughts with my peers. Toward the beginning of the semester, I wasn’t really participating in the discussions that happened in class. However, after I noticed that I should be sharing I started to participate more. This led to a lot more success based not only on what I contributed but what my peers contributed when taking what I shared into account. An example of this was sharing my thoughts in our small groups and people sharing their thoughts based on what I had already shared. This happened especially a lot when we were reading The Big Short. The last part of my journey through the semester was gaining foresight into what was expected so I could be the most prepared. I noticed some repetitiveness when writing our group essays (mini collaborations). After the first two I knew exactly what needed to be done to be successful in writing these essays. Throughout my semester-long journey I have improved immensely by looking for things to do better. And in doing that I have not only grown as a student but also as a person.

How Concepts in The Big Short Relate to Images of Human Landscapes in Southwest Florida.

By: Nathan Walz, Cole Kominiarek, Jayden Prashad, Lauren Bieniek, Lily Scobbo and Samantha Kim

In class, we have been reading and discussing Michael Lewis’ The Big Short and how many of our course concepts have some sort of theme throughout the book. To supplement The Big Short we also watched the documentary Inside Job narrated by Matt Damon. Both the book and documentary focus on the 2008 stock market crash and housing crisis, giving the viewer a look at what was happening behind the scenes. The Big Short pays closer attention to what led up to the crisis while Inside Job focuses on what was going on during and after the fact.  As we continued to read and talk about The Big Short, we also viewed images of human landscapes in Southwest Florida and worked to connect them to the text. The photographs were from a satellite of many different neighborhoods and landscapes that all had their own sort of structure. For example, some photos had multiple neighborhoods that were all cul-de-sacs while others had grid-style streets with houses that were close together and similar looking. This forced us to practice apophenia, which Beth described in class as the human tendency to see patterns. By observing images that all had their own sort of pattern, we were able to connect to The Big Short by thinking about the patterns that occurred throughout the crisis. More specifically, how during the time there were many powerful institutions such as rating agencies and investment banks that continuously made very risky decisions. They made decisions without thinking about who would be affected and to what degree. This cycle or pattern of poor decision making is ultimately what led up to the crisis The Big Short focuses on. 

The course concepts we find that most closely relate to The Big Short as well as the human landscape images in Southwest Florida are swapping, liquid/liquidity, trust, and moral hazard. A swap is basically described as some sort of exchange. This is closely related to liquid/liquidity which the same website defines as “the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price.” Meaning they can convert or swap an asset to something else. We also found that moral hazard and trust related to each other. Investopedia defines moral hazard as “a situation in which one party engages in risky behavior or fails to act in good faith because it knows the other party bears the economic consequences of their behavior.” This can be connected to trust because the party engaging in risky behavior trusts that the other party will deal with the consequences. They often trust themselves with their decision, which then encourages them to continue the cycle.

The images of the Human landscapes in Southwest Florida and course concepts like Swapping and Liquidity illuminate connections between The Big Short. Liquidity specifically appears in these connections through different examples. One of these examples includes all the houses in the photos having standing water between or around them. This can be interpreted literally as the definition of liquid but as well as the financial terms of liquidity. This standing water could represent the inability for investment banks to sell off their mortgage bonds they purchased that had become stagnant due to the market failures. Another example that represents liquidity is the half finished developments in the picture and its connection to the market failure or “bubble pop” in The Big Short. Developers and investment banks were both unable to liquify their assets as a result. There are many examples in The Big Short of the course concept swapping. One example being CDO’s. CDO’s are a collateralized debt obligation. In chapter 4 of The Big Short, The CDO’s are swapping their bad rated investment bonds with the few highly rated ones and sell the package off as a AAA rated bond investment. A second example of swapping in The Big Short is in chapter 2 with the multitude of banks buying and selling mortgage bonds to each other. The banks swapping these bonds cause an increase in the supply of money which relates back to liquidity. The swapping of banks buying and selling mortgage bonds also allows the banks to lend with easier terms. A third example of swapping is In the pictures in Human Landscapes in SouthWest Florida. In the pictures, you can see the homeowners normal backyards with pools being swapped to a big pond which is however out of the homeowners control.

The course concept of “trust” relates heavily to not only the Human landscapes images but also The Big Short and the documentary Inside Job. When looking at some of the Human landscape photos we noticed that there were some developments where there were one or two houses built and no more. In some developments people put a deposit down on a piece of land of a future development and they trust the developers to then build their homes. This connects really well to the big short where people trusted mortgage lenders to not screw them over with their mortgage payments. The banks did screw them over with what was called a subprime adjustable rate mortgage.A subprime mortgage is one that’s normally issued to borrowers with low credit ratings. “A prime conventional mortgage isn’t offered, because the lender views the borrower as having a greater-than-average risk of defaulting on the loan. Lending institutions often charge interest on subprime mortgages at a much higher rate than on prime mortgages to compensate for carrying more risk. These are often adjustable-rate mortgages (ARMs) as well, so the interest rate can potentially increase at specified points in time.”The Big Short also talked about how these mortgages screw people over. “Mortgage borrowers typically repaid their loans when interest rates fell and they could finance more cheaply”(7) However with the adjustable rate mortgage there was an initial two year period in which the interest rate was really low. After that two years the interest would skyrocket as debrided in the Investopedia definition of a subprime mortgage. As the quote from the Big short said most people waited for the rates to fall and with a subprime mortgage the rates went up. This basically screwed over people who intended on actually paying off their mortgage. Another example of how the course concept of “trust” relates to The Big Short and The Inside Job was what happened between the mortgage rating agencies and the banks who bought the CDOs rated by the rating agencies. In chapter four of the big short this was shown when Gene Park, an employee of AIG FP realized that they should not have trusted the rating agencies. “Confronted with the new fact—that his company was effectively long $50 billion in triple-B subprime mortgage bonds,masquerading as triple A-rated diversified piles of consumer loans.”(89) So the banks bought these triple A rated CDOs that were really trashy subprime loans. This betrayal of trust by the rating agencies was also shown in The Inside Job. Toward the end of the documentary there was a scene in which the rating agencies were testifying in front of congress about their false ratings. The heads of the rating agencies basically said that all of our ratings are opinions and not facts. However the true ratings of these loans were facts and not opinions. This really shows just how untrustworthy these agencies were. As a result of this many large banks went bankrupt and were closed. Trust was a huge reason why the whole housing crisis and stock market crash happened in the first place.

The course concept of “moral hazard” is another concept that relates heavily to the Human landscapes, The Big Short and The Inside Job. Investopedia defines moral hazard as “a situation in which one party engages in risky behavior or fails to act in good faith because it knows the other party bears the economic consequences of their behavior.” Some of the images in the Human Landscapes collection showed houses that were extremely close to the water. The reason this is a problem is because Florida gets hurricanes in which lot’s of flooding takes place. The developers that planned the housing developments out probably knew this and still kept these risky designs because they knew it wouldn’t affect them. Unfortunately for the people who bought these houses have to bear the financial burden on these risky designs if their houses are ever flooded. The people who paid for waterfront homes get screwed if there is a water related natural disaster and the developers walk away scot-free with all of the money that they made from developing all of these homes. The concept of moral hazard also came up in The Big Short. The CDO rating agencies were persuaded to put false ratings on these horrible piles of loans. They did all of this while knowing that they wouldn’t be hurt financially in any way. “Having gathered 100 ground floors from 100 different subprime mortgage buildings (100 different triple-B rated bonds), they persuaded the rating agencies that these weren’t, as they might appear, all exactly the same things.”(73) The subprime mortgage lending agencies needed to sell these bonds to make the money they wanted so they basically fooled the big banks by working with the rating agencies. So moral hazard applies to both the rating agencies and the subprime mortgage lenders  because they knew that these were risky loans but they tricked the big banks into buying them anyway knowing that they wouldn’t feel the financial pain that the big banks were going to feel. Moral hazard also related to The Inside Job. The scene discussed earlier in the trust section is the one that moral hazard relates the most to. The rating agencies testified before congress and said that their ratings were just opinions and not fact. However this was their way of avoiding the financial hurt that the big banks experienced. They knew that the CDO’s were bad, they just knew they could make money without consequence even if they were caught. Moral hazard took a big part in this crisis. If moral hazard hadn’t taken place then there’s a decent chance that the whole crisis could have been avoided.

These connections are important because they lend the crises a more relevant and genuine feel. You can witness how bankers and investors built a system that was destined to fail while still turning a profit in The Big Short. However, the images of the landscapes in Florida capture what actually transpired on the ground. It’s simple to read about financial concepts like “credit default swaps” and “subprime mortgages” without truly comprehending the implications of individuals. Photographs of deserted neighborhoods make it abundantly evident that this crisis was about more than simply money; it was about people’s lives. Ultimately, both pieces serve as a reminder that those who can least afford to pay the price are typically the ones who do so when the system is centered solely on profit and ignores long term consequences. Combined, the pictures and narratives provide a message: actual people and communities are left to pick up the pieces behind statistics regarding lost employment and foreclosed homes. 

By: Nathan Walz, Mia Hendrickson, Samantha Kim, Lauren Bieniek, Caleb Martin, Madelyn Perry

In class, we have focused on these three key terms: liquid/liquidity, swapping, and of course, expulsion. We talked about how language has multiple meanings and can be interpreted in many different ways. For example, Investopedia defines liquidity as the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price. Google, on the other hand, defines liquidity as “the availability of liquid assets to a market or company.” Interestingly, the word liquid itself also refers to “a substance that flows freely but is of constant volume, having a consistency like that of water or oil.” As for swapping, Investopedia defines swap as “a derivative contract through which two parties exchange the cash flows or liabilities from two different financial instruments.” A more general definition from google says, “an act of exchanging one thing for another.” In King Lear, these terms interact in a way that produces an outcome of expulsion from positions of power, homes, countries, and ultimately, life.

In King Lear, what marks the whole chain of events throughout the play starts at the very beginning in Act 1 Scene 1 where there is a significant swap of power. Lear, a King who is getting too old to hold power over his entire kingdom, decides he is going to divide the power between his three daughters, Goneril, Regan, and Cordelia based on how much they say they love him. This gives the first example of swapping, with King Lear swapping positions and power with his daughters. Goneril, the eldest daughter, starts off by saying to her father, “Sir, I love you more than the world can wield the matter” (1.1.60a), meaning she loves him more than words could ever describe. When it is Regan’s turn, she gives a very similar speech and it seems that the two of them may be acting in bad faith when saying their love simply because they want power over parts of the kingdom. When it gets to be Cordelia’s turn, she has a harder time overemphasizing her love for her father and says, “I love your majesty According to my bone, no more nor less”(1.1.102) She basically states that she loves the king because he is her father and not for the over exaggerated reasons Goneril and Reagan shared. In return, Cordelia gets expelled from the kingdom by Lear while the other two sisters are granted power over sections of the kingdom. Lear, having turned away his favorite daughter, Cordelia, when she did not fulfill his wish and claimed her heart could not be only for him, also cost himself his only ally. Lear utterly rejected Cordelia, disowning her from both his realm and his heart. This swap of power is the beginning of the end for King Lear.

It is impossible to trade without some sort of sacrifice. There will always be a consequence to follow as shown in the beginning of Act 3. We see time and time again that the search for power and status through liquidity and swapping only causes harm and suffering. Having been repeatedly expelled from the castle and treated worse and worse by his daughters, King Lear finds himself stranded out in a storm. Throughout scenes 1 and 2 Lear devolves more and more into a manic state, rambling and crazed. His state of mind is much like a liquid losing its form and spilling uncontrollably. He had traded his land and crown for the dream of freedom, only for it to cost him his status and power. Lear’s rapidly devolving mental state is a direct consequence of ultimately swapping his daughters for his status, “I am a Man more sinned against than sinning.” (3. 2. 62)  Lear’s belief that his daughter’s “love” was something that could be traded only led to the suffering and expulsion that follows in the rest of the story. We see this through Lear and his loss of status and family, as well as Gloucester and his relationship with his sons, and the many deaths that end the tragedy. As Edmund attempts to swap himself and his brother Edgar as Gloucester’s favored son, he only serves to tear apart their lives. Initially, his expulsion of his brother, and ultimately his father does serve to upgrade his status as he grows closer to Goneril and Regan, it ends with himself and his father dead and Edgar at the top. He sacrificed everything he had only for it to turn against him in Act 5. Lear’s choice to liquidate his land was only the catalyst, as following Edmund’s fraud and the expulsion of everyone and their status we see nothing but death and pain. In King Lear, Edmund questions the fairness of existence, Lear starting after witnessing Cordelia’s death, “Why should a dog, a horse, a rat, have life, / And thou no breath at all?” (5.3.370). His early questioning of the fairness of life and status foreshadows his terror throughout the tragedy. Similarly to Lear, his selfish pursuit cost him his status, his relationships, and his life. 

In comparing Shakespeare’s play King Lear to the 2008 Global Housing Crisis, it becomes ever more clear how Lear’s warning to Cordelia that “Nothing will come of nothing” (1.1.99) proves false in both the play and for those expelled from their homes. Despite the fact that the very definition of swap should make it abundantly clear that the transaction demands sacrifice to make a gain, there are points in which people are plainly and simply taken advantage of. That is to say, just as Lear sacrifices his kingdom to his daughters with the expectation that he will be able to effectively retire, there is the “fine print” of this transaction: his expulsion. His other expectation, that he is to be loved as much as his daughters first proclaim, also proves to be opposite in execution. Lear is left without that which is promised to him, thus illustrating how nothing can come from something. This experience is not unlike those of people who enter into loans and mortgages that are constructed for the sake of being confusing. The homeowners of 2008 that assumed they would be capable of paying their loans because the bank deemed them worthy of receiving said loan, like King Lear, learned that nothing can come from something- the nothing coming in the form of the loss of a home, and the something being a loan that homeowners thought they could pay off. Despite there being a clear chain of events which begins with the liquidation of Lear’s kingdom, progresses into multiple swaps of identity, and ends with total expulsion, compared to the Global Housing Crisis of 2008, the chain of events is much less capable of being organized. Ultimately, however, in both instances it is clear that despite the order in which they occur, liquidation and swapping result in expulsion.