this post was submitted on 13 Jul 2023
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[–] konodas@feddit.de 0 points 1 year ago

He did not claim that shorting caused the 08 crash, or am i missing something?

According to "the big short", the reason was that banks gave loans to people who could not really afford them in case of an unexpected drop in the housingmarket (mortage backed, as you say), bundled the loans into packages, went to rating agencies who gave best ratings for the packages, sold them to other institutions and then shorted them when they noticed that the market unexpectedly dropped, knowing people would not be able to pay back the loans in the packages. Which was completely reasonable, just somewhat unethical.

So, i think you could say it was an error of the rating agencies, as they underestimated the risk of a drop in the housing market when giving out the rating.