House of Cards Analysis

House of Cards David Faber, 2012) is a documentary that depicts the origin, process and results of an economic crisis that was initiated by the lenders targeting real estate and exploiting the housing shortage while taking advantage of the lowered interest rates by the Federal Reserve. The documentary highlights how the program which at the advent seemed wise and the best solution to the housing shortage and needs of the Americans, turned out to be a tale of deception and greed by the main money industry players like the banks to a magnitude that was unprecedented in the history of America.

The documentary uses a balanced approach to portray how the unsustainable trend in the supply of mortgage and the rising interest rates led to the vast foreclosures as never seen before within U.S.. The correspondent of the documentary gathered information from personal stories narrated by key participants, home buyers, investment bankers, mortgage brokers and investors. This documentary concentrates on a financial house of cards which was slowly built after September 11 attacks (Dauble, 2009). It can be summed up as a case where the U.S. government was trying to bring a revival to the economy post 9/11 through dropping the interest rates, an act that saw many families embracing this opportunity in order to refinance their mortgages, unfortunately the mortgage lenders exploited this gesture, swept everyone into the mortgage, taking even those who never qualified for credit by watering down the standards. However this was not very successful as presumed it would be but rather it became one of the most controversial issues with time.

As indicated, the crisis seemed as if it was glaringly preordained and it casts the mortgage lenders as being the greediest salesmen of the 21st century. This is because they had agreed to extend mortgage loans to the people who had bad credit ratings going below 500 points, they asked for no documents and went ahead filing forms that listed the incomes of the potential customers as being three or even four times what they earned in reality, hence ending up into the toxic loans. In the documentary, it is stated that the Federal Reserve chairman had a significant size of the blame for the collapse of the housing scheme financing due to persistently reducing the prime rates.

There are various issues seen to be emerging from the documentary that can be looked at from a business point-of-view. The house of cards documentary can be analyzed looking at strategy. The strategy used in the program was not economically viable and sustainable leading to the surge in the homes. The Federal Reserve chairman had encouraged the mortgage industry to come up with different types of loans in order to enable more people purchase homes. He went ahead to say that new mortgage arrangement would really be beneficial for American consumers if the lenders would offer a wider range of mortgage alternatives as opposed to the fixed -- rate mortgages which were in existence. This was very amusing to bankers since their business was to pool mortgages for investors to purchase and in turn would remit monthly payments generated by the mortgages. This means that the more mortgages lenders would have to offer for homebuyers, the more the bankers would sell. Unfortunately this was a very poor strategy for mortgage lenders. This is because this program was very inappropriate for the majority of those who took it (Richmond, 2009). Encouraging more mortgages with a view of encouraging spending and money circulation, unfortunately never came with check and balances hence the market ran unregulated. Standards for getting mortgages were set aside, the rating criteria by the rating companies were highly compromised with the view of having repeat clients and the banks were more willing to give out money in form of mortgages.