Sorry Star Wars, but the best movie out this Christmas is The Big Short, where all the knuckle-biting action is a bunch of Wall Street stuff you can’t understand.
Doesn’t matter! Adam McKay’s biting, infuriating comedy, adapted from Michael Lewis’ eponymous book, takes on the 2008 mortgage crisis, and finds entertainment gold tracking the real-life “underdogs” who saw the collapse coming and made a fortune betting that the economy would tank.
Yes, it’s awkward, because you’ll be cheering on these guys, too. For one, they’re portrayed by such marquee faves as Ryan Gosling, Christian Bale, Steve Carell and Brad Pitt, and the film taps generic expectations about rebels who succeed. Two, as squicky as these guys are, they’re right — and they’re motivated to take down even worse Wall Streeters.
The Big Short is funny as hell — you’ll laugh through your tears of rage as you recall the epic mess Wall Street bankers made, and how you, me and everybody else paid for it. (We’re not totally blameless: McKay periodically includes MTV-style montages of all the brainless pop culture that was otherwise consuming our attention at the time.) The film also finds a couple of quieter, emotional moments, such as a trip to Florida to see “dream homes,” and Carell’s character’s growing realization of how epically rotten the system is.
The Big Short helpfully illuminates tricky financial stuff in amusing ways: Jenga helps make sense of how quickly an interconnected market can collapse, and celebrities make cameos to explain a particular instrument. Chef Anthony Bourdain stops by to explain how a CDO — collateralized debt obligation — is akin to a stew that restaurants make with leftover fish: “It’s not old fish. It’s a whole new thing.”
Or learn from one of the film’s financial whizzes: “Mortgages are dog shit. CDOs are dog shit wrapped in cat shit.”
This article appears in Dec 23-29, 2015.
One of the year’s most important films. Tragic docu-comedy in the manner of “Wolf of Wall Street.” I reviewed it here: http://bit.ly/1RWheKa Highly recommended.
Michael Lewis’s retelling of the history of the subprime residential mortgage bubble and bust of 2008 was a good read.
But as a helpful guide to understanding the powerful political forces that fueled the animal spirits of all those realtors, mortgage lenders, investment bankers and bond traders “The Big Short” comes up very short, indeed.
Viewers can enjoy the story of a small group of odd-ball traders who decided the bubble was going to burst and battled their way to success. The screenwriters even managed to make “credit default swaps” comprehensible for the attentive viewer.
However, the explanation in both book and movie for why the bubble grew to such gargantuan proportions is essentially superficial and sophomoric: greedy bankers, traders, realtors and credit rating agencies.
There are no references to the recurring historical pattern of manias, panics and crashes so well described by Charles Kindleberger in his book with that title, nor to the insights that Hyman Minsky developed regarding the forces that create financial instability and crises.
In his book, Lewis goes so far as to write that, “The problem was the system of incentives that channeled greed.” But nowhere does he discuss incentives except with respect to “outrageous bonuses” and the transformation of the investment banks from partnerships to public (shareholder) firms, which vastly increased their appetite for risky trading.
There is not a word in the movie or book about pressure from “affordable housing” advocates and the obedient politicians of both parties in Washington to make lending institutions grant subprime mortgages. The chief instruments were the federal government’s Community Reinvestment Act (CRA), which coerced lending institutions into making subprime loans, and the lowering of standards by the two government-sponsored mortgage companies, Fanny Mae and Freddie Mac, as well as the Federal Housing Agency.
The chief front man for affordable housing promoters was Congressman Barney Frank, Chairman of the House Financial Services Committee. In neither the book nor the movie does Barney Frank exist. He played a leading role in pressuring the government housing agencies to lower their lending standards and bad-mouthing those who warned of possibly dire consequences, as Gretchen Morgenson and Josuha Rosner detail in their book, “Reckless Endangerment.”
It is notable that Frank has confessed to being a part of the problem. In an interview in 2010, he stated “it was a great mistake to push lower-income people into housing they couldn’t afford and couldn’t really handle once they had it.”
Of course, there were lots of other players, mentioned above, who threw wood on the fire once it was lit, and who helped to make this particular boom/bust cycle an unusually severe one.
Perhaps the best study of the forces which lead to all major financial crises can be found in “Fragile By Design” by Charles Caloramis and Stephen Haber. Their bottom line is that “Banking systems and financial crises . . . are produced by political bargains that shape the institutional structure, incentives and regulatory framework within which banks operate.”
As Caloramis and Haber show, the bargain which played the leading role in the great bust of 2008 was straightforward: banks that wished to take advantage of the 1994 law allowing interstate banking needed to buy off affordable housing advocates who could block the banks’ expansion plans by charging them with failure to comply with the de facto lending quotas that grew out of the 1977 Community Reinvestment Act.
Trashing tough-talking bankers, bond traders, credit rating agency managers and realtors for responding to the incentives put in place by politicians and regulators may earn “The Big Short” more than one Academy Award. But as a thoughtful story of why the subprime bubble bloomed and burst, this movie deserves a D minus.