Every American should see “The Big Short.” There’s nothing like superb direction and an all-star cast to help the medicine go down. The film explains through storytelling what actually happened back in 2008 — and why the worst is yet to come.
Christian Bale plays Michael Burry, M.D., an autistic math whiz with a glass eye, and one of a handful of smart guys in the high-flying financial sector (and the book by Michael Lewis) who bet against the housing sector — in a maneuver called “shorting” the market — before it collapsed.
Burry’s wife, whom we never meet in the flesh (wives are curiously absent even when we do meet them), married him because he told her upfront about the glass eye and that he had a mountain of medical-school debt. He failed to mention that in addition to being broke but honest he was obsessive and crude — like when he kept fiddling with the fake eyeball as his colleagues tried to focus on the wisdom he was imparting instead of bolting for the bathroom.
The off-camera narrator, played by Ryan Gosling, is a pretty-boy banker with a heart of ice. A wheeler-dealer by the name of Greg Lippmann in real life, Jared Vennet’s cynicism never wavers. His decision to short the market is fueled by high-octane greed.
Steve Carell plays fund manager Mark Baum, who blames Wall Street for his brother’s suicide. Rounding out the gang of contrarians is the character played by Brad Pitt, a trader who took his Wall Street winnings home to Colorado to grow organic seeds, on the theory that the world was coming to an end thanks to Wall Street shenanigans, so he might as well be prepared. Alas, he’s unable to resist a pair of salivating spaniels in sweatpants who run a tiny hedge fund out of a family garage and are willing to do the heavy lifting if he’ll help them fund their short.
You wouldn’t know from seeing the Hollywood version that there were bigger players shorting the market than these small fry. But while Americans love the underdog and Hollywood knows it, there are no heroes in “The Big Short,” only varying degrees of venality. A Wall Street Journal reporter represents media cowardice (he gets the math but doesn’t want to lose his job), even though heroes did exist: notably Minnesota native Gretchen Morgenson of the New York Times.
Director Adam McKay doesn’t allow such minor details to weaken the larger point, which is that comparing banking in the 1960s and ’70s to banking in the ’80s onward is like comparing a pony ride to the Indy 500. He offers his audience a front-row seat as the race turned ugly.
In a way, the film is a 21st-century take on “All the President’s Men.” It reminds us how times have changed. We all knew back then who the bad guys were, from Nixon on down. In “The Big Short” the baddest guys are behind the scenes. No CEO is mentioned by name.
We meet instead the ineffectual black, female Morgan Stanley executive trying to rein in Baum (he, by the way, like the Jared Vennet character, asked not to be identified by his real name, which is Steve Eisman). We have the Chinese quant, the hotshot East Indian trader at Goldman Sachs, the sly Japanese corporate Gila monster, the dumb-blond stripper, the clueless country-club WASP. Lewis Ranieri, a boastful Italian who created the debt instrument that started it all — the mortgage-backed security — and who infamously declared mortgages a myth, made his first million working for Salomon Brothers.
While “The Big Short” avoids sanctimony, it also avoids muddying the waters. It’s refreshing not to hear about how left-wing social engineers overpromoted homeownership. (Yes, Fannie Mae lost its moral compass, but that was only after its choice was either to swim with the sharks or be eaten. Eighty percent of the subprime loans were made and traded by the private sector.) It’s refreshing not to hear how lowlife American home buyers willfully suspended disbelief when loans were dangled in front of them that required no down payment, credit score or even gainful employment.
The bankers knew, of course, that no sooner was the ink dry on the documents, the mortgages would be bundled and traded as securities. The big banks rigged it so the only people who, at the end of the day, had “skin in the game” were those same schmucks who lost their homes and then their jobs and now had to pick up the tab for the whole spending spree. When the tower of blocks built on a foundation of silly putty collapsed (this actually happens in the film, with Jenga blocks), it fell on top of people who had made their mortgage payments on time or, as is demonstrated in a touching scene involving a poor Hispanic family in Miami, paid their rent on time to newly rich (on paper) landlords owning several houses they’d bought for nothing because housing values never go down.
The film shows how the financial industry got away from everybody — the regulators and the real estate agents and the mortgage bankers and the big banks and the Fed and the U.S. Treasury Department and (this is not hard to imagine) President George W. Bush. Not even Hank Paulson, the Harvard-educated genius who ran Treasury under Bush at the time the tower of blocks collapsed and was one of its chief architects when he ran Goldman Sachs, knew what was going on. It was just too big to get your head around, he would later explain.
That’s what happens when the unholy trifecta — greed, fraud and stupidity — takes over and the regulations that keep the big three in check are rendered impotent.
Probably the most memorable example is the case of President Bill Clinton’s Commodities Futures Trading Commission director. (This was not in the film.) Brooksley Born emphatically opposed the use of derivatives in the mortgage market. She was first ignored, then mocked, then finally forced out of her job by none other than that human trifecta whose legacy is the deregulation that took place during the Clinton administration — former Harvard University President Larry Summers, then-Federal Reserve Chairman Alan Greenspan and Clinton’s Treasury Secretary Robert Rubin.
Smarts and stupidity can coexist in one brain. Any one brain, regardless of gender or ethnicity. Arrogance is the sticky substance that binds them together. From “housing prices will never go down” to “I graduated from Harvard, so I am never wrong” isn’t such a leap when there’s money on the table. And we’re talking trillions.
The best thing about “The Big Short” is the ending, of which there are two. First comes a harrowing scene of handcuffed suits being shoved into police cars. That’s what should have happened, the narrator tells us. Then the film shows us what actually did. Knowing that ordinary Americans still didn’t get why they’d been screwed, Wall Street and the Obama administration collaborated in a giant coverup orchestrated by none other than the allegedly liberal Summers, by then director of the National Economic Council under President Obama. There were no criminal trials, no convictions. Everyone got off scot-free. Except the victims.
As for the rich, the Bush-era tax cuts were in force and there were loopholes aplenty, many involving offshore havens that eventually lured homegrown multinational corporations like our own Medtronic overseas so as to avoid “onerous” U.S. taxes. What did Wall Street do with all this loot? The stock market recovered its (paper) value in less than a year. The bull-ward trend is only now just beginning to wobble on the thermal of hot air it is resting on.
Meanwhile, the Fed frets over how the economy will react to an interest rate hike of one-quarter percent. The central bankers are right to worry. With fundamentals this shaky, just about anything can trigger a meltdown. Will it be a steep rise (or fall) in oil prices? Another terror strike? A tsunami off the Southern California coast? Or how about plain old civil unrest?
“The Big Short” explains how lie after cleverly concocted lie enabled clueless Americans to create their own kind of alchemy, weaving fear into hate, pitting immigrants against the working poor, and Muslims against Christians.
Director McKay said in an interview that he surprised himself by making such a serious movie. But he’d tried satire — and that 2012 film about the mortgage crisis left audiences and critics alike scratching their heads. They didn’t get the jokes. This time he would make sure they did.
Information can be transformative. I can’t wait to see what McKay comes up with next. Let’s just hope it’s not a horror film.
Bonnie Blodgett is a writer in St. Paul. Reach her at firstname.lastname@example.org.