The Big Short has ambitions. Based on Michael Lewis’s best-selling book of the same name, The Big Short seeks to explain the economic crisis of 2008 and make us laugh. A film with a very serious subject, it’s directed by Adam McKay, the same fellow who helmed the very silly Anchorman and Talladega Nights—a bold choice that works very well. The Big Short easily held me in rapt attention for two hours and ten minutes and made me laugh when it wasn’t making me feel like crying.
In Amsterdam in 1637, for a brief period, a single tulip bulb could set you back more than a fine townhouse in that rich city. Capitalism had given us the first asset bubble in history.
Fast-forward 370 years to the United States, 2007, for the most recent in a long line of asset bubbles: the collapse of the mortgage-backed securities market, which almost brought down the world’s entire financial system–supposedly, ATMs in the UK were a few hours shy of ceasing to function. Just like all other asset bubbles, the financial crisis was fueled by greed, supported by debt, facilitated by fraud, and enabled by the willful suspension of logic and reason.
The film’s title refers to the practice of “shorting” a financial instrument; that is, betting that a stock or bond will fall in price. What’s shorted here are mortgaged-backed bonds, and the story is told through three groups who, against conventional wisdom, made a killing by shorting the housing market (they were generally thought to be nuts for doing so).
First we meet Dr. Michael Burry (Christian Bale), a poorly socialized mathematical genius who runs his own investment firm. He wears shorts and t-shirts and goes barefoot in the office while playing drums and listening to death metal and avoiding direct eye contact.
Next in the cast of characters is Mark Baum (Steve Carell, who, even amidst the stellar cast, steals the show and deserves an Oscar). He’s a righteous crusading moralist in the amoral world of Wall Street. As a child, he was an avid Talmudic student, but a rabbi tells his mother that her son is looking for inconsistencies in God’s word. As an adult, he can barely contain his rage at the banks, including the one he works for; once he stumbles upon the truth of the situation, he eagerly sets out to profit from the banks’ stupidity.
Finally, we meet a couple of young earnest nice guys, Jamie Shipley (Finn Witrock) and Charlie Geller (John Magaro), whose $30 million “garage band” hedge fund is a mere $1,470,000,000 short of what Morgan Stanley requires for an ISDA. An ISDA, a/k/a a “hunting license,” is what Shipley and Geller need to sit at the big kids table. When a Morgan Stanley underling blithely tells them to come back when they’ve grown up, they call upon their old friend Ben Rickert (Brad Pitt), a retired trader of legendary prowess who now spends his time warning his friends to head for the hills and collect heirloom seeds. Rickert gets them their hunting license.
Via a wrong-number phone call received by Baum enters Jared Vennett (Ryan Gosling), an oily, seductively cynical bond salesman who has stumbled onto a dirty little secret–the housing market is a gigantic bubble. No one likes him; no one trusts him, but he’s the one who’s figured out how to profit from the bubble bursting. When Baum demands to know how the whole banking scam works, Vennett explains:
Vennett: It’s fueled by stupidity.
Baum: But that’s not stupidity. That’s fraud.
Vennett: Tell me the difference between stupid and illegal and I’ll have my wife’s brother arrested.
We’re soon in the thick of the insanity. We go from well-appointed Manhattan office suites to fights over taxis on Park Avenue to South Florida sleaze, naïveté, and desolation. We meet the stripper with five condos. We run from the alligator in the swimming pool of a foreclosed house. The fourth wall is continuously broken by celebrity cameos (Margot Robbie in a bubble bath explaining what “subprime” really means; Anthony Bourdain turning rotten fish into a fish-stew special; Selena Gomez at the black jack table explaining derivatives). They cut through the technical financial jargon to reveal the bullshit.
All of this started out innocently enough. In 1977, Louis Ranieri invented the market for mortgage-backed securities. Ranieri (and Salomon Brothers) took solid, boring, reliable individual home mortgages and combined thousands of them into big sexy bonds that investment banks could sell to institutional investors. This was supposed to be an extremely safe investment—as one character asks, “Who doesn’t pay their mortgage?” Safe as houses.
Twenty-five years later, the solid mortgages of 1977 had morphed into loans on overvalued houses written to people (and in some cases, pets) the sleazy mortgage brokers (former bartenders) laughingly refer to as “NINJAS” (no income, no job, no assets). These “subprime” mortgages (i.e., “utter shit”) were then bundled with a few good loans and sold as a package, still supposedly rock solid. The rating agencies, blinded by self-interest, gave them their highest rating, AAA.
Alan Greenspan said there was no problem. How could he be wrong? And, when it all finally blew up, guess who paid for it? The banks gobbled up the life savings of people who worked for a living. Wall Street made money hand over fist, with no thought of tomorrow, while millions lost their homes and their jobs and even their lives (as Rickert reminds us, “For every 1% rise in the unemployment rate, 40,000 people die.”)
I witnessed a few examples of these shenanigans from the bottom up. In 1999, I worked as a temp proofreader for Global Financial Press (long since bankrupt). I marveled at a colleague, another temp, who had purchased a house in Jersey City without having a full-time job. The bank didn’t check his credit or income. He told me I could do it, too. At the time, I had other priorities.
The Big Short, directed by Adam McKay. Written by Adam McKay and Charles Randolph. With Christian Bale, Steve Carrell, Ryan Gosling and Brad Pitt. Paramount Pictures.
Reviewed by Franklin Mount.