Eat my shorts
- Scott R. Garceau (The Philippine Star) - January 19, 2016 - 9:00am

It’s no easy feat to make credit default swaps and collateralized debt obligations not only understandable to the average moviegoer, but somehow exciting. So how does Adam McKay, director of The Big Short, do this? Well, one method is having sexy Australian actress Margot Robbie explain such investment schemes while submerged in a bubble bath, sipping champagne (which she does).

Another way is to bring in a riveting cast who show us how a handful of people managed to spot the biggest financial meltdown in US history. (To date, that is.) When the subprime housing loan market collapsed under its own debt and greed in 2008, it resulted in eight million people losing their jobs, and six million losing their homes. The Big Short explains how a series of under-the-radar bets against risky investments fed this collapse, and brings in Oscar-worthy turns by Steve Carell and Christian Bale, along with Brad Pitt and Ryan Gosling and others. Yep, it’s a guy-heavy movie, because it was mostly guys in suits responsible for selling the US economy down the river in one of the biggest cases of outright greed and “me first” plunder in history.

Not only Robbie but foodie Anthony Bourdain and Selena Gomez are presented to break the fourth wall, speaking directly to the camera to explain tricky financial moves that, let’s face it, need to be understood by a whole lot more people lest they be suckered once again.

The movie has an adrenalized, from-the-hip quality, similar in ways to Martin Scorsese’s The Wolf of Wall Street. So much so that you begin to care about these very flawed, very crazy characters from the opening moments. But you’d be hard-pressed to find a hero here, sifting through the financial debacle. The investment managers who bet against the banks, the banks that willingly pooled bad loans and mortgages, the overseers who either missed the coming tsunami or decided to ignore it — they make no apologies or try to disguise their motivations. They all just wanted to get rich.

Let’s start with Michael Burry (played by Bale), an eccentric hedge fund genius with one glass eye. Burry, an ex-neurologist, sits barefoot in his office, cranking out Metallica at top volume and analyzing the housing market of 2005. He comes to one inescapable conclusion that very few recognized: the rising housing market was a fast-growing bubble, and it was going to burst, big-time. So he decided to bet against it. Through an instrument called a credit default swap (CDS), one could effectively take out insurance against someone else’s investment. That way you get paid even if the investment fails — a strategy known as “The Big Short.”

The only problem was, at the time, credit default swaps didn’t exist for home mortgages, which were typically bundled by the thousands, their value in the many millions, their financial soundness consecrated by credit rating agencies like Moody’s, Fitch and Standard & Poor’s. So Burry decided to have the banks create such an instrument for housing loans: he agreed to pay the high insurance premiums for as long as the mortgages stayed sound. Which he did, convinced that it would all topple, and the banks would eventually have to make huge insurance payouts to him. (Which they did.)

This insight also comes to one Jared Vennett (Gosling), a Wall Street trader who starts peddling the credit default scenario to other investment firms, like the one run by Mark Baum (Carell), a man so inherently worked up, he’s chastised by his rabbi as a boy for “looking for inconsistencies” in the word of God in his Talmudic readings. Baum buys into Vennett’s analysis of the wobbly housing market (a Jenga model helps us visualize what will happen when enough B-rated loans collapse, taking the upper As, AAs and AAAs down with them). Baum, whose moral compass is strong, sees no ethical problem with screwing over banks that aren’t taking the time to analyze their own loans.

Meanwhile, another pair of eager young investors, Charlie Geller (John Magaro) and Jamie Shipley (Finn Wittrock), are looking for a way to leverage their $30 million investment nest egg into $1.5 billion. They, too, bet big on the Big Short, with the financial help of gray-haired, inscrutable retired banker Ben Rickert (Pitt). In Las Vegas, Rickert guides them to a national convention of securities bankers — to see just how stupid and greedy the people holding the loans are.

There we learn that banks across the nation were immersed in the same chicanery and flimflammery — writing subprime loans to thousands of ordinary people who had no conceivable resources to pay off those mortgages, pocketing fat commissions, then repackaging those bad loans and selling them off again, all the while ignoring the warning bells and praying that they could get out before the whole crapstorm blew. Not only banks but the crediting agencies, the US Federal Reserve under Alan Greenspan and the Securities and Exchange Commission apparently turned a blind eye to the bad loans: they didn’t want the bubble to burst either.

The Big Short manages to take Michael Lewis’ deeply technical (but still fascinating) account of the market collapse of 2008 and make it furious cinematic fun. But unlike the sober 2010 documentary Inside Job, there are no heroes to root for. Inside Job at least gave its filmmakers, personified by Matt Damon’s voiceover narration, a “heroic” role in that they were exposing the evils of Wall Street greed and complicity. The Wolf of Wall Street even had us siding with Leo DiCaprio’s crooked penny-stock investor Jordan Belfort since, after all, he was just a talented young American guy trying to get ahead in life.

You won’t find any heroes among Baum, Burry and Pickert — only a quiet sense of redemption, when they realize just how damaging being right can be.

By the end of The Big Short, you’re left astonished by the sheer ethical indifference of those who handle other people’s money. But at the same time, you somehow can’t help rooting for Burry — a little bit — for pulling it off.

 

 

 

 

ACIRC ALAN GREENSPAN AND THE SECURITIES AND EXCHANGE COMMISSION BAUM BEN RICKERT BIG BIG SHORT INSIDE JOB LOANS QUOT WALL STREET WOLF OF WALL STREET
Philstar
  • Latest
Latest
Are you sure you want to log out?
X
Login

Philstar.com is one of the most vibrant, opinionated, discerning communities of readers on cyberspace. With your meaningful insights, help shape the stories that can shape the country. Sign up now!

FORGOT PASSWORD?
SIGN IN
or sign in with