The Big Short-age of Warning
by Daniel Delaney and Clif Luber
Over the past eight years the American artistic canon of books, articles, movies, and documentaries have frequently attempted to explain the complex eccentricities of the 2008 Financial Crisis. However, none have come to capture the story quite as well as the newest addition to this burgeoning field — Adam McKay’s recent film, The Big Short. This masterfully woven rendition of Michael Lewis’ bookpits comedy against tragedy as it explains financial complexities with relative ease and humor, and leaves the viewer thinking, “How the f*** did nobody see this coming??” and, “I’ve never hated Goldman Sachs more in my life,” and, “Wow, what the f***, those son of a b**** mother f*****s!!!!”
If you saw the film and left the theater feeling this way — we both did — then you’ve experienced the true genius of the film: it successfully, and intimately, conveys the collective conscious of the American people in the days and months following the crash. It imbues within you the feelings of suffering Americans who were all asking, how could this have happened? Is there any hope for recovering my retirement? Where am I supposed to live?
Who do I blame?
No matter what angle a film, newspaper article, documentary, or book takes on the crash, they all attempt to answer: whom do we blame?
Most commentary tends to blame the banks — highlighting the sheer fraud and Midas-offending greed — and on this particular point, The Big Short does not differ. The film ends with an epilogue that tells you what happened to the characters, how many people lost their jobs and homes, how nobody went to jail and how the banks got away with murder.
They’re not wrong. The banks did get greedy, and yes they hid billions of dollars in worthless securities because it was just too lucrative not to. Did they see it coming? Yes — in a phone conversation with Goldman Sachs, Dr. Michael Berry (Christian Bale) essentially says, “You didn’t call me back because you were busy covering your ass, but now that you’re sure you won’t be insolvent, you’re ready to do business.” And the Goldman guy on the other line responds, “I don’t know what you want me to say.”
The question really shouldn’t be, did the banks see it coming? They did. It shouldn’t be how did nobody see this coming? Many did — in a recent New York Times article, Neil Irwin points out that in 2005 alone, there were 1,628 articles in major world publications that used the term “housing bubble.”
The question should be, who saw it far enough ahead to do something about it?
Answering this question could be a thesis or dissertation. Did the banks see it in time? Possibly, but it’s also possible they were too late. Did the scholars see it in time? They saw pieces of it, but not enough to explain it all. The only thing we can be sure of is that many of the people who may have seen it in time are all discussed in this film. So within the confines of this article, we want to ask you: when you assigned blame for the crisis at the end of the film, did you give it all to the banks? Or did you pass some of it on to the characters?
In the same aforementioned New York Times article, Irwin wrote, “What the characters portrayed in “The Big Short” figured out that people writing housing bubble stories didn’t was how the rot from bad mortgage loans that helped fuel the housing bubble had come to permeate supposedly safe securities. There were billions of dollars of highly rated bonds floating around that were in fact worthless, or at least worth far less than advertised.”
When you realize the above, The Big Short takes on a whole new undercurrent of questions surrounding morality and ethics. What role do these characters play in the crash itself? Do they deserve some of the blame? How did their actions negatively or positively affect the crisis?
The film is not oblivious to the moral and ethical conflict between making millions of dollars and screwing over the American people. McKay sets it up beautifully. The first half of the film is the comedy, where he spends most of his time creating characters that are interesting and charismatic. Pretty soon you’re rooting for them to “stick it to the man”. It doesn’t matter that you already know they’re going to be bleeding money by the end of the movie; you salivate over every step towards the $1 billion payday.
But very subtly, McKay prods you and says, “I know you love these guys, but think about what’s happening.” One of the earliest moments comes when two partners from Mark Baum’s (Steve Carell) hedge fund realize a guy’s landlord owns the home under his dog’s name. “You should talk to your landlord,” they say, and then walk away. A short while later, Baum and his team visit a ratings agency to try and understand why so many worthless bonds were AAA rated. When the agent asks them if perhaps it’s in their best interest to see the bonds fail, Baum replies, “It doesn’t make me wrong,” to which she replies, “No, it just makes you a hypocrite.” Finally, in a moment that signals the film’s transition from comedy to tragedy, Ben Rickert (Brad Pitt) turns to a gleeful Jamie Shipley (Finn Wittrock) and Charlie Geller (John Magaro) and says, “You realize that if you guys succeed, millions of people will lose homes, jobs, savings, pensions. Don’t dance.”
By the end of the movie, you may or may not feel as though the characters deserve a share of the blame, too. You might think why didn’t the characters say something earlier? Why didn’t Mark Baum, who was, from the opening minutes of the film, deeply conflicted about the rampant greed coursing through the veins of Wall Street banks, step up and blow the whistle? How could they justify making so much money from such a catastrophe?
While it’s largely omitted from the movie, the truth is that they tried pretty effing hard to blow the whistle. It’s actually kind of shocking that nobody paid attention. In 2010, Michael Lewis, author of the original book, The Big Short, spoke with NPR about how loud the characters were. Shipley and Geller (Jamie Mai and Charlie Ledley in real life) tried to get the SEC to investigate the ratings agencies, and the SEC told them to shove it. Michael Berry wrote a number of highly persuasive letters that were widely circulated in the investment community about the madness of subprime mortgage lending well before he started shorting subprime mortgage bonds. Nobody noticed. And Mark Baum (Steve Eisman in real life) ran around Wall Street being rude to as many people as possible who were involved in the business, telling them that they were going to blow up their firms with what they were doing. People gave him the finger.
Of course, on the other hand, their chivalry didn’t stop them from making the bets. Once they figured out what was happening, it was so easy for them to make millions that they couldn’t pass it up. I repeat, “It just makes you a hypocrite.” McKay even goes as far as to suggest that betting against the banks was their way of saying, “F*** you.”
It’s hard to blame these guys, and really, you don’t even want to. They went to great lengths to make people aware of what was happening. But it’s worth considering the moral implications of making so much money off of the system’s failure.
In that same 2010 NPR interview, Michael Lewis noted that the characters do in fact deserve some of the blame. When people bought their credit default swaps, they bought insurance on the subprime mortgage bonds. In doing so, they effectively replicated the bonds that were being insured, thereby doubling the risk in the system. It’s as if they created a whole new pool of subprime mortgage loans simply by buying the credit default swap. The problem is that none of this was recorded on the banks’ balance sheet. As a result, the combination of adding to the bad debts in the system and doing it in a way that was unaccounted for greatly increased the problems when they finally came to the surface in 2008. When the banks were bailed out, a portion of that bailout money went their way.
You can’t help but love the characters. They’re the tragic heroes, the too-smart-for-school nerds that jocks like Goldman and Bear shoved into the lockers. And then, they got the last laugh and everything was right in the world. In the grand scheme of things, they were easily the angels of the bunch.
But if you watch the movie again, check to see if you still love them as much at the end.