D Gary Grady

The Big Short begins with an on-screen quotation: “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Perhaps appropriately for a film largely about mistakes and fraud, it falsely attributes the line to Mark Twain.

As with Spotlight, this film dramatizes real events, with an excellent cast, many of whom based their performances on the real people they’re portraying (though the character names are changed). It also breaks the fourth wall like Deadpool, not to mention matching it in foul language.

It’s frequently very funny as well, despite the fact that the subject matter is the development of the financial crisis that peaked in 2008 and brought about the Great Recession that would almost certainly have led to an economic collapse worse than the Great Depression had not the Federal Reserve and the Bush and Obama administrations not intervened as forcefully as they did.

The detonator was something called a mortgage backed security (MBS), a type of bond that let investors buy part of a pool of home mortgages. Since people tend to pay their mortgages because they don’t want to lose their homes, and even when they don’t lenders presumably can foreclose and sell the house to recover the principal, mortgage lending is considered a pretty safe investment. A collection of mortgages ought to be even safer, since any individual bad mortgage would be a tiny fraction of the whole pool. There’s nothing at all wrong with this in itself.

But as mortgage backed securities grew more popular with investors, the Wall Street firms issuing them ran short of quality mortgages needed to construct the pools and started buying up any and all mortgages they could find.

This meant that lenders could make a quick profit by selling mortgages to Wall Street as fast as they could make the loans, as opposed to waiting years for the borrowers to repay them. In fact, since they were making money up front, it made no difference to the lenders whether the loans got repaid at all. To meet the demand they cheerfully lent to subprime borrowers, people with bad credit and low income, and to attract them the lenders structured mortgages with tiny teaser interest rates in effect for the first year or so, making for very low payments almost anybody could afford. They often didn’t bother to explain to borrowers that before too long they would suddenly owe monthly payments three or four times as big. The Wall Street firms buying and packaging the mortgages into MBSes overlooked their low quality as well, and they effectively bribed the rating agencies to lie about their safety. They also embraced obscure terminology to make things harder for investors to understand.

That presented a problem for the filmmakers. How do you explain the necessary details to the audience without making their eyes glaze over? I liked the way they solved this problem. When it becomes necessary to demystify what a subprime MBS is, the narrator announces, “Here’s Margot Robbie in a bubble bath to explain.” Cut to just that.

A handful of people realized that a crisis was in the making, and they’re the protagonists of the movie but not its heroes. They were mainly just looking to make a lot of money by betting against (“shorting”) the investments other people thought were safe. Only a couple of them think about the fact that a lot of innocent people are going to be hurt. If there’s a hero, it’s the character played by Steve Carell, who stands out even in this fine cast. He’s a morose, angry man made that way by personal tragedies and by his conscience and feelings of guilt. When he grasps the full scope of the problem he tries to make more people aware of what’s going on, and at a couple of points he speaks his mind loudly and publicly, and (as other characters turn to camera to tell us) he actually did that in real life.

Near the end Carell says, “I have a feeling in a few years people are going to be doing what they always do when the economy tanks. They will be blaming immigrants and poor people.” He’s right.

Right-wind media in particular tried to blame it on borrowers for taking out loans they couldn’t repay, overlooking the fact that they were routinely misled by the lenders. With even less justification, others tried to blame an anti-redlining regulation requiring commercial banks to make loans in minority neighborhoods, even though that regulation had been in effect for decades without problems and explicitly prohibited the risky lending practices in question. Moreover, the regulation applied only to commercial banks, and the subprime mortgage problem was markedly worse among other types of mortgage lenders who were not subject to the regulation and were less regulated in general.

This is an excellent film I highly recommend.

by