“The Big Short”: Mortgages Most Foul

The Big Short!

“Hi, yes, I don’t have a question. I’d just like to point out for the record that no one has ever produced a single shred of evidence linking paper companies to the 2008 recession. So SUCK IT, BANKS.”

The first time I saw the name Adam McKay, he was a writer on Saturday Night Live who occasionally appeared in short films that helped kill time during the show’s after-12:30 wasteland. Those never did much for me, but he moved on to helming Will Ferrell comedies that attracted much larger audiences, of which I’ve not been a part. Fourteen years after his SNL stint, he’s now co-written a Marvel super-hero movie (last summer’s not-bad Ant-Man) and directed a Best Picture nominee in The Big Short, which ought to be mandatory viewing as an ethics cautionary tale in all future finance classes ever.

As Hollywood careers go, that escalated nicely.

(Expanded disclaimer for added emphasis: my day job involves things containing money. All opinions and interpretations expressed herein are either me summarizing the filmmakers’ viewpoints or inserting occasional commentary that’s entirely mine alone.)

Short version for the unfamiliar: Based on Michael Lewis’s 2010 nonfiction book The Big Short: Inside the Doomsday Machine (love that title), the movie picks up three years before the recession, when mortgage companies were all but giving away subprime loans like they were free stickers to anyone who wanted a house and could hold a pen. While countless Americans racked up debts they didn’t know could destroy them, banks and mortgage companies used the income from those debtors as the basis for high-end investment vehicles called collateralized debt obligations that would earn big money as long as the really crappy mortgages backing them stayed relatively stable. When millions of homeowners collectively realized their checkbooks couldn’t keep up with skyrocketing variable-rate interest and whatever other fine-print fees came to mind, it was only a matter of time before the mortgage companies and anyone with a large vested interest in CDOs was about to have a really bad decade.

One guy saw it coming: hedge fund investor Michael Burry, played by Christian Bale as a socially deficient genius who locked himself in his office and listed to Metallica and Mastodon while predicting the end of the American economy. Using his hedge fund’s assets as his war chest, Burry talked Goldman Sachs and other firms into selling him millions of dollars’ worth of credit default swaps, an obscure product that basically lets the buyer bet against other loan-backed vehicles such as, say, CDOs. If everyone’s loan payments stay on schedule, the buyer keeps paying premiums till he goes broke. If the loans default, the buyer gets paid. If millions of loans default, the buyer finds himself swimming in enough money to buy the moon. Real shame about what’s gonna happen to the company that sold him all those swaps, though.

News of Burry’s totally legal scheme floated down to Ryan Gosling’s trader, a Gordon Gekko sleaze who breaks the fourth wall to narrate the movie for us and gloat about his eventual profits. To expand his cut even more, he clues in another hedge fund manager, a constantly irritated Steve Carell who hates the game and all the players, but keeps at it anyway because it’s what he does. Over the next few years Bale holes up at his desk, keeps watching the markets, fends off nerve-wracked detractors, and waits to do his headbanger’s told-you-so dance. Meanwhile, Gosling, Carell, and a small crew of guys descend deeper into the wild world of Wall Street to verify Burry’s calculations and look for more indicators that they’re not plunging themselves into a fiduciary abyss. They follow a trail of greed, ignorance, neglect, and multi-level frauds upon frauds that have to be seen to be believed, if not entirely understood.

Hey, look, it’s that one actor!: McKay and his crew want you to understand the intricacies behind what happened, and they do their best to guide viewers through all the fancy math concepts and intentionally alienating business-speak. To that end, the movie pauses at several points to define its terms through simplified explanations and analogies delivered by not-boring guest speakers like Selena Gomez, Chef Anthony Bourdain, Suicide Squad‘s Margot Robbie, and a large Jenga set. Their user-friendly breakdowns of college terminology are much more entertaining than having an usher hand you a two-page glossary on your way into the theater. Thankfully this means you also shouldn’t have to pull out your phone for immediate Wikipedia help, though some extracurricular reading later at home might not hurt.

A few famous faces illustrate potential breakdowns in the ostensible checks-and-balances in the system. Billy Magnussen and New Girl‘s Max Greenfield are carefree real estate agents who will sell you any house in the size of your choice even if your FICO score is a twelve-digit negative number. Academy Award Winner Melissa Leo is a Standard & Poor’s rep who may or may not admit they really like the fees that all those super-sized financial institutions pay for their very nice credit ratings. Former Doctor Who companion Karen Gillan is a useless SEC rep who’d rather transition to an investments career because the pay is way better. Adepero Oduye, who was sold alongside Chiwetel Ejiofor as young Eliza in 12 Years a Slave, is the fund officer in charge of confounding Steve Carell every twenty minutes.

Carell’s team includes Life of Pi‘s Rafe Spall. Bale’s enraged boss is playwright/screenwriter Tracy Letts (Bug, August: Osage County). Over in a concurrent storyline, a pair of young wannabe super-traders (including Finn Wittrock from American Horror Story) catch the credit default swap wave and convince hairy recluse Brad Pitt to mentor them down the same path. Pitt is one of the film’s producers, but he only shows up a few times to pause for thought and dispense advice to the rookies.

Academy Award Winner Marisa Tomei frets a lot as a supportive wife. She may have been the woman with the most scenes. By and large, this is a movie about dudes who profited off of other dudes who profited off of The System that profited off of us.

Meaning or EXPLOSIONS? It doesn’t take much for the average movie or TV show to depict the 1% as Big Evil Banks and assume you’re on board. It takes far sharper minds to teach you how so many of them indulged their sins in depth. In case the first ninety-odd minutes of advanced economics lessons don’t hammer home the salient points hard enough, a later sequence takes our dysfunctional heroes to a conference in Las Vegas for meetings with the minds that compose and perpetuate this virtual skyscraper of cards. The parallels between the upscale investment world and the bright-‘n’-shiny casino floors aren’t hard to spot. In fact, the concept of synthetic CDOs is illustrated using a hand of blackjack and a crowd of seedy onlookers.

And it gets worse. The months leading up to the recession drag out a bit beyond Murry’s predictions because in the event that fraud causes collapse, other frauds are built into The System to keep the surface-level frauds humming along as if nothing is wrong. Then take into consideration how many of these events ended with government bailouts to keep America alive. At least one character wonders if the monolithic instigators knew such bailouts were a viable fallback position and whether or not they strategized their frauds accordingly.

That’s the movie’s take on it all, anyway, presumably taken straight from the book. Feel free to pencil in the word “allegedly” six times in each sentence if you think it ought to be there.

If you’re the kind of viewer concerned about movies that deviate from reality, occasionally Gosling and other characters look straight at the audience and admit the boring things that actually happened instead of the cooler or easier thing they just performed. At a few ludicrous points, they have to turn and tell us basically, “Yes, that goofy thing you just saw happened exactly like that.”

Through all of this, the banks laugh. Oh, how they laugh. Except for a haunting scene near the end at the abruptly abandoned offices of Lehman Brothers. As Pitt’s pupils wander through the former company’s echoing halls, they find one downsized employee’s desktop covered with a monumental house made of empty Red Bull cans. What once contained boundless energy is now a hollow shell.

Nitpicking? I don’t get why the editor kept clipping off the ends of scenes in the middle of a word of dialogue. Annoying.

Also, I wish they’d explained what a hedge fund is. Many of us don’t work at a hedge fund, didn’t graduate college, and don’t keep that one tucked into our basic vocab.

From a content standpoint: the F-word abounds, but it’s hard not to agree with some of the sentiments it crudely expresses. Two scenes of strippers, one limited to Level Mad Men; the other, brief and eclipsed by the lady’s innocuous summarizing of her vast real estate portfolio that would take an awful lot of singles to afford.

So what’s to like? Carell, Gosling, and Bale are all compelling in their own ways in face of so much cerebral, technically intangible “action”. I learned quite a bit from The Big Short, which is funny at times and flabbergasting at others. I’m sure they only scratched the surface of some aspects, but the recession factors they cover are noteworthy enough as things stand.

My wife and I became first-time homeowners in 2007, scant months before the recession hit. Despite having ARMs and other options dangled in front of us for pretty large maximum loan amounts, we qualified for — and insisted on going with — a fixed-rate mortgage for a house priced tens of thousands less than our max quote. In 2008, mortgage company #1 was bought out by company #2. Five years later, company #2 sold out servicing rights for this block of business to company #3, who in turn merged last year with affiliate company #4, whose names appear on our billing statements today. The chain of buck-passing has been sad and befuddling to behold.

Toward the end of The Big Short, when all the cookies begin to crumble, two of those four companies’ names are included in various depressing montages. As you might imagine, I’d say that constitutes vested interest in the subject matter. Over the past few years our mailbox has seen plenty of offers to refinance, purportedly to save us money while surely making them money in some other fashion not explicitly stated in their sales memos. After seeing the shenanigans of such companies writ large, I’m inclined to leave our contract exactly as-is, finish out the term on schedule, and never give any mortgage companies any more attention or dimes than I have to for the rest of my life.

How about those end credits? No, there’s no scene after The Big Short‘s end credits, though they do confirm near the very end that the folks at Bloomberg provided what I’m guessing was invaluable interpretive assistance. In the meantime, stick around to hear giant speakers blasting Led Zeppelin’s version of “When the Levee Breaks” and pretend you’re sitting in Michael Burry’s office, listening to another great metaphor for what happens when big things fall apart.

(“Don’t it make you feel bad / When you’re tryin’ to find your way home / You don’t know which way to go?”)

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