Monday, May 2, 2016

The Big Short

Since the catastrophic housing "bubble" and associated financial market meltdown of 2008 my wife and I have had this debate as to where to assign blame.  I point fingers at the banks, enabling people far from eligible to purchase a home to get in the door.  Sometimes with (adjustable rate, subprime) loans to more than one house!  My wife cites the consumers who did not take responsibility for their financial decisions, who so willingly signed over to that most common tenet of the American Dream - owning a home, without considering the long term payment structure.  My take is that folks will take advantage when the opportunity is there.  Many do not think ahead and certainly are not sufficiently educated on loan terms, how the market works, etc.  To me, the match was lit by corporate greed, pure and simple.

This is confirmed over and over in 2015's THE BIG SHORT, an adaptation of Michael Lewis non-fiction book.  The key moment may be when hedge fund manager Mark Baum (well played by Steve Carrell) and his brokers listen to mortgage guys explain how they really make serious money by selling risky mortgages to the banks on Wall Street.  The loans have been converted into what are called a collateralized debt obligations, basically bonds that have their principle backed by a pool of mortgage debt.  It only gets more complicated from there.

The screenplay by Charles Randolph and director Adam McKay attempts to make the multilayered financial machinations and jargon at least semi-understandable to the layperson, but unless you're in the business (or were one of those who suffered a foreclosure), good luck. Wall Street wants you to be confused, to not have a true understanding of their workings.  This may be true of other professions as well.   Things are so complex the filmmakers thought it helpful to have periodic fourth wall breaking by celebrities like Margot Robbie and Selena Gomez (appearing as themselves) to break it down in easier to understand terms.  Even chef Anthony Bourdain shows up and uses an analogy with day old fish.

THE BIG SHORT switches among several characters, all of whom are following the hunch of Michael Burry (Christian Bale), another hedge fund manager (and medical doctor) who is convinced that the housing market will collapse a good two to three years before it finally occurs.  He alarms his bosses and clients by creating several credit default swap accounts at banks all over Manhattan. It's a long term strategy that will cause his companies to lose millions until the day of reckoning, when the collapse causes a 489% increase in his fund.  But who wouldn't panic in the meantime?

Other traders and investors catch wind of Burry's strategy and likewise brave the wild ride, and the film intercuts their scenes fairly well, never feeling episodic, maintaining a manic energy throughout, much of that owed to caffeinated editing by Hank Corwin and a lively soundtrack of rap and rock music.  The cast also includes Ryan Gosling and Brad Pitt, who plays a retired securities trader who assists a pair of upstarts.

Curiously, it isn't until late in the film that the characters begin to feel some remorse - they are about to profit from the destruction of several financial markets around the world and all the poor souls who entered into unwise terms.    There are scenes where the characters express regret, even go to the press to try to expose the banks, but on doomsday still take the money.  So you could argue that they are no better than the bankers and CDO managers.  Pretty depressing.

2015 was a year where some directors like McKay, more associated with goofy comedies, made a bid for more high brow fare.  Note Jay Roach's helming of TRUMBO.  Not sure about that one, and McKay gives THE BIG SHORT a good try, but I wouldn't toss him the keys to any potential classics just yet.

The end scrawl informs us that CDOs have returned to the market, now called "bespoke tranche opportunities".    Unsurprising.  I wonder if there is a Michael Burry type looking to profit over a possible/probable student loan bubble to come?

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