Reel To Reel: The Big Short
Going Rate: Worth full price admission
Starring: Christian Bale, Steve Carell, Ryan Gosling, Brad Pitt
Red Flags: Multiple f-bombs and two scenes inside a strip club
In one my Royal Father's favorite movies, Trading Places, the characters portrayed by Dan Akroyd and Eddie Murphy reek revenge against their bosses and get rich by short-selling futures in the commodities market. The Big Short shows us the same process, only billions of dollars bigger and all true. It zooms in on the securities nobody thought would crumble -- until they did and took the economy down with them in 2008. It's easily my favorite movie of this year and the best movie about Wall Street I've seen since Wall Street.
The film, based on Michael Lewis' book of the same name, follows three sets of traders as they discover dangerous problems with mortgage-backed bonds. Brokers have been pushing their stability and quality, but it turns out the securities -- which are bundles of individual mortgages sold as investments -- contain oodles of sub-prime loans. Sub-prime, by the way, is Wall Street politeness for saying, "These loans are [bleep]!"
Eccentric, dressed-down hedge fund manager Dr. Michael Burry (Bale) discovers it first by looking under the hood of the bonds and discovering an alarming amount of loans about to go bad. The fat cats don't see it yet, but the analysis from his think-tank mind predicts massive defaults are coming as people get shocked by adjustable rate mortgages or end up falling behind on loans they never should have gotten in the first place. Burry wants to take the groundbreaking step of betting against the housing market. It's so unheard of, he doesn't even have a way to do it until he convinces big investment firms to create credit-default swaps, a form of insurance that's not technically insurance nor regulated like it.
Other traders smell trouble. Button-down investor Jared Vennett (Gosling) hears Burry is buying up massive amounts of swaps and decides to get in on the action after doing his own homework. A misdialed phone call accidentally tips off capitalist crusader and trader Mark Baum (Carell), who is already convinced the financial world has it in for the little guy. Vennett and Blum team up after Blum's team discovers the flimsiness of the mortgages and the cracks forming in the housing sector. In a garage, financial whizkids Jamie Shipley (John Magaro) and Charlie Geller (Finn Wittrock) also get wind of what Vennett knows. But they can't pull off the massive financial operations they need to cash in until they turn to reclusive retired banker Ben Rickert (Pitt), the man who can get them to the big boys' table.
The financial instruments at the heart of this can be hard to comprehend. The film takes the inventive step of breaking the fourth wall and bringing in celebrities to give us quick Wall Street lessons, including Selena Gomez explaining issues with collateralized debt obligations and celebrity chef Anthony Bourdain using a stew to demonstrate how Wall Street makes bad bonds look good. Many of the key players themselves also speak directly to us, aided by flashy editing and illustrations, making this a mashup of Wall Street and GoodFellas with a touch of Oceans 11. It feels like the kind of film Martin Scorsese and Guy Ritchie would crank out if they combined directorial forces, only it's directed by Adam McKay (Anchorman) as a rollicking black financial comedy.
The Big Short doesn't present us with any clear good or bad guys. It reminds us the people who are getting rich off multiple layers of convoluted Wall Street risk are betting against the American economy. As they win, financial institutions collapse, millions lose jobs, and the recession hits. Wall Street's big players are stupid, clueless, criminal, or just problem gamblers. We see how fast and loose the markets play with securities, as one risky bet becomes an even bigger risky bet which is then folded into an even larger bet. Yet we can still relate to all this financial abstraction on a human level through the traders who discover it. They -- and we -- are shocked to find so much money flowing into such crummy investments, ones people don't even understand.
I have told you before that derivatives -- which include mortgage-backed securities -- are a bad habit Wall Street just can't kick. Even though the feds have tried reining them in, the financial lobby is a powerful player, and we are once again seeing the kinds of risky instruments on the market that got us into this mess.
Many of you will also be asking, "Why didn't the fat cats go to prison for this?" It's a simple explanation: in Las Vegas, you don't go to jail for making bad bets. You just lose money. However, in Vegas you're playing with your own money. On Wall Street, the big shots are playing with your pension fund and IRA's, but it's considered a bet, not an investment, at all the convenient times.
The Big Short brings this all into focus and makes us understand it all. You don't have to be a financial guru to love this picture. You just have to have a brain and a willingness to accept the truth everybody else believes they can trade away.