Sunday, May 8, 2016

The Big Short (Paramount, Plan B Entertainment, Regency, Monarchy, 2015)

by Mark Gabrish Conlan • Copyright © 2016 by Mark Gabrish Conlan • All rights reserved

Three nights ago Charles and I watched a movie I haven’t had the chance to comment about until now, which means I’ll inevitably give it shorter shrift than it deserves: The Big Short, a 2015 movie directed by Adam McKay (his first feature for theatrical release — but then Citizen Kane was its director’s first feature for theatrical release, too!) from a script by McKay and Charles Randolph based on a true story as told in a nonfiction book by former financial-services guy Michael Lewis. The story it tells is about a handful of people in the financial industry, most of them in charge of small-scale hedge funds (one of the key players was part of a hedge fund run out of the huge Morgan Stanley investment bank but administratively separate and not responsible to the bank’s hierarchy — sort of like a cosmetologist renting booth space in a salon), who realized at pretty much the same time (around 2001, as the markets were just recovering from the bursting of the last stock bubble, in high-tech) that America’s housing market looked sound but was really in deep trouble. The story really began in the late 1990’s, when a man from Citibank named Lewis Ranieri (played in the film by Rudy Eizenkopf) had the idea of pooling hundreds or even thousands of home loans into a package and selling securities based on them. They became known as “mortgage-backed securities” and were considered ultra-safe investments because virtually all home buyers regularly made their mortgage payments. But then the investment houses selling these things got greedy, and so did the banks issuing the mortgages; in the late 1990’s it became considerably easier than it had been to get a home loan because the bank issuing the loan was no longer on the hook if the borrower didn’t (or couldn’t) make the payments.

By the mid-2000’s we’d entered the age of the “liar’s loans,” in which banks would lend people money even if they didn’t have a job, a credit history or any of the other traditional indicia of financial soundness. The reason they were willing to make loans with such a blissful disregard of whether or not the borrowers could ever pay them back was that they were no longer on the hook if and when the loans went bad; they were selling them to “servicers,” who in turn were selling them to other companies, who in turn sold them to other companies, with the result that when the people stopped making their payments it was often difficult to trace the loan and find out who owned it and therefore had the legal right to foreclose on it. This also meant that the so-called “AAA” mortgage-backed securities were in fact highly risky investments and the assumption built into the sales pitch that 99 percent of the loans in these things were going to be paid back regularly was so much B.S. The protagonists of The Big Short are Dr. Michael Burry (Christian Bale, making another movie about financial skullduggery and one that’s considerably better than American Hustle!), who left medicine for Wall Street and ran a hedge fund called Scion Capital; Jared Vennett (Ryan Gosling), an official at the U.S. branch of Deutsche Bank who catches on to Burry’s insights; Mark Baum (Steve Carell), an idealistic stockbroker who preaches the evils of greed to his colleagues at inconvenient moments and sees the impending collapse of the housing market as a sort of divine retribution; Charlie Geller (John Magaro) and Jamie Shipley (Finn Wittrock), who’ve built up $100,000 of their family’s money into a $30 million nest egg and want to keep playing the game; and Ben Rickert (Brad Pitt, wearing bushy hair and glasses and for once turning in a performance instead of letting his blue eyes and baby face do his acting for him), who like the painter character in Magnificent Obsession got disgusted with the greed and viciousness of Wall Street and quit finance, but gets sucked back into the game when Geller and Shipley need his help to get an ultra-restricted trading license usually available only to people with fortunes (their own, or other people’s they’re managing) in the billions.

Inspired largely by the revelation Dr. Burry has when he actually reads the full text of a mortgage-backed security and sees for himself how many of the loans it contains are shaky, these unlikely partners concoct a scheme to buy credit default swaps on the housing market, thereby selling it short — a bit of financial-industry legerdemain that allows you to sell something you don’t own and thereby make money on it if its price goes down — against the opposition of their financial backers and virtually everyone else on Wall Street who can’t believe anybody is actually betting against the housing market. The Big Short could have been an excessively dull film — one problem making a movie about white-collar crime is that it’s boring to watch and needs a lot of exposition to tell you why this group of people in suits (and it’s almost all men — a couple of the participants in the Big Short have wives and we catch glimpses of them occasionally, but virtually no women are shown working on Wall Street itself and the avalanche of F-bombs and S-bombs on the soundtrack make the whole scene seem like a giant frat party and were the main reason the ratings board gave this movie an R for “pervasive language”) is doing whatever they’re doing and what’s illegal or at least unethical about it. McKay and Randolph solve this problem by turning their movie into a sort of bastard cross-breeding between Charlie Kaufman and Michael Moore, complete with cameo appearances by celebrities like Selena and Anthony Bourdain to deliver guest explanations of some of the financial skullduggery involved, including the collateralized debt obligations (CDO’s) sold from mortgage-backed securities and the CDO’s that were piled on top of CDO’s until they were called “synthetic CDO’s” because their value (if any) derived not from the mortgage-backed securities themselves but the bets other investors were making on them — with the result that people were investing (and ultimately losing) billions on financial instruments several generations removed from the production and consumption of goods and services which is what an economy is supposed to be about.

The film is a nail-biting suspense tale — can our intrepid financiers hold out long enough before their predictions come true and the housing bubble collapses? — and though McKay and Randolph leave out one of the sourest and most radical points Lewis made in his book, which was their fear that the government would step in to bail out the home borrowers and thus render the Big Short a huge money-loser (they needn’t have worried, a point Lewis made in the book: when government did intervene it was to save the asses of the big financiers and the mega-banks, and the poor home buyers got lost in the shuffle and forced into foreclosure and economic devastation), for the most part they are able to turn this story into an indictment of capitalism, not just one particular manifestation of it. Wall Street is depicted here as what essentially it is: a bunch of super-rich people making casino bets on parts of the economy that can ruin the lives of real people, and who simply don’t care that their financial success is going to mean unemployment, homeless and privation for hundreds of thousands, or even millions, of the 99-percenters out there. It’s also a machine that systematically drives away anyone with a conscience, or even the hint of one; it’s Rickert’s character, the one who’s already exited Wall Street before the story begins, who points out to the other Big Shorters that if they’re right millions of people are going to be ruined financially and the American — and possibly the world — economy is going to tank. The grim picture The Big Short paints of the world we live in is one in which anyone with any real compassion for their fellow human beings is systematically driven away from any position of power and replaced with the most unscrupulous and (dare I say it?) evil — less in the immoral than the amoral sense — people humanity as currently constituted can generate. And yet so enthralled are people in general and Americans in particular with the idea that making money is a sign of superior wisdom, sagacity and morality that this country is quite likely about to elect a President whose only qualifications for the office appear to be a massive bank balance and an equally massive ego!