25 Febreuary 2016
The Big Short
A film by Adam Mackay
reviewed by Adam McCormack
Director Adam Mackay, along with co-writer Charles Randolph, has done a tremendous job in explaining complex financial products to a level where film goers can both appreciate the enormity of the financial crisis of 2008, and marvel at the small group of investors who saw it coming. That the audience does not immediately walk out on the mere mention of MBS, CDOs, CDS and ISDAs is impressive, given that so many supposed financial professionals involved in these products did not understand them at the time. Much praise is due to Michael Lewis on whose book this film is based, which was equally compelling, but the decision to produce a dramatic film, rather than a documentary, is pure genius. The use of humour and pathos produces a perfect vehicle for both understanding and entertainment. Having the leading characters make contextual asides to the audience is not new but is very effective here, with the real innovation of using of well known celebrities (eg Margot Robbie in the bath and Anthony Bourdain making a fish stew) to explain financial concepts in a way we can all relate to.
At the heart of the story are two very complex characters who start to question the extent to which mortgages have been granted to people who have little prospect of paying them back (sub-prime borrowers, many of whom get mortgages despite low incomes and extreme gearing -we meet a stripper who is financing 5 houses and a condo for example), as well as the products used to securitise their loans. Hedge fund manger Michael Bury (Christian Bale) has struggled to interact with people since he lost an eye as a child (he has since concluded that he has Asperger Syndrome). He decides to look under the bonnet of the mortgages behind a number of bond issues and is shocked by the level of delinquencies, which are seemingly ignored by the rating agencies. Asking the same questions is fund manager Mark Baum, who is greatly troubled by the suicide of his brother. Baum, looks at the myriad of products financially engineered on the mortgage market (CDOs) and see a potential domino effect that threatens not just a housing market crash, but the future of the whole US financial system. He is persuaded by bond salesman Jared Vennett (Ryan Gosling), to look at ways to “short” the US housing market. Thereafter the film very effectively poses questions as to how banks could justify their bond pricing, how rating agencies did not act for fear of losing banks as clients, and – a big question this – how the investors could profit from their “Big Short” if the banks they had traded with went out of business as a consequence of their having the correct view.
Ultimately they, and the financial system, are saved by the actions of the US authorities, but this leaves us with the biggest questions of all – why were these products allowed to be developed to such an extent? and still more important, why are they being created all over again? This film is first class entertainment, with particularly strong performances from Christian Bale and Steve Carrell. ****
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