‘The Big Short’ is greed, loss and 2008 collapse

BY

Is this a great country or what! Where else can “reputable” financial weasels gamble with our life savings, reap massive rewards and pay no taxes? Best of all, when they blunder, we taxpayers bail them out; capital idea!

Remarkably, four financial outsiders bet big on the eventual collapse of the American economy and made out like bandits.

Everyone has an idea what caused the 2008 financial meltdown. It certainly included widespread fraud, fueled by stupidity and arrogance. Author Michael Lewis (“Moneyball,” “The Blind Side”) offers a more methodical analysis in his bestseller, “The Big Short.” He delivers a powerful message without preaching or speaking down to his audience.

Director Adam McKay (“Anchorman 2”) delivers his first dramatic feature with wit, cynicism and gallows humor; even if the joke is on us. The humor is plentiful and appropriate, but knowing what we know, it’s infuriating and hurts – a lot. To bring us up to speed, a couple cameo actors offer financial primers. They define essential terms, such as “mortgage backed securities” and “collateralized default obligations (CDOs).”

This sad but true story stars Ryan Gosling, Christian Bale, Brad Pitt and Steve Carrell as the few who recognized signs of the eventual collapse. Each offers spectacular performances, but Bale and Carrell seemingly perform as if they have a score to settle. Villains include the institutions themselves; household names such as Goldman Sachs, Bear Stearns, Morgan Stanley, Merrill Lynch and Lehman Brothers (may it rest in peace).

We are reminded how the housing market was the bedrock of our U.S. economy. Then, bankers became ever more creative to sell more mortgages. Greed drove the degree of creativity and packaging, while regulators turned their heads. Whether it was the sheer magnitude or pervasive negligence, the term “fiduciary responsibility” became irrelevant.

The initial instigator was Dr. Michael Burry (Bale), a brilliant but socially awkward financial “Rain Man.” Using systematic analysis for his small firm, Burry discovers most mortgage portfolios are rated much higher in value than the sum of the parts. Worse yet, every trend indicates the portfolios will only get worse over the next several years.

Burry realizes every one of his counterparts is crafting macro-economic decisions based on a false premise. Meanwhile, reckless financial “geniuses” are universally oblivious to their pervasive sub-prime mortgages. Three years prior to the eventual 2008 bust, Burry confidently concluded the bedrock mortgage industry was a house of cards.

Mark Twain once said, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Burry decides to “short” the market by betting against the housing industry. His nervous brokerage owner asks, “You’re asking me to lose millions while waiting for something to happen that has never happened before?”

While each bank took Burry’s money for what they saw as a “few magic beans,” a few dissenters also challenged the premise and drew Burry’s same calamitous conclusion. While a financial executive reveals the elaborate conspiracy, the dissidents realize, “He’s not confessing, he’s bragging.” The “Chicken Little’s” would have been laughed out of the business if they didn’t have the resources to ante up. But what they discovered was this incestuous industry was not going down without a fight; by hook or by crook.

“The Big Short” is 130 minutes and rated R for language and sexuality. It is meant to educate, entertain and enrage, but not necessarily in equal measure. The signs were there, but ignored. In September 2008, the market collapsed causing a global economic meltdown. It took four years for the U.S. stock market and unemployment rate to return to pre-collapse levels. Yet, the economy is still not the same.

You could blame the banks, regulators, credit agencies, consumers and housing policies; and you’d probably be right. While the industry says it was simple ignorance and public insists it was fraud, let’s compromise: they were idiots and thieves! No joke.

Ron’s Rating: B+   Leigh’s Rating: C