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In 2010, I used this space to recommend Michael Lewis’ “The Big Short.” The book, I wrote back then, “gave me a better understanding of collateralized debt obligations and credit default swaps than I’d been able to glean from 18 months of meltdown postmortems.”
Now “The Big Short” has been turned into a movie — as were other Lewis best-sellers like “Moneyball” and “The Blind Side” — and it’s even more easily digestible than the book. Adam McKay, the director who adapted Lewis’ book, assembled a killer cast (Brad Pitt, Steve Carell, Christian Bale, Ryan Gosling) and drew the characters broadly enough to make them easy to keep track of. McKay uses asides to the camera to reassure the audience that, yes, what these folks were doing really was as idiotic as it seems.
More than just a good movie with an attractive cast, “The Big Short” is a public service.
It’s been eight years since the Great Recession started. This year’s college seniors, including my younger son, were still in middle school at the start of the economic crisis that is still coloring their future prospects.
They probably didn’t, and won’t, read “The Big Short,” nor are they likely to sit down and watch “Inside Job,” Charles Ferguson’s Academy Award-winning documentary from 2010. But they might watch “The Big Short,” and they might at least appreciate that the American people (and the rest of the world by extension) were let down by every institution.
I walked out of the movie reminded of just how angry I was when I read the book. Most irritating: What passes for heroes in the story are not really heroes.
They are not insiders who blew the whistle, a la Sherron Watkins at Enron or Cynthia Cooper at WorldCom just a few years earlier. Instead, Gosling’s character (based on Deutsche Bank’s Greg Lippmann but given the fictitious name of Jared Vennett) embodies an insider willing to actively work against the long-term interest of his company because he would make more money in the short term. (This is what Alan Greenspan would ultimately refer to, with characteristic understatement, as “a flaw” in his free-market ideology that counted on the “self-interest” of lending institutions to protect investors.)
The heroes also weren’t regulators who protected the public. The Securities & Exchange Commission is represented in the movie by a regulator who takes off work to bikini-party in Las Vegas with the bankers she hopes to go to work for. Brooksley Born, remember, had long since resigned as chairwoman of the Commodity Futures Trading Commission after her effort to regulate derivatives was stonewalled by Congress and the Clinton administration. (Greenspan was wrong about that, too.)
The heroes certainly weren’t the rating agencies, whose corrupt failure to downgrade mortgaged-backed securities that they knew to be junk was the final market-based failure. Melissa Leo, portraying a midlevel manager at Standard & Poor’s, explains to Carell (as Mark Baum, a character based on Oppenheimer’s Steve Eisman), “They’ll just go to Moody’s” if S&P balked. While the movie doesn’t skip that part, I wish it had been underscored a few more times. The kind of onerous regulation that banks on Wall Street and Main Street complain about might have been avoided if the rating agencies had done their One Job.
The heroes in “The Big Short” are the contrarians who understood before the rest of us that the housing bubble was being fueled by mortgages made to people who could not afford to repay them. They understood before the rest of us that, without any skin in the game, mortgage brokers really would make loans to what one character in the movie calls “ninjas” — “no income, no job” — and that the secondary marketers would accept them. It took them awhile, but they even came to understand that the rating agencies were accessories, giving pristine ratings to securities made up of destined-to-fail mortgages just to keep the investment banks happy.
The heroes did take risks — with their own money, with investor money, with their careers — but ultimately all they did was become fabulously wealthy by figuring out a way to bet against an American economy that was already destined to implode. It’s hard to really love them, but they did prove that what happened was knowable and predictable and therefore preventable.
Yeah, that’s the part that made me mad all over again.
As I walked out of the theater, I overheard two men who had just watched the same movie. “Did you read the book?” one asked. “Didn’t have to,” his friend responded. “I lived it.”
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Gwen Moritz is editor of Arkansas Business. Email her at GMoritz@ABPG.com. |
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