By Mel Gregson
The Big Short is a Hollywood comedy about some of the people involved in the US housing market collapse that triggered the Global Financial Crisis of 2007-08. Sounds terrible, huh? But it’s not. It’s excellent.
Director Adam McKay goes to great lengths to explain details of Wall Street trading that most viewers would not be familiar with. Throughout the film he succeeds in explaining complicated finance terminology without making it feel like an economics lesson.
The story follows a handful of Wall Street traders and hedge fund managers as they slowly discover the absolute rort behind “collateralised debt obligations” or CDOs. These are the mechanisms by which banks repackaged risky sub-prime mortgage securities as AAA credit rated bonds – meaning they passed off dodgy loans as safe investments.
As these characters look further into the housing market, they discover that billions of dollars is being bet on these worthless bonds, yet no-one seems to be bothered by it. The false certainty that housing is a safe investment and mortgages are always paid blinds some of the world’s richest and most powerful people to the impending crisis. Various characters repeat axioms such as “housing is always stable, low risk” and “who doesn’t pay their mortgage?” only to be proven completely and thoroughly wrong.
The film is at its weakest when it attempts to characterise those who took out the sub-prime mortgages at the heart of the collapse. We meet mortgage brokers who brag of selling homes to poor immigrants and unemployed people, a stripper with “five houses and a condo” and a landlord who took out a mortgage in his cat’s name. While these extreme situations were certainly made possible by the total lack of regulation and oversight of the banks, they were not the norm. The vast majority of people who lost their homes in the collapse we ordinary working class people who did no wrong.
In an attempt to explain the crisis, the film ends up overemphasising some of these dramatic features of the US housing and securities markets, and downplaying the fundamental cause of the crisis: the low wages of US workers.
This truth is not ignored, just buried in the rest of the chaos. In one scene Christian Bale’s character – a hedge fund manager who sees the crisis coming – says to deaf ears “The average take home pay is flat. Home prices are soaring. That means homes are debt, not assets”. This statement, more-so than the complicated scenes about CDOs and synthetic CDOs, articulates the actual cause of the crisis. But it’s easier to blame stupidity and greed than it is to implicate the entire capitalist economy. This is a Hollywood film after all.
Some reviewers have complained that the film venerates its Wall Street protagonists for seeing the impending crisis yet doing nothing to stop it. In fact, they profit enormously from the devastation. If anything, this aspect of the film strengthens the key takeaway: our ‘heroes’ are no different from those who bet billions and lost. What the film brilliantly shows is that everyone caught up in the collapse – from the stripper with the six mortgages to the deliberately-turning-a-blind-eye ratings agent to the smarmy fake tanned mortgage brokers – were each doing exactly what was expected of them.
They were all cogs and bit players in a corrupt, irrational and inherently unstable system. It is the market itself, in all its complexity, recklessness and unpredictability, that comes out as the villain of the film. This is a good thing.
Ultimately this is not a film about the millions of people whose lives have been devastated by the collapse of the US housing market and the knock-on financial crisis that spread across the global economy. It is a comical, yet serious, expose of the market system that inflicted this pain on them. Director McKay explained how the filmmakers wished to deal with the victims of the crash: “When the crash hits, we in no way wanted to under-represent it. [We] went out of our way to show little pops of people being hit by it. Personally, we have a lot of people who were affected by it, close family members, a lot of people who lost jobs. We felt like to treat the ending with anything less than tragic tones wouldn’t be fair.”
There is no happy ending to The Big Short, because for ordinary people, unlike the bankers, there has been no meaningful recovery. The film, in its final minutes, acknowledges that no serious reform has been achieved and the financial mechanisms that helped create the crash are still being bought and sold to this day. The film leaves us feeling sick at the alarming prospect of another financial crisis brewing.
The Big Short is both entertaining and insightful. It helps demystify some of the lies we’ve been told about how and why the Global Financial Crisis happened. Most importantly, it helps dispel the myth that it can’t happen again.
Establishment critics are right to be enraged. Anyone who goes to see this film is likely to come out more of a socialist than when they went in, or at least more sceptical about our future under capitalism.
