By Matthew E. Milliken
Jan. 2, 2015
The Big Short is a strangely entertaining and extremely timely movie about a wholly unlikely subject: A handful of investors who anticipated, and got rich because of, the collapse of the American housing market.
Director Adam McKay’s feature is based on Michael Lewis’s 2010 nonfiction book, The Big Short: Inside the Doomsday Machine. Lewis also wrote Liar’s Poker, Moneyball and The Blind Side, among other books; the first of these drew on Lewis’s experiences on Wall Street, while the latter two became enormously successful sports movies. The latest Lewis-inspired outing was translated to screen by thriller screenwriter Charles Randolph and McKay, the director of such excellent comedies as Anchorman: The Legend of Ron Burgundy and Talladega Nights: The Ballad of Ricky Bobby.
The Big Short tracks three sets of characters in their quest to make a bundle of money while betting against conventional wisdom. One of the men at the heart of the story is Michael Burry, a one-eyed possibly autistic medical doctor who runs a Silicon Valley investment firm. As played by Christian Bale, Burry is an oddball who loves to play heavy metal rock music at eardrum-piercing volumes and who regularly shows up at the office dressed as if he were about to spend a day cleaning his garage. Burry wears the shirt throughout the film, which takes place over the course of about three years.
Burry, who’s capable of prolonged bouts of concentration, finds that an alarming percentage of housing mortgage bonds are based on poorly secured subprime loans. A single bond consists of thousands of individual mortgages, each of which represents the debt owed by a home buyer to a lender; investors buy the bonds in order to receive a share of the monthly mortgage payments.
For decades, such bonds were a rock-solid investment. What Burry discovers — contrary to the assertions of virtually every economist in the known universe — is that many of home loans being made were incredibly risky. As a result, the mortgage bond market is highly overvalued and therefore due for a correction, otherwise be known as a crash.
Burry approaches major investment banks with a proposal to buy a financial instrument known as a swap, which will pay off only if the values of housing mortgage bonds collapse. The banks agree, thinking that this is about as risky for them as selling someone insurance against the sun rising in the west.
There’s just one catch, or at least there’s just one up-front catch. (As we learn later, other catches will arise.) Because the banks will owe a tremendous amount of money if they do have to pay off Burry’s investment firm, they require him to pay a maintenance fee — a sort of insurance premium. Burry readily agrees, and the bankers begin to celebrate what they think will be an enormous payday for them.
A salesman named Jared Vennett (Ryan Gosling) gets wind of one of these deals, realizes that Burry is right about the underlying weakness of housing mortgage bonds, and starts pitching similar swaps to other potential investors on behalf of the banks. He accidentally approaches a small firm headed by Mark Baum (Steve Carell), a highly skeptical investor who is struggling to come to grips with the suicide of his brother. Baum and his team, played by Rafe Spall, Hamish Linklater and Jeremy Strong, begin investigating Vennett’s claims about the vulnerability of the housing sector. Eventually, they get on board with his way of thinking and begin plotting how to capitalize on the market inefficiency.
Around the same time Baum and colleagues enter the picture, so do a pair of successful small-time investors and former college buddies named Charlie Geller and Jamie Shipley, played respectively by John Magaro and Finn Wittrock. They stumble upon Vennett’s proposal, realize that they’ve found a tremendous opportunity, and scramble to find a way to exploit it. They’re assisted in this endeavor by a disgruntled former financier named Ben Rickert (Brad Pitt) who is preparing himself for the collapse of Western society. (In this, Rickert is like a version of Baum who’s taken his cynicism one step further.)
Anyone who graduated from high school around or before 2008 knows what happened: The housing market did indeed collapse, thanks to countless bad loans, and it plunged the worldwide economy into the worst slump since the Great Depression. The Big Short’s protagonists get rich, but not without fighting the banks to get their rightful share.
Due in part to the likability of the actors and in part to McKay’s deft handling of the material, the viewer ends up rooting for the movie’s contrarian investors. This was true for me even though the characters, as Rickert points out, placed big bets on hundreds of thousands of people losing their jobs and their homes. But I also came to sympathize with the investors partly because The Big Short persuasively argues that the entire international financial and regulatory system has been corrupted in order to enable big banks to flourish — quite literally almost no matter what happens.
McKay makes some debatable choices, wielding no fewer than four different gimmicks to convey relatively complicated financial and sociopolitical points without losing the viewer’s interest. He uses Vennett as a narrator; he has Vennett and at least one other character break the fourth wall by directly talking to the audience about the movie and the events it depicts; he uses titles to translate and explain a few bits of financial jargon; and he inserts three short segments in which celebrities playing themselves give quick financial lessons in which they again directly address the audience.
I think having the characters (as opposed to celebrities) directly address the audience added very little to the movie; the other tactics struck me as being effective without being unnecessarily jarring. But in general, everything works surprisingly well.
Everything works surprisingly well, in fact, is a good capsule review of The Big Short, which ends on a very sobering note. At the conclusion, Baum, who functions more than any other character as the movie’s moral compass, finds his entire life transformed. Vennett, who would merely have become rich had the projections of Burry et al fallen completely flat, instead becomes ludicrously wealthy.
So does Burry. Titles inform us that he has retreated from most investing with the exception of one commodity. If you don’t find it somewhat chilling that Burry now focuses his attentions on water, then you haven’t been paying enough attention.
In the end, this movie reminded me of the 2009 environmental documentary Home. The movies have nothing in common stylistically, and they employ very different visual vocabularies, but they both lay out the basics of very serious global quandaries. They also challenge us to do something about the issues they explore.
I wish I could say that I was very confident that our society will address these challenges with the vigor and persistence they deserve.