The Big Short – good entertainment, bad storytelling
After seven years of bruising political debates, The Big Short finally managed to fit the real story of the 2008 financial crisis into a two hour window, allowing many Americans to finally understand the mechanics of the Wall Street greed that so thoroughly destroyed the economy at the end of the previous decade.
The movie does an excellent job informing the viewer on the financial crisis. The celebrity cameos that explained some of the more obscure jargon used to describe Wall Street’s activities in the mid-2000s make the movie a crystal-clear and accurate portrayal of the financial crisis. However, when screenwriter Adam McKay stops drawing on the source material of Michael Lewis’s book of the same title, and begins to form his political message, it almost feels as if he forgot what the movie is about. He makes a number of policy prescriptions which have very little to do with what was actually depicted and the movie ends up only muddling the conversation its source material so valiantly fought to clarify.
Most of the movie does a great job of accurately identifying some of the truly irredeemable characters in the financial crisis. An agent from the credit agency Standard and Poor’s explains that they just give away unwarranted AAA ratings (the highest possible) to prevent bankers from getting their assets rated higher down the block at Moody’s. These inflated ratings boosted investor confidence at a time when investors should have been getting nervous, causing the mania behind the housing bubble to spread without impedance. Steve Carell’s Mark Baum sits at a table with the smarmiest individual who tells him that he is the one in charge of making sure investors are not defrauded by Merrill Lynch’s investments, but he’s on Merrill Lynch’s payroll and has no stake in making sure the investments go well. Arrangements like this are what allowed the financial contagion to spread so quickly and virulently. Without mentioning the concept of leverage, which might have just been throwing too much jargon at viewers, there is even some discussion of how the reason the bubble burst so violently was due to how much borrowed money was used to purchase the shaky assets, getting at the heart of the problem. However, as well as McKay does stoking accurate anger, he throws it all away in the final seconds.
The scene that really made this movie leave a bitter taste in my mouth came right at the end, as Baum sits on a deck telling his coworker that Wall Street is about to be bailed out. He tells his coworker that the rest of Wall Street wasn’t stupid; they just knew that if something went wrong the taxpayers would be there to foot the bill. This is a very common bit of rhetoric surrounding Wall Street, but literally seconds before this scene, we witness massive quantities of people, most of them crying, carrying their belongings in boxes. It’s hard to watch as one woman drops her cardboard box and struggles to repack it among the masses of newly unemployed exiting Merrill Lynch. To make everything worse, that pseudo-consumer protection individual from earlier in the movie is there telling people to “go straight to your transportation and do not talk to the press.” Those jobless bankers were certainly a part of the mania, and they had no reason to expect a government bailout. Yes, after the fact, it’s easier to realize that the total of nearly (deep breaths) eight trillion dollars spent by the Federal Reserve to bail out the banks was a little too much. The reports of bonuses being paid to remaining executives from the excess were infuriating. However, much of the TARP program that Baum was referring to — along with the rest of the expenses the government paid — were engineered buyouts that prevented the Great Recession from becoming the second Great Depression.
McKay then uses discussions of the bailout to leap into a bizarre discussion of the events that unfurled in response to the financial crisis. He starts with one of the most uncontroversial points many make about the financial crisis — a huge number of people broke the law and exactly one went to prison. I’ve always been disturbed by the retributive nature of this argument (full disclosure, I think we should probably rethink criminal justice entirely and abolish prisons, but that’s another thing entirely), but in a world where people who commit minor, inoffensive crimes like smoking a joint see prison cells, people who commit massive scale fraud probably deserve some jail time, too. Further, McKay scathingly and correctly condemns the strain of virulent racism and elitism that followed the crisis that blames immigrants and poor people for stealing jobs and being lazy rather than the brutal mistakes of Wall Street employees. However, his message continues into an area that doesn’t really make sense. His next two calls are that Congress needs to break up the big banks, and that it failed to pass meaningful Wall Street regulation.
The first claim is false. Breaking up the big banks is not good for stability. The reason that this crisis was not the end of the western economy was that Chase, Bank of America, and Wells Fargo were aided by the government in swallowing up failing banks that had so much of America’s money with them. These giant banks that are able to survive losses are plenty enough to be competitive (ten major American banks is a less concentrated system than any other financial industry on Earth and also less concentrated than most other American industries), but also provide an anchor if banks begin to fail. Yes, the taxpayers could find themselves on the hook if we were about to lose Bank of America, but we were never about to lose Bank of America. When a large number of smaller banks crashed in the late 1920s, we had a much more intense economic meltdown that culminated in a nuclear attack on another country. Even if one individual bank isn’t too big to fail, the industry is. However, big, resilient banks mean that the government has an avenue to stop the bleeding if the worst happens.
The second claim, that banks avoided regulation, is revisionist history. The problem in 2008 was massive overleveraging. Dodd-Frank, the 2010 banking reform bill, aimed very specifically at leveraging, including capital requirements that made it so banks could never be in debt they couldn’t get out of. Dodd-Frank made the cost of being an overleveraged threat to the economy really high, and banks are naturally downsizing without causing a sudden hiccup in the market. This is a much safer and more stable banking system than we had eight years ago. There may be crises in the future, simply because there are so many things that can go wrong and we probably don’t even know what half of them are. However, overleveraging is not likely to be a problem again for a very long time.
The fact that the movie stops telling its own story and hops on with a populist agenda is not only jarring, but it’s a legitimate plot hole to the point where it just ruined the movie. The link between the proposed policies and the crisis, a link that’s not entirely obvious, is never explained — which is too bad, because the movie had done such an incredible job of explaining up to that point.
I’m generally a huge fan of movies that are blatant and preachy with their messages even when I don’t agree, but the disparity between this movie and its stated message is so unsettling. I advise Adam McKay to watch his own film. It’s honestly a great time. Just make sure you’re watching the movie adaptation of Michael Lewis’s book and not the Adam McKay original commentary sloppily tacked on at the end.