writer in English, French and Spanish with published credits available in government publications, local and ethnic media. I live in Sydney.
Published January 23rd 2016
The Big Short-Sell downriver of the Mortgage Bonds Market
While one may not need a degree in economics to appreciate the plot of 'The Big Short', one does probably need to contextualise its workings beyond the immediate issue of its main subject, the Global Financial Crisis of 2008, and how a handful of Market players managed to spirit fortunes from an event which brought wrack and ruin to everybody else.
If you do not do this, if you do not make the transition from the moral outrage sparked by an institutional system permitted to grow rotted at the top, to an understanding of what American society is all about, as symbolized by the Bernie Sanders-Donald Trump continuum in the current race for the White House, then you risk oversimplifying the complex of emotional reactions generated by the denouement of this gripping story, which is at once historical feature, docudrama, biopic, and comedic drama in the finest tradition.
Once again, inexhaustible human ingenuity for creative explanation of controversial phenomena, plus morbid fascination with catastrophe, combine to bring about another great movie on the GFC, this offering from a 'dissident' writer who actually worked for Wall Street (author Michael Lewis for Salomon Brothers); a stand-up comedian whose principal interest in life is comedy (Director Adam McKay, with a much touted 'unique' comic 'sensibility' or comic take on life); and a professor of philosophy with an overwhelming interest in popular culture, Charles Randolph, who actually does the adaptation to screen of the Michael Lewis book.
The various claims and talents of these people meld together in recognisably original manners to produce what is a quirky take on what is otherwise a pretty glum subject (forget the families being evicted from homes to live in cars and tent cities, or the properties thus repossessed being returned to the market time and again; I alone personally know of at least one suicide!)
The involvement of Paramount Pictures as distributor, and of actor Brad Pitt's 'Plan B production company' in the happy marriage, goes the rest of the way towards explaining the final sleek product, which apart from Brad Pitt himself, wizened eminence grise of Wall Street Ben Rickert (more tussle-hair than silver fox) includes other A-list actors such as Ryan Gosling, the trader Jared Vennett of Deutsche Bank, narrator and whisperer of the dirty little secret at the heart of American finance; Christian Bale, Dr. Michael Burry, the Hedge Fund manager of Scion Capital, looking for 'investment-value' on behalf of his clients, who uncovers the dirty little secret at the heart of American finance; plus other transitional and upcoming talents, such as Steve Carell, who is Mark Baum, the 'moral center' of the story, who as scrupulous money manager of Front-Point Hedge Fund, is devastated to discover that 'he' is the dirty little secret at the heart of American finance, since 'he', as one of the main players, stands to benefit from its exploitation; and Finn Wittrock and John Magaro, as, respectively, Jamie Shipley and Charlie Geller, a couple of part blood-hound-investors / part comedy-duo, about to stumble on the opportunity of their lives (with a little help from 'eminence grise' Brad Pitt), i.e: the dirty little secret at the heart of American finance, which is going to make them very, very rich, and thus fulfill the dream that they are chasing.
So, what is this dirty little secret? For purposes of disambiguation, let us state what it is not: It is not 'deregulation'; and it is not the "Financialisation of the economy" (Palley, 2007; James Tobin, member of Kennedy's council of economic advisors, 1984, quoted in Foster, 2007 ). Nor is it the plethora of 'financial instruments' (innovations and derrivatives) which, as the very objects on which 'Financialisation' rides, and harbingers of the Financial Crisis, also 'star' in the movie: the Assets Backed Securities (ABSs), baskets of Mortgage Backed Securities (MBSs), the pools of Collaterized Debt Obligations (CDOs from MBSs), quickened by Adjustable Rate Mortgages (ARMs), and last but not least, the true stars of The Big Short, the Credit Default Swaps (CDSs), about which, Eliot and Atkinson, writing in the UK, say: " a final absurdity has been the creation of financial instruments that give a creditor a vested interest in the failure of a company that owes them money the Credit Default Swaps (CDSs), a type of insurance policy that can be traded on the open market " (2008)
None of these are the dirty little secret at the heart of American Finance, nor yet the opportunity provided by the CDSs to make money from the failure of a whole system, which however, is certainly its shame. Nor specially the fact that all of these 'instruments' (that is to say, the incomes derived from the debt that they represent) are traded all over the place ("the open market").
The dirty little secret at the heart of American finance is its runaway success, compounded by the fact that it is fully within the purview of human nature not to wish to upset the apple cart when things are going so swimmingly well. This is the real dirty little secret at the heart of American Finance, and the trigger of irony that constitutes the comedic drama of the film: the fact that, in the absence of any checks or balances ('deregulation'), human nature can't be trusted, and its chinks and foibles combine, through no agency of anyone's own, to constitute their own institutional momentum towards dishonour, deception, and ultimately, disaster.
It stands to reason, to reminisce Pailley and Tobin above, that in an economy increasingly committed to both expansion and debt financing, credit standards must fall. How far must they fall? Further than anyone cares to admit. The financiers, traders, managers, investors, et al, on the other hand, aren't stupid. They know that this is the problem that the whole array of innovations and derrivatives is supposed to address, through the internal callibration of the various 'tranches' with variable credit ratings, which are supposed to render these 'instruments' stable (i.e.: failproof); but just like the idea that the system can then go on to trade so 'big' that it 'cannot fail', there is that blind gap, perhaps best symbolized in the film by Dr. Burry's 'glass eye', as well as by the almost universal abrogation of the duty to check, verify, and authenticate; to wit: the roles of the rating agencies in the movie as well as in real life, which trust in the system, and that everyone is doing the right thing; whereas in fact, with market saturation, and the dynamic desire to keep things going as they are, a moment is reached where the whole financial set-up turns, ceases to be bona fide, and becomes 'toxic' and nobody notices
This is the moment which might also be known as the quickening of the lemmings, heading towards cliff-fall. The moment when Dr. Burry can't believe his one good eye! The moment when Mark Baum can't believe both his good eyes, or ears, and sends a team out to do field work in Florida to check out the truth of the subprime mortgages; it is the moment that is unscrupulously and immediately seized by Jared Vennett, of Deutsche Bank, who has single handedly been alerted by 'a Dr. Burry', who wants to bet against the system (in real life, only Deutsche Bank and Goldman Sachs listened to Dr. Burry quoted in Vanity Fair; Michael Lewis; March 2010). it is a moment which, when stumbled upon, no one is quite certain what to do with, with Jamie Shipley and Charlie Geller, for instance, both simultaneously recognising the opportunity of their lives, yet also rushing off to alert the press, in a panic state, which of course can't do anything about it because it isn't one single fraudster: It is everybody, it is human nature past the point of no return, headed for the cliff fall. Once again, Eliott and Atkinson: "Central banks, rating agencies, investment banks, hedge funds, the financial media; all were fully implicated in the manufacture of the new products". (2008; 193)
It is important to make this transition, from systemic blaming, from anyone-blaming, to the firm and fearless identification of the real culprit, namely 'unregulated', happy-go-lucky, free as can be, human nature, because if one doesn't, then the movie fails to detach itself from the morass of ambiguity and recrimination above which it ought to soar, and from which, none of the protagonists escape.
As the moral conscience of what is otherwise an epic disaster of unbridled cupidity, Mark Baum gets both to shout the most radical line in the movie "We live in an age of fraud", and pocket $200 million from his decision to hedge against the system. The twin blood hound investors, Shipley and Geller, are restrained, and rebuked, by the older and wiser Ben Rickert, who explains that the $80 million they have just made comes at the expense of the human misery about to be unleashed on America and beyond. But to Vennett, the Deutsche Bank trader, who, as the typically cool, most morally vacant player of the six protagonists, is also given the privilege of narrating the situational background, and of sometimes addressing the audience directly, go the final most eloquent words on the subject: when we find him counting the $47 million bonus he has just earned from Deutsch Bank for 'predicting' the disaster; he tells the audience: "I can feel your disgust, it's palpable". Dr. Burry, for his part, who started the ball rolling, posts winnings of $720 million for himself, and his clients, thank you very much. Everyone else is hitting the skids.
The question is whether the audience can just leave there the meaning of the events just witnessed. My suggestion is that it cannot, for if it does, then it leaves these events at the level of their ambiguity, and the problem with ambiguity is that one never knows what to do with it.
There is no suggestion that the director and script writer in particular intend anything else. On the contrary, the indications are that ambiguity and detachment is precisely what they are aiming for. Nor do we need to ask the reason why. The effect of ambiguity is always to make an audience think harder, and these are certainly events that bear thinking about.
There is moreover the Mark Twain epigram at the start of the film which sits uneasily with the story told: 'it aint what you don't know that gets you into trouble, it's what you know for sure that just ain't so'. In the movie, the exact opposite happens. It's what the world doesn't know that gets the whole world in trouble, and it's what only a few 'know just ain't so' which makes them rich. The epigram stands in an inverse relation to the film, and that in itself is a clear indication to the audience to not take things at face value.
It is tempting to condemn the six protagonists in the story as summing up the systemic evil which has brought this disaster about, but what else would any member of the audience have done, given that the paradigm within which they were operating allowed it? This is also the message about the paradigm itself. Obviously, it is the paradigm that must be changed, or at least fixed, but while the film remains committed to its own ambiguity and detachment, it clearly shows what went wrong, how it went wrong, where and why. The rest, is up to the audience. All in all, a tremendous tour de force.