The Big Short: Forgotten lessons from the last crash

The Big Short redraws the financial crisis of 2008 in a funny and didactic way.

2008, the financial crisis, people losing jobs and houses, banks collapsing.

Now you can relive it all in the cinema by watching The Big Short, with a screenplay derived from Michael Lewis’ 2010 novel The Big Short: Inside the Doomsday Machine.

Some good features that realistically depict the crash or stories around it have already made it to the screen: Margin Call, Inside Job and Too Big to Fail, for example. The Big Short joins that list, but manages to elevate the topic to a higher level.

Director Adam McKay has added a dash of humour and gathered a triple-A cast to tell the story.

Christian Bale plays Michael Burry, a character inspired by the manager at US hedge fund Scion Capital, who made the initial bet against the US housing market with credit default swaps.

Lost in the quants, Burry lives in his bubble, facing alone the anger of his investors who disagree with his investment decision and want their money back.

Steve Carell gives humanity to alternatives manager Mark Baum who rails against the way banks dupe honest people.

Ryan Gosling becomes Jared Vennett, an evil and opportunistic trader at Deutsche Bank who exploits Burry’s bet to its maximum and narrates the whole story.

Brad Pitt’s role is that of a respected banker who retired from finance but decides to give a hand to two investment newbies who have realised what is coming.

The Big Short tries to solve an issue often highlighted as a reason why individuals have lost all interest in finance. The abstract vocabulary used by financial workers is explained through short spots in which showbiz celebrities refer to understandable metaphors.

In one of them, teenage star Selena Gomez, who said she did not really understand the screenplay when she read it for the first time, sits at a blackjack table to summarise the concept of synthetic collaterised debt obligations.

The Mark Twain quote that opens the movie sums it all up: “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

Ironically, The Big Short is being released at a time when many macroeconomists claim the crisis is over and speak of a global recovery in markets, while others foresee a further crash on the way.

The movie suggests lessons have either been partly or wholly forgotten.

Synthetic CDOs have been restructured and have reborn in the US credit market under the name of “bespoke tranches”. But experts claim there is no way bespoke tranches could lead to a repeat of the 2008 crisis.

Also the way Gosling’s character introduces the further collapse of the US real estate market and CDOs to Carell’s team sounds like a pitch fund marketers would have made today in front of investors starving for returns after years of weak performances in active management.

Those who see The Big Short ought to come away with one key, real lesson learned from this film.

A scene shows Carell’s character standing by himself in the middle of a crowded street in New York, hooked on his cell phone.

He seems resigned as he stares at individuals wandering around, and realises that no one is conscious of what is occurring in the finance industry and how deeply it will impact their lives.

However, it is not certain people will pay more attention to global financial ‘stuff’ after viewing The Big Short.

As soon as the audience leaves the theatre, the complex strategies presented in The Big Short, even simplified, will probably have vanished from their minds. Still, the cast’s performance is to be remembered.

If The Big Short was a CDO, it would be rated AA+. The feature will be graded the ultimate notch if it is rewarded with an Oscar on 28 February 2016.

The Big Short, Paramount Pictures, 130 minutes, directed by Adam McKay, screenplay by Adam McKay and Charles Randolph.

Adrien Paredes-Vanheule
Adrien Paredes-Vanheule is deputy editor and French-Speaking Europe Correspondent for InvestmentEurope, covering France, Belgium, Geneva and Monaco. Prior to joining InvestmentEurope, he spent almost five years writing for various publications in Monaco, primarily as a criminal and financial court reporter. Before that, he worked for newspapers and radio stations in France, in particular in Lyon.

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