The Big Short
starring Christian Bale, Steve Carell, Ryan Gosling, Melissa Leo, Hamish Linklater, John Magaro, Rafe Spall, Jeremy Strong, Finn Wittrock, Marissa Tomei and Brad Pitt
screenplay by Charles Randolph and Adam McKay
directed by Adam McKay
Based upon the book by Michael Lewis, The Big Short is a largely true account of the 2008 world economic meltdown, led by U.S. banks and their “sub-prime” mortgage scheme. Under the Presidency of George W. Bush, the Republican government practically destroyed capitalism by its reckless neglect of the finance industry. President Barack Obama and the Democrats saved capitalism in America, but that has never stopped Republicans from blaming him for their mess.
For all its diversity and size, the home-building industry is the largest sector of the U.S. economy. Home mortgages are the bedrock on which their economy is built.
The movie starts a couple years before the 2008 meltdown when some clever stock traders discover a problem with the banks. The sub-prime loan system - a system allowing borrowers to buy homes that they really could not afford - was so complex and fabricated that even the experts had difficulty understanding its convoluted mechanisms. The problem these clever few noticed is that the performance of investment instruments was not reflected in their parent institutions’ Stock Market values and projections. An unsustainable situation was evident that no one was recognizing - or, at least, acknowledging. To take advantage of it, some traders began buying what they believed were grossly over-valued bonds soon to fall. It was an unheard of gamble against the U.S. economy.
But instead of falling and allowing them to recoup their money bond prices kept increasing, despite the math. Throughout 2006 and 2007 bond prices kept rising because the bond pricing system in the U.S. was completely fraudulent. The banks were too big to fail, there was collusion between banks, traders and government ratings agencies to keep stock and bond prices fraudulently high. So, either the banks were incompetent and they didn’t understand the subprime loan structure, or they were criminals and they knew the American housing market was built on shit and they were hiding it in a vain attempt to protect themselves.
To people younger than me this movie - if they realize that it is based on real events - might be news and educational. Not to me, though, since I have a good memory and I remember the sub-prime housing loan scandal and the resulting economic collapse. Canada was less affected than the U.S. because more financial market regulation exists there than in the U.S., where irresponsible, unrestrained - and, as it turns out, illegal - free-wheeling capitalism is the norm.
No bankers went to jail. The government of Barack Obama bailed out the big banks and other institutions, and now eight years later U.S. banks are once more flirting with sub-prime lending schemes under a different name. Furthermore, the rise of Donald Trump makes it seems that Republicans are successfully blaming the economic collapse on immigrants and minorities. That is not a deviation, of course. That is always the policy of Republicans.