The Big Short (2015)

*** out of ****

When someone suggested making a movie about the causes of the economic crash of 2007/2008, people must have thought they were nuts. In a hopelessly convoluted series of systemic abuses in the banking and financial industry, where even many of those participating didn't understand the multi-layered depth of the fraudulent practices, how could an entertaining movie be made?

The answer shown to us by “The Big Short” is to make the movie about a group of financial industry mavericks who saw it all coming and decided to try to make a profit on it. While their actions are not very heroic, trying to profit on the downfall of the big banks and the western economy, it is all framed in such a way that they almost appear to be heroes.

Let me try to describe this without making it too clinical. Unlikely, but I'll try.

Christian Bale is in great form as Michael Burry, the one-eyed manager of the Scion hedge fund, who was the first to really understand why the crash was inevitable. When he started to analyze the sub-prime lending market he saw that a huge percentage of sub-prime mortgages were built on teaser rates and that the bonds backing them were losing value. When the teaser rates ran out and the mortgages reset to standard rates, the mortgage holders would be forced to default due to the greatly increased payments and thereby lose the properties, which would then have to be sold for face value (in a rapidly declining market) to maintain the dollar value of the bond fund. Since such a high percentage of these defaults were inevitable, and since the property values would decline rapidly in a crashing market, it would cause a complete collapse of the financial institutions holding the loans. This is all explained fairly well in the film..... but this is where things START to get complex.

Burry decides the surest financial investment is to bet that the housing market will crash. The banks were propping up their bond funds by paying off the fund rating agencies to claim their equity funds were solid, though eventually we see that the banks were certain that they were not. So Burry began to take out huge insurance policies (called default swaps) that will pay if the funds fold. A trader at one of the banks (Ryan Goseling) hears of these swaps and after investigating himself also finds the collapse is inevitable. He pitches it to Mark Baum (Steve Carell), a cynical hedge fund manager, who also begins to invest everything in swaps. Another couple of investors (John Magaro and Finn Wittrock) are able to bring in a big-money investor (Brad Pitt) who leverage everything on swaps.

While all this is occurring, Baum discovers the greater fraud by the banks in their creation and issuance of synthetic CDOs (which in the film are just called “derivatives”) where the bank issues securities based on their own swaps which derive their value from the swap premiums....so they are in effect insuring their own bond funds against default, which they know is inevitable. It's enough to make you hold your head.....

This film is chock full of terrific performances. Carell and Bale in particular are excellent in the lead roles, but everyone does a great job. But what “The Big Short” does best is take a really complicated financial crisis and make it relatively understandable. Don't get me wrong, I am sure there are plenty of people in the theatre that still didn't really understand the details, but would have enough broad strokes to know what was happening. And the film plays out like an international intrigue movie, and it keeps you nailed to the action. So much is happening all the time that you're afraid to look away for fear of missing something.

The relative financial success of the this movie is a real stunner, because it doesn't really have the typical things that make a hit film. But it is riveting and fascinating, educational and even a bit of fun. I sincerely doubt that Oscar will recognize this movie, it just isn't the kind of film Oscar usually loves, but it is excellent from start to finish, even despite the relative anti-climax. I thoroughly enjoyed it.