It's not too much of an insult to state that the layman probably knows as much about high finance as he does about particle physics. Terms such as subprime mortgages, quantitative easing and binary options share the same air of unfathomable mystery as quarks, gluons and leptons. Help is at hand. A recent addition to Netflix tries to unravel the mysteries of banking, with the aid of a stellar cast of seasoned acting talent. The Oscar-nominated The Big Short was released in January in the UK. Directed by Adam McKay, it attempts to explain in a faintly comic, pseudo-documentary style the fall of the US housing market that triggered the 2008 crash.
The film is based on Michael Lewis's 2010 nonfiction book of the same name. The movie centres around one individual who saw the crash coming in 2005. Michael Burry (Christian Bale) was the successful, off-the- wall hedge fund manager of Scion Capital LLC. He investigated the US housing market and found it to be too reliant upon thousands of subprime (i.e. risky) mortgages. He realised that a whole swathe of adjustable-rate mortgages would kick in when 2007 popped along, and hence thousands of people would no longer be able to pay their loans. Their mortgages would default, making the million-dollar securities they backed worthless.
Burry persuades investment banks to allow him to 'short' against the housing market - in effect betting that it will fail. The banks believe the housing market to be secure, so they accept his proposal. Burry invests over £1 billion of his client's money, then sits back, kicks off his shoes, listens to death metal, and waits. Also along for the ride are narrator Ryan Gosling who plays Jared Vennett, a salesman who learns about Burry's analysis, and tries to sell shorts to fund managers. One of the managers he sells to is Mark Baum (Steve Carell), who patronisingly illustrates with a pile of jenga blocks that once subprime mortgages fail, they will take the housing market down with them. Completing the mega-star line-up is a subdued, bearded Brad Pitt as Ben Rickert, a retired securities trader who is enlisted as an advisor by a pair of young investors who also want to elbow in on the shorting action. Rickert examines their proposals and confirms that the banks are acting fraudulently. He advises them to invest in credit swaps, then packs up his laptop (in a pub in England for some unexplained reason) and quits the financial industry in disgust at what he finds.
McKay, perhaps influenced by his Anchorman stylings, plays much of The Big Short for uneasy laughs. There's plenty of fourth-wall breaking, some of which is completely uncalled for. In addition, when technical aspects need a quick dumbing down, unexpected sources are wheeled in (including singer Selena Gomez and actress Margot Robbie (last seen as Harley Quinn in Suicide Squad) in a bubble bath) to explain. It's easier to laugh than baulk at the horrors that unfold. Burry initially incurs the wrath of his investors, then walks away from his fund after his 'hunch' increases its value five-fold (he has since returned to investing). Vennett and Baum both become super-rich but neither seem too stoked about it. We asked Adam Grunwerg, CEO of brokers review website Investoo.com, whether the film gives an accurate representation of the trading industry. He responded: “The truth is unpalatable - bankers grew rich off the backs of the common folk, secure in the knowledge that the same common folk (i.e. the tax payer) would be called to bail them out when - not if - the markets went belly up. The movie sums up the carefree, callous attitude of bankers pretty well.”
Bale is memorable as Burry, playing him as socially-awkward rather than a geeky weirdo. Both Gosling and Pitt do what they can with their material. Carell too, although he spends the entire movie frowning in a dodgy wig, pissed off as he and his colleagues make millions. You can't help but think this is a missed opportunity. The Big Short should have had audiences leaping from the cinema and carrying pitchforks and flaming torches to their nearest branch of RBS, HBOS or Lloyds (lest we forget, the UK taxpayer 'bought' these banks in October 2008 for £37 billion). Instead, this black comedy gives greedy bankers no more than a slap on the wrist - a bit like the regulators in the aftermath of the crisis.