The Big Short is directed by Adam Mckay and stars Christian Bale, Steve Carrell, and Ryan Gosling. Each of these actors plays a different man but they share the same goal: to short the housing market based on subprime mortgage loans. The film takes place in the years leading up to the financial crisis in 2007. No one in the world could foresee the crisis because the fraudulent activities of banks were hidden from view. The film highlights the unique sort of person who discovers the housing bubble before the herd and thus gains access to the bet of a lifetime.
Of all the characters in the film, Christian Bale’s performance as Michael Burry was the most impressive. Burry is a real person and a doctor who quit being a neurosurgeon and found financial success by looking for value in unexpected places. His approach is based on hard data and he stumbles upon subprime loans simply by looking at the numbers himself. His decision to invest all of his fund’s liquidity into credit default swaps angers his investors. No matter how assured Burry is that his investment will pay off, his investors will not trust him. Bale’s performance garners sympathy because of his outsider status. Burry is autistic and never able to feel like he belongs. Fortunately this outsider perspective enables him to find the value that no one else sees.
Steve Carrell’s performance as an angry hedge funder might be the central role in the film. Carrell carries the emotional weight of the film. His character is predestined to sniff out inconsistencies wherever he can find them. This inclination is what leads him to a career as a financial analyst. He is a troubled man dealing with the recent death of a child. He is the character most likely to voice his opinion in an obnoxious way. When the crisis hits, Carrell’s character is the last one to hold onto his credit default swaps, refusing to let the wrongdoers off easy. The character thrives by pointing out the hypocrisy of others but he is unaware of the conflict within himself. He thinks of himself as a hero when his true motivation is profit. Every character in the film is motivated by one thing: money. Carrell’s character is no different.
It is also worth mentioning the two men behind the garageband fund that is Cornwall Capital. These two are young compared to other characters, yet they find something that no one else sees. They discover that the triple-A rated securities in the tranches are actually triple-Bs in disguise. The rating agencies rules for rating the quality of the securities are completely dependent on what Wall Street wants them to be. The level of fraud in the system is remarkable. Discovering this allows these guys to make more money than any of the other characters.
The film also touches on Cornwall’s investment strategy prior to the events of The Big Short. The two men started their fortune by betting on events that people had underestimated. People don’t like to think about bad events happening, so they underestimate their likelihood. Cornwall’s strategy profits by finding bets with potential gains exceeding the potential losses.
The most troubling thing in the film is the level of fraud it exposes. After a second viewing, I was profoundly aware of how fraudulent the system was. Wall Street gamed the system to serve their own needs without regard for the effects. Fraud extended from Wall Street to rating agencies to insurance companies. The burden of repayment eventually fell upon the taxpayers. The system continues to function and its likely that another recession will happen.
The Big Short works on many levels. It works as a comedy, drama and half-true documentary. As someone interested in economics, I was completely enraptured by the film. I recommend The Big Short as one of the funniest and most interesting films of 2016.