The Big Short


The Big Short

Film review by Robert Henderson

Director: Adam McKay

Main cast

Christian Bale as Dr. Michael Burry, a fund manager running Scion Capital
Steve Carell as Mark Baum, the manager of Wall Street hedge fund, Front Point Capital
John Magaro as Charlie Geller, one of the founders and partners of a wannabe hedge fund, Brownfield Capital
Finn Wittrock as Jamie Shipley, Geller’s friend and partner at Brownfield Ryan Gosling as Jared Vennett, a bond salesman at Deutsche
Brad Pitt as Ben Rickert Charlie and Jamie Shipley’s trader and mentor, who previously worked at the JPMorgan Chase Bank in Singapore


The Big Short falls halfway between The Wolf of Wall Street and the documentary The Smartest Guys in the Room. Its subject matter is the biggest heist in history, the suckers being the US taxpayer and eventually the taxpayers of the developed world.

In 2005, Mike Burry (Christian Bale) concludes that the US mortgage market is built on sand because huge numbers of mortgages have been given to people who had no business being given mortgages as their financial situation is hopeless. He correctly predicts that the market will collapse in 2007 and when it does his fund makes a 489% profit.

That the US mortgage market had not already collapsed by 2005 was due to such debt being traditionally considered an ultra safe form of lending because mortgage providers historically operated strict lending criteria. It was thought that the repayment of mortgage debt would be a first call on a mortgagee’s money because the threat of losing your home was the most powerful incentive to ensure that mortgage payments were paid before any other debt.

Such prudential behaviour on the part of both lender and borrower was catastrophically undermined when mortgage lenders started to lend to people who were riskier than before. For example, people without a job managed to get massive mortgages which in the most absurd cases were not even just 100% of the purchase price but more than 100%, the extra being to pay the expenses associated with buying a property or simply to provide some ready cash for the mortgagees. This was the subbest of the sub-prime disaster.

How did such nonsense get off the ground? It floated on the belief that the housing market would rise and rise so that even if the mortgagee could not afford the mortgage, if they held onto the property for even a year or two the value of it would rise more than enough to cover the mortgage if the mortgage company foreclosed. The problem was that there is never any guarantee that house prices will always rise or rise at a rate which will provide an increase in the property value to offset the basic insolvency of many borrowers so that in the last resort a property can be sold at a value beyond the size of the mortgage.

While unwarranted faith in the sanity of mortgage providers and blind optimism in ever  rising house prices drove the subprime market, other forces were at work to shore up the market. Mortgages of wildly different soundness began to be parcelled up in Collateralised Debt Obligations (CDOs). Within each CDO were groups of mortgages arranged in tranches. In the top tranche would be the soundest mortgages, below them the next soundest mortgages and so on until rock bottom was hit with mortgages which were almost certain to fail. Why did these very risky CDO packages ever get bought? Here comes what to the ordinary person must seem nothing more than criminal fraud. They were bought and traded because they were rated AAA or AA by the big credit rating agencies despite their rotten contents. This rating allowed banks and other financial organisations to purchase CDOs and present them to shareholders and clients as respectable and safe investments.

At the same time there was the growth of Credit Default Swaps (CDSs). This is a form of insurance which allows the holder of assets such as CDOs to hedge against the possibility of CDOs becoming junk. Burry is portrayed as the man who created the CDS market and he uses his fund’s money to effectively bet against the US housing market.

Burry realises that if a credit default swap (CDS) market can be created he can bet against the US economy and make a great deal of money. He persuades a number of major banks to create CDS because they still believe that the housing market in the US is sound and that therefore CDS would be money for old rope as defaults which would activate them are most unlikely.

This is the foundation upon which The Big Short is built. There are various interlinking stories of people trying to climb on the bandwagon once they hear of Burry’s forecast of the collapse of the US housing market.

The acting is almost good across the board. Bale, an actor who never gives a poor performance, is twitchily watchable; Ryan Gosling as Jared Vennett is persuasive; Steve Carell is amusingly hypocritical pretending to moral scruples but always overcoming them when it is a case of take the money or run; and Brad Pitt is well, Brad Pitt. He is the one weak character not least because his motivation for helping Geller and Shipley is unconvincing.

The dismaying thing about all of these portrayals is the absence of any moral sense. Most of the characters display no scruples and the few who do still go ahead with what they know is monstrously wrong and catastrophic for huge numbers of people. All that matters is the gaining of money or who is smartest in this world. They are all engaged in something akin to a computer game in which the outcome does not have any real world consequences. To underline the quality of fantasy around the whole grubby business can be added the failure of the US authorities to punish almost all of those who made vast amounts of money by behaving with a criminal recklessness that rebounded on everyone who was not genuinely rich. All too much to make for comfortable viewing.


ROBERT HENDERSON is QR’s film critic. He blogs at in a

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