Two years after the global economic collapse of 2008, author Michael Lewis, author of a series of debunking books about Wall Street, published a documentary study of the secret springs of the financial disaster that left millions of Americans with nowhere to live and nothing to live on. The researcher pointed to corporations with colossal money involved, such as JPMorgan, Lehman Brothers, Morgan Stanley, Bear Stearns, Goldman Sachs, Citibank and others. He also described individual people – ordinary financiers who, thanks to their intelligence and foresight, foresaw the collapse of the mortgage market and managed to cash in on it.
The Big Short (2015), directed by Adam McKay, is a screen adaptation of the book of the same name, The Big Short, by writer and financial publicist Michael Lewis. The genre of the film can be described as a kind of mix of a financial disaster film and an eccentric tragicomedy. The events, which eyewitnesses called “the end of capitalism” and “the eve of the Middle Ages,” are described from the perspective of several people who bet huge money on the collapse of the American economy and won the “march” in the financial casino. At the same time, the tent cities of bankrupt Americans and the innumerable nameless victims of the economic crisis remain far behind the scenes.
The plot of the movie
New York. 2005 year. Finance manager Michael Burry, a quirky, grotesque character with monocular vision and the music of a metal band constantly ringing in the player, got bored in his office and decided to go through thousands of mortgage stories that no one was interested in before. After reviewing all the loans backed by subprime mortgage bonds, he saw that the number of “toxic” loans was on the rise. Money for housing construction is generously given out to rogue people who are not able to return it, but pay only interest. In this state of affairs, the collapse of the real estate market is inevitable. Instantly realizing that this can make good money, Michael insures his clients’ money (about $ 1 billion) through credit default swaps. He buys backing bonds for huge sums. The CDS deal is risky. In the event of an increase in the price of the product, it insures banks against non-payment and ruins the buyer. A fall in the price of mortgage-backed securities will bring him a fabulous profit.
The bankers are confident that they are making a good deal: Burry will pay them premiums for the rest of his life, since the real estate market is stable. And some astute financial analysts guess that this strange activity of Burry has a rationale. They are developing their own schemes of participation in the game against the banks to lower the exchange rate of the MCB.
The head trader of one of the multinational banks, Jared Vennet, enlists the support of an investor – the head of a small hedge fund, nervous and depressed in connection with the suicide of his brother Mark Baum. Using the Jenga tower as an example, Vennet demonstrates to him that BBBs will become problematic as soon as 16% of the borrowers in the mortgage pool default. Baum is convinced of the inevitability of a default by talking to those who issue loans. They are not at all concerned about the solvency of customers and give out loans in bundles, so that they can then be resold to banks.
Sensing that “it’s easy to fish in troubled waters,” ambitious newcomers to the stock market, Jamie and Charlie, enter the game. Young self-taught investors go to the annual subprime conference. Communicating with its participants, they discover that no one suspects the coming crisis. This means that there are no competitors, and you can safely invest in swaps. Ben Rickert, a highly qualified banking specialist, who has retired, is invited to become a partner.
For two years, a shorting company has been waiting to get rid of its swaps for a big profit. They will be able to short trades as soon as mortgage bonds fall in price as much as possible. The hunches and calculations of Burry and Baum turn out to be correct: in 2007, the current business model fails. The “soap bubble” of the American real estate market bursts, the collapse of the securities rate begins. On the crest of the crisis, the characters in the picture more than return their investments one by one.
Ending of the story
For the heroes of The Big Short, the on-screen story ended with a happy ending.
The “garage” investors, the smart guys Geller and Shipley, have a “feast during the plague.” Not at all worried about the fate of their bankrupt compatriots, they enjoy the opportunity to spend the fabulous money that has fallen on them. The earnings of the former broker Ben Rickert allows him to realize an old dream: to grow greens in the countryside and deal with environmental issues. Closes the deal, having received his millions of dollars, Mark Baum. The hedge fund manager abstracts from the moral aspect of what is happening, because he received the money of ordinary people, at the expense of which they eliminate the consequences of the crisis. The author of the theme, cleverly designed by enterprising financiers, Michael Burry brings his investors $725 million and receives $100 million for himself, which is almost 500% return on investment. But a successful trader unexpectedly closes his hedge fund. He lost interest in financial markets, bought a guitar, became interested in music.
The meaning of the film is that, at its core, for the main characters, getting rich on the collapse of the American real estate market is a Pyrrhic victory. They win millions, but they lose the country: millions of compatriots lose their jobs and housing. In the finale, which takes place in the empty premises of Wall Street, members of the NYSE exchange, in tears and anger, vacate their jobs.
In the post-credits shots, the happy faces of bankers and real estate traders who got rich on the “soap bubble” flash, including billionaire John Paulson, who earned the most from the crisis. The main characters of the film are just minor financiers who profited from the crisis not because they made the right bet in the financial casino. But because the big players also bet against their own institutions, and they needed to admit the collapse in order to fix their personal profits.
America, even after the epochal crisis, continues to follow the lead of those who rob it. History does not teach anyone anything – and what once happened as a tragedy inevitably repeats itself in the form of a farce.