By Kyle Smith
December 6, 2015
Being funny is not the same thing as being unserious, but in trying to be the former, the guy who made the movie version of “The Big Short” has proven merely that he is the latter.
In the movie, fortune smiles on an ambitious young Wall Streeter when another moneyman accidentally leaves him a briefcase full of tasty secret information. An actor turns to the camera and explains that it didn’t happen this way in reality, but who cares? This way, we are told, it makes for a better story.
That’s a strange tactic when your movie bills itself as a true story: What else, the audience will wonder, is made up?
So it goes with the financial crisis of 2008. Few of the people talking about it, from President Obama on down, show the slightest interest in understanding what actually happened and how to prevent it from happening again. The story is everything, and that story is: Evil bankers in an unregulated Wild West of capitalist depravity crippled the economy, cost us taxpayers billions of dollars in bailouts and carried on in a lawless spree that should have resulted in jail time for everybody.
To say the least, it’s an imprecise view, which raises the question: When it’s time to make a movie dealing in complex material about contemporary financial instruments, is the guy who brought us “Anchorman 2” really the best available option?
Longtime Will Ferrell collaborator, former “SNL” head writer and director Adam McKay, whose work usually isn’t even on the smart end of the comedy spectrum, co-wrote and directed “The Big Short,” an inept and frequently idiotic take on Michael Lewis’ deeply engaging book, and it will largely be remembered for three things: bad haircuts, overacting and Margot Robbie in a bubble bath.
Robbie (along with Selena Gomez and Anthony Bourdain) is one of the celebrities whom McKay throws onstage at random intervals to explain various aspects of the meltdown in silly ways calculated to dumb things down to make the film play better with an audience that won’t be showing up at a film like this in the first place — financial illiterates, teens, the easily bored and those recovering from very recent brain surgery.
In other words, McKay finds all this stuff so boring that he thinks the only way to juice it up is to keep interrupting himself with strange sketch-comedy bits like having Robbie (the blond vixen from “The Wolf of Wall Street”) sipping champagne and lounging in the tub as she explains it all for us.
Cutting to her isn’t something you’d do if you actually hoped to persuade people with the power of your words.
Later, McKay brings in Bourdain to explain that collateralized debt obligations are like a stew into which you throw all your worst fish. It’s not particularly entertaining, but it’s also just wrong. CDOs — packages of loans — aren’t necessarily rotten any more than a mortgage necessarily is.
The brilliance of Lewis’ book is in how elegantly and simply it explains the many such terms involved when mortgages were bundled, sold and sliced up. The non-brilliance of McKay’s movie is how it trades Lewis’ restless curiosity — his need to understand — for cheap gags.
McKay introduces the bond-rating agencies — which gave AAA ratings to packages of mortgages that included a lot of subprime loans of the kind traders call “dogs–t” — in the form of a little old lady complaining she can’t see anything and wearing impenetrable black sunglasses. Get it? Standard & Poor’s mis-rated the bonds because they’re blind.
This isn’t even pie-in-the-face comedy but rather the on-the-nose variety, and while a sense of the absurd can be a useful approach in satire, even when dealing in the realm of the dark or dire, McKay’s style is witless, clunky, sophomoric. The preachy, hectoring tone he takes at the end of the film is not only discordant, it’s also hugely misleading.
McKay thinks one of the main takeaways from the crisis is this: The banks “blamed poor people.” No one blamed poor people, but McKay seems unaware of the major role the federal government played in nudging poor people to buy houses they couldn’t afford.
The relentless push for subprime loans simply doesn’t happen in, say, Canada. (The subprime mortgage rate there is about 5 percent; at the peak of the financial crisis in the US, it was 24 percent. Any questions about why our economy tanked and Canada’s did not?) This wasn’t “predatory lending” either: Banks lose hugely when they are forced to foreclose. Banks don’t actually want to lose money.
At the end, McKay runs all the statistics that seemed so frightening seven years ago — all the trillions in wealth destroyed, all the billions in bailouts, all the crimes unpunished.
Except the wealth wasn’t so much “destroyed” as it was sidelined for a few years. (If you ever declared, as Christopher Hitchens did with his dying breath, “Capitalism . . . downfall,” you’ve been proven a fool. The crisis turned out to be a massive buying opportunity for bargain hunters.) As for the hundreds of billions we supposedly lost in the bank bailouts, it was all repaid, and then some: The government made a $25 billion profit on them.
There are sound philosophical reasons for opposing the bank bailouts, but “because they cost us a lot of money” isn’t one of them. You’d be hard pressed to name a more successful Washington program — how often does a gigantic federal spending bill result in Washington actually being paid back, with interest? (Certainly not the Detroit bailout: That cost us $9.5 billion, Treasury Secretary Jacob Lew announced at the same press conference last December at which he announced the final score for the bank bailouts.)
Stopping a nationwide financial panic at a cost of zero seems like a bargain, but doing so at a profit of $25 billion kinda looks like the single brightest thing the government has done this century. And no, despite the liberal rhetoric, it wasn’t a new Depression: The meltdown was in September and the economy was growing again by the following June. Did we need to rethink the entire economic system to make that happen, or did it turn out to be the right idea to more or less do nothing except stabilize the banks?
If you want to be outraged by taxpayer dollars being shoveled into the furnace solely to warm the hearts of groups that bought off the government, take a look at Head Start: Fifty years, $180 billion of your money gone, zero results, deep-pocketed teachers unions delighted. (The NEA and the AFT are the fourth- and sixth-largest political donors over the last dozen years, according to OpenSecrets.org, with Goldman Sachs lagging way back at No. 15.)
McKay does get one thing right at the end, though: Despite the 2008 election of a Democratic president, Democratic Senate and Democratic Congress, all of whom screamingly blamed the crisis on Republicans, there’s no reason a similar crisis can’t happen again.
So we can finally all agree that George W. Bush had nothing to do with causing the crisis, which could have happened on anybody’s watch. If the next one occurs while a Republican happens to be in the White House, don’t be fooled.
Dodd-Frank is signed by President Obama (AP)
The major achievement of the Dodd-Frank bill is that it made it almost impossible for small banks to launch amid the new regulatory requirements, which essentially amount to a newly fortified protective fence built around the existing large banks.
So don’t be taken in by anyone who tells you Democrats don’t do favors for big business, either.
In fact, it is longstanding Democratic party policies that are the principal reason we’re at risk of another bubble, or even another meltdown: One of the cherished agendas of the progressive-administrative state that has come to dominate federal agencies to such a degree that no chief executive is likely to be able to roll it back is encouraging bad loans in the name of “diversity” or “fairness.”
The Department of Housing and Urban Development pressures Fannie Mae and Freddie Mac to underwrite more loans to low-income borrowers — in 1992, Fannie and Freddie were required to make 30 percent of the mortgages they bought from those who were at or below the median income for their areas.
Then Andrew Cuomo, as HUD secretary in the Clinton administration, raised that requirement to 50 percent. The only way to do that was to push the system toward more subprime mortgages, and by 2008, fully 56 percent of all of Fan and Fred’s mortgages were subprime. Two-thirds of these risky loans were on the books of entities sponsored or controlled by the government.
It’s as if a car insurance company tasked with the urgent political directive of “keg-party outreach” was required to search every kegger in the country for drunken teens and beg to insure them as though they posed barely any additional risk.
Under longtime CEO James Johnson, a longtime Democratic Party stalwart, “Fannie Mae led the way in encouraging loose lending practices among banks whose loans the company bought. . . . Johnson led both the private and public sectors down a path that led directly to the financial crisis of 2008,” wrote New York Times business reporter Gretchen Morgenson and financial analyst Josh Rosner in their book “Reckless Endangerment.”
Far more important than CDOs and tranches to the story of the crash is the Community Reinvestment Act of 1977, which directed banks to be more aggressive about serving the poor and minority communities with mortgages.
That such people would be better off simply renting their homes than forced into a situation likely to lead to foreclosure, bankruptcy, the destruction of their credit rating and/or homelessness doesn’t bother the administrative state.
If a law can be framed as “doing something” for the poor and minorities, even if that something is counterproductive for the people it is intended to help, that is all it takes to push it through.
Proud of themselves
A question McKay does not ask himself (because he’s not interested in knowing the answer) is this: Why were so many of the smartest people in the country unaware of what was happening in 2007 — that the housing market was about to crash because so many people were holding mortgages they could never pay back?
“They were crooks who rigged the market!” isn’t an answer. Goldman Sachs would have been happy to sell kerosene while the world burned. Instead, it was (for a while) on the wrong end of those deals.
Far from having paid off the referees, it had no idea what was about to happen. (It was forced to turn to Warren Buffett for $5 billion of emergency funding to stay in the game. Buffett wound up making more than $1 billion in the deal.)
McKay’s movie essentially tells us that the big banks like Goldman had ensured that the fix was in — they had criminally rigged the system. How so? You can hardly yell “People should have gone to jail” when you can’t point to a single individual and explain what crime he committed. Betting that AAA-rated securities are in fact sound investments may sometimes be stupid, but dumb isn’t the same as fraudulent.
And justice isn’t supposed to work on lynch-mob principles in which anger and a noose are all you need to deliver a satisfying conclusion.
“The Big Short” is already getting praise in Hollywood for its “powerful message.” Critics and award voters won’t care that it doesn’t tell the whole story. They’d rather be righteous than right.