This needs a spoiler alert. But not because I’m giving away the plot but because it may spoil your day.
We went to see the Big Short at our latest newest cinema, the East Dulwich Picture House. All very lovely, especially the large seats for those of us of comfortable years. The cafe/restaurant is also v good.
But the film is why we are here, n’est-ce pas?
In short (ho ho) it’s about how the world financial system nearly imploded in 2007 and how a few people – weirdos wackos and the serially untrusting mostly – saw it coming and made a killing. It’s based on fact, based on an excellent book by Michael Lewis. I’ve read his stuff since he deconstructed the rise of bond trading at Salomon Brothers in the 1980s. Frankly you had to be either in the world of finance or close to that world to understand the intricacies of his books, especially The Big Short and I did wonder how it would translate.
The answer is brilliantly. Like government, the world of finance is dominated by acronyms – MBS, CDS, CDO – and the concepts these few letters cover are as confusing as the names. The film often breaks the fourth wall, talking to camera to explain things, using, variously a porn star in her bubble bath, a world famous chef and an American pop star to explain mortgage backed securities, collateralised debt obligations and synthetic collateralised debt obligations in easy to consume chunks. Yeah, really.
Mostly though the film is fun and funny. Or it would be if it wasn’t real. If these guys saw the egregious fraud that was played out by the banks, the rating agencies, the insurers and governments, why didn’t a lot of others. This was a classic example of ‘you can call it pure oxygen, but if it smells like a fart in a phonebox, it probably is a fart in a phonebox and just as welcome’. That’s where the laughter hurts and stops – just like the realisation that a joke, while funny I’d actually really appallingly tasteless. It brings you up short. Lives were ruined, pensions decimated, national economies brought to their knees meaning citizens no longer had the safety nets they once took for granted. All because of exceptional long term greed.
This film is a fantasy come to life. It is science fiction on planet earth where some otherwise odd bods made a lot and huge numbers suffered but a faceless group, in this film at least they remain mostly in the shadows, got away with it. The regulators, the traders in the banks, the complicit agencies that wanted their fees – they all wanted their fees and bonuses – none of these have been prosecuted. A few have been banned from business – Fred the Shred at RBS for instance, but no doubt they will reappear somewhere else, calling time on whatever contrition might have been shown.
The sick thing, for me, is I was part of this world. In 1985 I helped, as a young lawyer, with the early mortgaged backed securitisations that underpinned the market that eventually brought everything to the point of disaster. Back then there were checks. These things were new, untested and people were rightly suspicious, but they made sense and could be understood by most people, unlike the Byzantine monstrosities that grew to dominate the markets post 2000.
And now? As is implicit in the film, as is apparent from the way major world economies remain burdened by intolerable levels of debt from the banking lifeboats, as can be seen from the fact we still have too big to fail banks that haven’t been sliced and diced into bite sized chunks that can be swallowed if they fail; and bonuses that are beyond obscene – we are no safer today than in 2008. Truly we remain a global shock away from a return to chaos.
There were ten ‘good’ years of growth before the collapse in 2007/8 and there have been so far some five or six years of stable creeping forward after the initial disasters played out. If in the next five or six years we see, say, a conflagration in the Middle East, a significant set back in China, maybe a shake up of the autocracy that is the Chinese state machine then the turmoil will return I fear and be awful. And this time we will have no choice but to restructure how the world economies interreact. But while that happens more hurt and more instability will accrue.
That’s what I thought as I left the film. ‘How is the patient doing, doctor?’ ‘Frankly it is far too early to say.’ And I had my small walk on role in this drama.
Go see it. Go clear headed because it is still a tough ask to understand what was so bad – the betting on the betting that’s what they mean by synthetic, which is beautifully explained in a casino, by a professor of statistics and Selena Gomez. And wonder why some financial crooks – Allen Stanford, Bernie Madoff who hurt a limited number of individuals – ended up in jail with terms of 100 plus years but no one involved in the bond market collapse went down. Too big to fail? Too many to jail, more like.