Depiction Of The 2008 Financial Crisis In The Big Short

The Big Short (2015) by Adam McKay reasons the publics frustration and anger towards a fraudulent and unequal system that left millions unemployed and homeless during the Great Financial Crisis. The film brings together three separate storylines, to tell the story of the 2008 Financial crisis, which is explicitly described to have been triggered by a housing market crash and a credit bubble created as a consequence of greed and fraudulent behaviours by financial institutions. McKay recounts the detrimental events that occurred during the years leading to the crisis, through the eyes of those who detected the flaws in this corrupt system, anticipated the effects and found a way to profit from it. However implicitly, McKay criticises the neoliberal economic structure existent at the time; through an opposing post Keynesian, Marxist and Minsky lens that saw the inherent contradictions in an exploitative neoliberal and financialised economy. The Big Short however never actually mentions the term neoliberal state or financialization it is only subtly implied as the events happen during this period. Hence a common criticism of the film is that there is too much emphasis on the on banks becoming too greedy rather than the actual economy allowing for this to be the case. The film is an eye-opening masterpiece, using critical dramatic conventions, characterization and a carefully articulated plot to explain the GFC while adopting comic relief to ease the discussion of this catastrophic topic that has impacted the lives of millions world-wide; asking the audience to be conscious of their economic decisions and sceptical of the state, despite making constant remarks about its complex nature.

The Big Short Starts in the 1970s when arguably ‘one man’ changed our lives introducing mortgage backed securities to the banking system following through to 2004 a point of economic wealth and stability for the US and ends in 2008 at the spike of the crisis. In economic terms this period has been coined the neoliberal era. Whereby classical economics resurfaced within the framework of financialization shifting from an era of industrial promoted growth to ‘service capitalism’ whereby new financial instruments, practices and technologies emerged. McKay explains the nature and dynamics of this period through three separate storylines, while a voice over by Jared Vennett speaks directly to the audience explaining these topics further and highlights their complexity.

In the start of the film McKay introduces the audience to the concept of mortgage backed securities; by an enactment of Lewis Ranieri himself proposing the idea of MBS to investors. Ranieri represents the banks in collecting a pool of mortgages and sells them to a tranche (a pool of similar investments) which then sells bonds based on the idea that mortgages will be repaid. Once the concept is explained the scene cuts from snapshots of fast structural and technological growth to snapshots of empty offices with statistics showing extremely high unemployment, homelessness and reports of the event when “everything came crashing down.” Hence McKay provides the reason and impact of the GFC from the very beginning and the remainder of the film becomes a long explanation, pulling apart Ranieri’s MBS to find the flaw in the system.

Following this scene, the audience is immediately introduced to Michael Bury whom discovers the issue within the economic system. While it is not yet unravelled, throughout the scene, Bury listens to heavy metal music a form of music associated with anger and revolutionary behaviour. Hence interestingly McKay’s use of music foreshadows the central events in the film, a revolution against the new economic system and the financial instruments in place.

A voice over by Vennett acknowledges the intentional complexity in the concepts mentioned and explains them in different ways throughout the film. The first issue unravelled, was the shift from prime to subprime lending; Margot Robbie explains that: “The banks started filling bonds with riskier and riskier mortgages.” The reason these mortgage bonds became risky was because there were no rules regulating the dispersion of loans; loans were provided to new home owners with poor credit history, low incomes and insecure jobs with adjustable rates. This concept is effectively described by Vennett, using Jenga blocks to represent the mortgage bonds each of the blocks have a credit rating starting from triple A at the top to B at the bottom; due to the high risk loans it becomes increasingly likely that borrowers won’t be able to pay back their loans, as illustrated through the Jenga blocks crashing down after he removes the b rated blocks at the bottom of the tower. Furthermore, the concept of CDOs is explained by the celebrity chef Anthony Bourdain who recycles unsold fish that should be placed in the garbage into a new dish, without the customer knowing. Hence, implying that despite knowing that the majority of these loans were Ponzi and Speculative they were still fraudulently given AAA ratings. When a bond is deemed too risky it simply gets re-bundled with safer bonds under a new name called CDOs. This uttermost fraud in this system is depicted through Georgia an employee at Standards and Poors, a credit rating agency, who confesses that they are aware of the CDOs being filled with risky debt yet still provided high credit ratings, to maintain business. “Can you name one time in the past year? Where you checked the tape and you didn't give the banks the AAA-percentage they wanted? If we don’t give them the ratings, they'll go to Moody’s right down the block.” Synthetic CDOs were also created betting on the performance of the CDO, illustrated through the example of people betting on Selena Gomez playing a poker game, then having people blindly bet on the first better. These concepts illustrate the broken foundations to the economic system. Which came crashing down due to the greed and fraudulent behaviours of financial institutions. Which was permissible due to the government’s deregulation, privatisation and creation of new financial instruments rapidly increasing the money supply without intervention or stabilisation tools.

Similarly, the greed of the financial institutions and naïve nature of investors is illustrated through the final storyline and location Las Vegas. Ben Rickert suggests the two eager investors to go to Vegas: “What’s in Vegas?... Every bond and CDO-salesman, sub-prime lender and swap-trader is going to be there I'm telling you your bet is against their money, it's about time you find out just how dumb their money really is.” The location Vegas is significant as just as Rickert explains in Vegas the gambling capital of the world, people unconsciously spend large sums of money on unfair games. Portraying the risk-taking nature of a neoliberal and most significantly McKay brings to light that when one person wins everyone else fails; Like a lottery game. When Mai and Ledley finally invest in the credit swaps and begin to party, Rickert lectures anxiously: “Do you know what you just done: you just bet against the American economy, which means if we are right people loose homes, people lose jobs, people loose retirement savings people loose pensions. You know what I hate about f*cken banking it reduces people to numbers. Here’s a number. Every one percent unemployment goes up 40000 people die! We were just excited. Just don’t f*cken dance. Woooow I just got really scared.” This scene is particularly significant, as it provides an eye-opening account on the substantial effects of the GFC. This point wakens the audience like the characters to the detrimental impact of the exploitation, fraud, greed and instability within a neoliberal economy.

Mark Baum’s clear frustration with the system provides basis for McKay’s critique of the neoliberal system legitimising anger towards the system. Baum’s scepticism and frustration is associated with his traumatic experience and it is what allowed him to dodge the disastrous impacts of the crisis. Hence his role and characterisation in the film is again suggestive that one must be weary of the neoliberal system in place. Furthermore, in the scenes leading up to the crisis, in a debate Mark Baum states “wall-street took a good idea: Lewis Ranieri’s mortgage-bonds and turned it into an atomic bomb of fraud and stupidity that's on its way to decimating the world economy… For fifteen thousand years fraud and short-sighted thinking have never ever worked not once.” This line portrays the post Keynesian critique maintained throughout the film as it links the current market failure to previous failures that heightened the importance of greater government intervention and policy making. Hence The big Short brings to light the dangers of a neoliberal economy and illustrates the need for government intervention.

Finally the characters are shown to be right at the cost of the US economy, snapshots of empty financial institutions, reports of banks freezing accounts and scenes of people leaving their workplaces all set the scene, illustrating the drastic effects of the crisis; before statistics display the devastating losses experienced worldwide: “5 trillion dollars in pension money, real estate value, 401K, saving and bonds had disappeared. 8 million people lost their jobs, 6 million lost their homes and that was just in the USA.” These effects were shown to be due to neoliberalism portrayed as an unstable system susceptible to crashing at any given time. Hence, McKay effectively unravels the flaws in privatisation, deregulation and free markets and implicitly implies the need for government intervention to ensure stability in the market and prevent another crisis from occurring. The film however shares a pessimistic outlook as it expects such consequences to continue to occur as similar capital intensive, risky financial instruments continue to be used.