Collateralized debt obligation. It’s a fantastic phrase; it just kind of rolls off the tongue, doesn’t it? A collateralized debt obligation, or CDO, is what happens when a series of loans are packaged together and sold as a vehicle for sequenced repayments. Principal and interest from the loan payments funnel into the CDO, and the CDO’s contents are paid by credit rating, from the highest-rated down to the lowest-rated, in sequence. They functioned as one of the primary drivers of subprime mortgage loans, and one of the crucial ingredients in the 2008 economic crisis.
Movie Review: The Big Short
By Ben Gruchow
December 29, 2015
This is a very simplified mapping of one factor among many, in a recipe that led to millions of people losing their jobs and their homes (and in many cases, their reputations and lives). It’s more than enough to power a rational, analytical story about a complex process with virtually nothing but shades of gray. This is not what we have here. Adam McKay’s The Big Short is the angriest film on the subject since Inside Job back in 2010, and it’s a potent reminder of how very close we remain to the same precipice. More than that, it’s an intelligent and perceptive piece of work that helps to give us an idea of just how readily we’re willing to skirt the edge of that precipice, as long as we’re given the idea that everything will turn out all right.
The movie begins on a note that’s unusual but appropriate, with Christian Bale’s hedge fund manager, Michael Burry, telling a story to a would-be hire at his Scion Capital investment group in 2005. The story is an anecdote that serves to introduce us to a man who seems to be all wrong for this line of work: partially blind, a doctor of medicine, an eccentric who takes his therapist’s advice (to express himself) in the bluntest of ways. We follow Burry for the first short chunk of The Big Short, as he realizes in short order that the U.S. housing market, thought to be rock-solid and on an unstoppable climb in 2005, is actually unstable and on the verge of collapse. When his initial warnings to his partner go unheeded, he ventures into the world of credit default swaps with several investment banks; he’s betting against the housing market. The investors, believing there to be no end in sight to the market climb, accept his proposals with barely-concealed glee.
This activity is highly unusual; one communication leads to another, which leads to another, and it ultimately reaches a core group of investors and traders who realize the potential for profiting off of the housing collapse puts the revenue from the housing itself to some shame. The principals here are Jared Vennett - played by Ryan Gosling with exactly the sort of combination of intelligence and cockiness that you would figure must be part of the job description for an investor of his type - and Mark Baum. I’m hard-pressed to think of any actor who could effectively represent the real-life Baum’s notoriously caustic and confrontational demeanor better than Steve Carell, and The Big Short gains several extra layers of energy whenever he’s onscreen by the sheer heat and volume of the performance.
Understanding that the world of CDO’s, credit default swaps, and subprime lending is complex and difficult to parse in a cinematic context is one thing; finding a way around that roadblock is quite another. I found 2011’s Margin Call worthwhile, but it’s not the stuff of escapism, and it closed its theatrical run with barely over half a million dollars - less than what some of its narrative participants made in a month. The Big Short addresses this by cross-breeding the technicalities of Margin Call with the tone and spirit of 2013’s The Wolf of Wall Street. The combination works; both of those films thrive on complicated mechanisms spit out at high energy by people who made their living on thinking on their feet. And it shares with both films the theme of high-stakes investment and trading, and the separate personal trait of dehumanization, representing causation instead of correlation.
Bale writes out a short manifesto in this film that says as much in a more direct and empathetic way, and one of the other things that The Big Short shares with the other upper-echelon films of its type is the representation of more than one point of view, and the uncomfortable (almost certainly true) assessment that nobody involved really thinks of themselves as the villain of the piece; such a perspective would require looking at what is right and wrong in the industry in the context of ethics, instead of smart and dumb in the context of revenue. You can look at the individuals responsible for building the house of cards that the market turned into, and you don’t see someone who’s gunning for the collapse of a person’s life; you see someone who thinks about their line of work in binary and clinical terms.
The Big Short addresses this in a direct and elementary way, in a scene between Brad Pitt’s former Wall Street banker Ben Rickert and two private investors who have also become privy to the impending collapse. The scene takes place against the backdrop of slot machines; in a real-life gesture that’s so thematically appropriate that the film really has no choice but to present it as-is, a convention for financial securities - attended by well-heeled bankers and investors seemingly ignorant of the impending collapse - is held at the Caesars Palace in Las Vegas. You see the setup there, and you think that while the bankers may not have known what was about to happen, their travel agents and coordinating staff may have had an idea.
The scene makes the explicit acknowledgement that the credit default swap goldmine our main characters are gunning for will come about because people will lose their jobs, their homes, their security. Pitt gives them and us the statistic on just how much people depend on those things: for every one percent rise in the unemployment rate, 40,000 people die. How that happens is not explained; it doesn’t really need to be.
This scene is energetic and emotional; it’s also primal and elementary. I’ve backed off on my immediate post-screening assessment of The Big Short, which was that it was one of the best films of the year. For all that the movie gets right, it bears the hallmarks of a director still navigating his way around complicated and emotional character beats. This is logical; director Adam McKay’s career before now has mostly centered around Will Ferrell comedies. This is a step up for him, but it’s one he hasn’t finished making. When it comes time for the movie to speak plainly and earnestly - as it does in several scenes between Baum and his wife, played by Marisa Tomei - it often does so at the expense of its own rhythm and narrative flow.
Still, The Big Short gets a lot right, and it avoids that kind of arrhythmia by very rarely taking a detour into earnest territory. This is smart and uncompromising material, albeit rough and unmodulated in its approach; when we get technical explanations about the nature of the impending collapse, they come out of the mouths of people who are by turns disbelieving and cynically believing of how anyone could be so stupid, or so corrupt. As if to reinforce this, the movie ends with a postscript that’s sort of like a kick to the gut. The real punchline of the joke here isn’t that we got ourselves so close to the precipice and then went over it; it’s that we’re fine with being that close indefinitely as long as it’s packaged in the right way.