Earlier this month, I was fortunate enough to attend the world premiere of “The Big Short,” the financial crisis drama based on the book of the same name by Michael Lewis, starring a cast of high level with Christian Bale, Ryan Gosling, Steve Carrell and Brad Pitt (Full disclosure: I was in this movie as an extra). The first day I appeared on the set of the movie, I was a little worried about how left-wing Hollywood would handle a politically sensitive topic like the subprime mortgage crisis, especially since when everyone was on the set was asked by directors if they knew what a CDO was, no one else on set at the time could explain them, let alone what “CDO” meant.

The only person who knew (besides me) was the man in the director’s chair, Adam McKay. The director, known almost entirely for directing Will Ferrell comedies like Presenter, Presenter 2, Half brothers and Knights of Talladega, as well as co-founder Funny or die, took an obsessive approach to studying the subprime mortgage crisis, something that deeply affected him (his sister lost her job during the Great Recession) and in doing so, decided to become an expert on the subject . As he called on NPR’s Adam Davidson and others to help him, he knew this film project was more than discussing the political ramifications of the financial crisis ahead of the 2016 presidential election, but rather telling the story of it. very human story of the subprime mortgage crisis and the human crisis. events leading up to it. The film, before entering the story of a small group of eccentric individuals who predicted the financial crisis, in sardonic form, tells the brief stories of Lewis Ranieri’s invention of mortgage-backed securities. in the 1980s until the passage of Gramm-Leach-Bliley in the 1990s.

After watching the film, it was clear that Adam McKay, a registered Democrat, did not let his political views dictate the film’s exposition of how financial institutions worked before the financial crisis (unlike Charles Ferguson’s 2010 documentary Interior work), but instead aims to tell a deeply human story (based on the book by Michael Lewis) of a few eccentric individuals at the crossroads of the worst economic collapse since the Great Depression. The film actually tells three separate stories of three different groups of financiers who predicted the collapse of subprime mortgages after careful analysis and many tribulations from influential individuals who discredited or rejected them altogether.

Brad Pitt as retired hedge fund manager Ben Rickert (based on Ben Hockett in real life) works with Jamie Shipley (Finn Wittrock) and Charles Geller (John Magaro), two young financiers who started a hedge fund in their garage (based on the real life Cornwall Capital) and had a new idea of ​​short selling mortgage bonds that they confidently knew would pay off when the market finally collapsed. Through the cinema, Rickert is a conscientious investor who thinks beyond his financial gains, warning them to temper their joy at spotting the mortgage bubble as they are “ultimately betting against the US economy” and that when the mortgage market does eventually collapse, ” millions of people will lose their jobs ”and suffer massive hardships of all kinds.

“The Big Short” offers a variety of explanations for what caused the financial crisis

In the aftermath of the 2008 financial crisis, there was no shortage of arguments and various explanations for the various causes of the collapse of subprime mortgages. While some researchers have further indicated that government housing policy creates a bubble in the US real estate market (see the recent book by Peter Wallison Hidden in a simple site), others have directly tackled risk-taking in financial institutions themselves. McKay, rather than siding entirely with one point of view, artfully amplifies how each character has a different take on the causes of the crisis.

After visiting several Florida mortgage bankers who offered home loans without a credit check, Steve Carrell as Mark Baum (Steve Eisman) points to the “greed” of mortgage bankers who are simply looking to collect premiums and fees without take into account the FICO scores and the underlying fault. mortgage underwriting risk. In a speech given at a conference of mortgage investors in the midst of the crisis, his character continues to blame not only “fraud” in banks for the crisis, but also in “government” and other places.

Ryan Gosling as Deutsche Bank trader Jared Vennett (based on Greg Lippmann in real life) takes a more nonchalant approach, arguing that the subprime mortgage was the result of “stupidity” rather than a “Fraud”, in disagreement with the character of Steve Carrell. In a meeting.

Other characters echo various concerns throughout the film, such as one of the younger traders who says that “the banks, the rating agencies, the government were all asleep at the wheel.”

Cameos Selena Gomez, Anthony Bourdain, and Margot Robbie Explain How The Mortgage Collateral Market Works

One of the biggest challenges any financial film faces is explaining complex financial concepts to audiences in layman’s terms. Adam McKay, using his comedic talent, comes up with the innovative idea of ​​having various celebrities appear in cameos to explain how different elements of the mortgage collateral market work. Margot Robbie explains what a subprime mortgage in a bubble bath is, Anthony Bourdain explains how lower quality credit tranches can be repackaged into CDOs, and Selena Gomez explains how synthetic CDOs work alongside the economist of l University of Chicago Richard Thaler, using a blackjack betting analogy that explains how systemic risk can arise.

Seven years after the financial crisis, is the financial system safer?

With the implementation of Basel III capital requirements in the US banking system, one could argue that the financial system is safer today by having banks better protected against another significant drop in asset prices with a cushion more important capital of about 8.5 to 11% Tier 1 capital and 10.5-13% of the total capital in place.

It could also be argued that certain elements of Dodd-Frank made the banks bigger and the banking sector less competitive (exacerbating “Too Big Too Fail”) by creating a special designation for “systemically important” institutions. A 2014 study presents evidence that tthe Durbin amendment (adopted as part of the Dodd-Frank financial reform in 2010), which requires the Federal Reserve to limit the fees charged to retailers for debit card processing, has contributed to a decline in free checking accounts offered by banks and the dramatic increase in the number of “unbanked” individuals in the United States who use payday loans.

As financial services reform continues to be a topic of discussion leading up to the 2016 US Presidential Election, there is no doubt that “The Big Short” will influence the thinking of many voters as awards season continues. begins with much praise.

See the trailer below: