December 5, 2015 -- This is a based-on-fact drama about a few of the people who saw that the 21st Century housing bubble was about to burst, collapsing the entire financial system. All of the top people in finance, including the Secretary of the Treasury, said the financial markets were fine in 2007, but these guys knew better.

Based on the 2010 book, “The Big Short: Inside the Doomsday Machine,” by Michael Lewis, this film does two things, it tells the story of a small group of people who were right when everyone else was wrong, and it tries to explain, in layman's terms, what caused the great economic collapse of 2008.

This film often breaks the “fourth wall,” the side facing the camera. Characters look straight into the camera (which is actively avoided in most films) and speak directly to the audience. This is rarely done, but is done a lot in this film. A lot of the time, it is done to explain technical financial market terms to the audience.

Banking used to be a boring market, with steady, reliable income and low percentage yields. Then with the relaxing of federal banking regulations in recent years, it became a kind of giant Ponzi scheme, with high risk mortgages being packaged in complex ways and passed off as low-risk bonds. Bond rating agencies went along with the scheme and federal regulators, with their budgets slashed, didn't stop this gambling either.

One of the first people to see the housing bubble is Michael Burry (played by Christian Bale of the “Batman” movies) a doctor running a small investment company, Scion Capital. A whiz with numbers and an eye for detail, Burry is an outsider (who has Asperger's syndrome) who sees things differently. He reads thousands of mortgage reports and sees that when monthly payments skyrocket for millions of adjustable rate mortgages in 2007, a flood of foreclosures will follow, bringing down the entire mortgage-backed bond market.

Burry begins to buy millions of dollars worth of financial instruments (called credit default swaps) that will pay off for his investment firm in the event of a default of the subprime mortgage market (mortgages taken by people expected to have difficulty keeping up their payments). People think he is crazy, including some of his own financial backers. For one thing, he has to pay millions if the market goes up, which it does. His investments will only pay off when the subprime market collapses.

An investment which pays off only when the market falls is called a “Short,” hence the name of the film. He knows the market will collapse, but it takes a lot longer than he thought. He faces a rebellion, including lawsuits, from his own investors before the market finally collapses, and his investments pay off, big.

Another guy who sees the financial collapse coming is Jared Vennett of Deutsche Bank (Ryan Gosling of “Drive”). In addition to being the film's narrator, he proposes a similar bet to what Burry is doing on Wall Street, but he can't find a financial firm to help him until he arrives at Mark Baum's (Steve Carell of “Foxcatcher”) firm. Baum, an angry man who distrusts the Wall Street bankers, is just the guy to take Vennett's proposal seriously.

Baum and his staff look into the claims that Vennett makes in his proposal, and find they are all true. Big Wall Street banks are indeed trading worthless bonds and other financial instruments based on millions of bad mortgages that will inevitably default. Baum and his team discover that the banks are betting big on subprime mortgages. They are betting many times more money than they have in reserve in case of default. As an increasing number of mortgages around the country go into default, in part due to rampant speculation, the financial system is on the brink of collapse, but few notice.

Baum takes the plunge and invests in Vennett's scheme. A couple of other investors, also become aware of the situation around the same time, Charles Geller (John Magaro) and Jamie Shipley (Finn Wittrock). They want to bet against the bond market too. Geller and Shipley don't have the financial clout to get into the market, so they contact an old friend, Ben Rickert (Brad Pitt of “12 Years a Slave”) a former broker who has withdrawn from society. He agrees to help them with their investment idea.

There is quite a bit of drama in the story, as all of these investors have to ride out unexpected fluctuations in the market before their risky financial bets finally pay off. Both Burry and Baum face a lot of pressure to sell off early when the market goes against them. Geller and Shipley also are at the point of going broke as the market behaves strangely.

Along the way, various famous people and experts explain, directly to the audience, some of the exotic investments that brought down the economy, such as “synthetic collateralized debt obligations” and other exotic packages of mixed prime and subprime mortgages, asset-backed securities, that looked safer than they really were to many investors. Basically, it was a banking shell game, and the game was rigged against investors.

The movie also takes us to Florida, one of the first places the housing bubble burst, to show us the impact on families, and to Las Vegas, where a convention of investors is the backdrop for Baum finding out just how much debt is tied up in the subprime mortgage market. At the end of the film, inter titles tell that banks are now up to those same old tricks again.

This is a very informative movie with strong performances by Carell and Bale (who are portraying real investors, by the way) but the on-screen narration and explanations interfere with the flow of the movie. This is almost like experimental filmmaking. It doesn't fully work, but it is not bad. For some people, it will be the best explanation they'll ever see of what is fundamentally wrong with our financial, political and regulatory institutions. This film rates a B.

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Copyright © 2015 Robert Roten. All rights reserved.
Reproduced with the permission of the copyright holder.

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