The Big Short is a great film, cinematically speaking. It’s fast-paced, smart, funny, and cool, at least within its own wonky context. As a commentary on the incident itself, it portrays itself as contrarian while being emphatically kosher. As Andy Nowicki noted in his recent review, this is a big budget mainstream film written, directed, and financed by Hollywood. Hell, the producer, ארנון מילצ’ן, is a Jewish billionaire with ties to the Israeli intelligence service and the international arms trade.
Needless to say, you’re not going to get the full story.
What you do get is most of the bottom half of the story (minus the minority lending hustle). It’s a familiar story about an irrational market bubble ballooning out of control and the fear and panic as it quivers and then pops. You get to learn about how the derivatives were stacked atop derivatives into something of a pyramid scheme by Wall Street. That part’s certainly scummy enough, though even here, the film wants to dwell on the garden variety greed of investors themselves and the opportunists who clapped along with and got rich off of the con job.
To have the film tell it, the ratings agencies at the center of the debacle just sort of innocently screwed up in their haste to compete with one another to rate bonds high so that they could rate more bonds. The full truth is that the bonds were rated high because the government was guaranteed to backstop them and everybody knew this. The film would have us believe that nobody knew what was going on save for a handful of hand-flapping spergs who figured out the financial scandal of the century in Excel at home in their pajamas.
This is myth-making silliness.
All of the smart money had fled the real estate market long before 2007. Donald Trump, after all, remains a billionaire. When the bubble burst, the majority of the financier oligarchs were already on high ground and the ones who weren’t received a gold-plated life preserver at taxpayer expense. The film would have us believe that knowing of the bubble inflation itself was a profound revelation and that the government bailout which followed was a revelation within a revelation.
I’m no conspiracy theorist. Really, I swear. Vague and informal ethnic networking is as deep as I believe the rabbit hole goes. I believe simple stupidity and neglect is responsible for more of the world’s problems than most in my circle presume. But Wall Street practically kidnaps the brightest and most ambitious young men from the most competitive Ivy League institutions in the world in bulk and dumps them all within walking distance of one another. The film’s premise, that almost nobody was smart or motivated enough to figure out what was going on strains credulity. Thousands in the relevant circles knew exactly what was going on.
Those who were situationally aware enough to see the bubble were situationally aware enough to see that the bubble was backed (in part) by the full faith and credit of the Federal Reserves itself, the United States federal government, the entire taxpaying public, and their unborn children. There were surely some men who fell between two stools, being smart enough to see the bubble but not smart enough to fully understand it. The Big Short depicts these exceptions as quantitative masterminds who were “smarter than the federal government.”
Sure, there was money to be made by calling the burst of the housing bubble, and there were some big losers who got saddled with toxic debt. But the government not only bailed out Wall Street as implicitly promised, but real estate investments are already creeping back up to frothy levels. After you get past the luck and mechanics of it all, stock investment is ultimately about insider information. The film, the SEC, and the American public all operate on this myth that “insider information” is something which can be regulated, but all that ultimately comes of those regulatory attempts are additional complexities and greater risk for those who don’t belong to the Jewish and old money ethnic networks.
Most of the proposed financial regulations and sanctimonious sermons against greed are not only guaranteed to fail, the oligarchs are guaranteed to grow stronger relative to “the little guy” retirement, real estate, and E*Trade investors as they’re better positioned to manage regulatory complexity in their favor and are the least likely to cloud their investment decisions with moralfag buffoonery. Investors should be mindful of the moral consequences of their trades in the same way that teenage boys should be mindful to ensure the virginity of their girlfriends.
Unless there are girls with standards, fathers with curfews and shotguns, and honest regulators consistently enforcing sensible rules, the ones who do attempt to behave honorably will be punished for their efforts and eventually driven out of their respective markets. It’s kind of like with landscapers and illegal immigration. As long as the government refuses to punish the landscapers who hire illegals, the ones who dutifully abstain will be driven out of business.
Beneath the faux-revolutionary theme of this movie is a despicable attempt to blame the mid- to lower-level investment class for failing to do their homework, failing to be moral enough, and even being mean to “poor people and immigrants.” Being a “racist” blogger on a “racist” website who’s about as anti-immigration as it gets, I’m at a bit of a loss here. Even we never blamed poor people or immigrants, much less any mainstream voices. We confirmed that anti-racist hysteria fueled the bubble by creating an excuse for more irresponsible lending, but that’s blaming the regulators and lenders, not the targets.
Our position on the alternative right was from well before the bubble burst that the government and financial institutions were preying on poor people and immigrants to drive their investment schemes. Perhaps I missed a blog post somewhere, but I’m pretty sure that absolutely nobody blamed the subprime borrowers for the real estate crisis. The film depicts poor people and immigrants getting hosed in precisely the manner our side was complaining about, though to have the film tell it, the Right just sort of broadly blamed hapless foreigners and welfare queens for the housing bubble.
The Lehman family were Jewish immigrants and Lehman Brothers went bankrupt, so perhaps they’re the poor foreigners we’re blaming.
The short answer to the moral conundrum disingenuously presented by The Big Short is that you can’t have an honest and reliable market without honest and reliable regulators, and you can’t have honest and reliable regulators without an honest and reliable government. You can’t have an honest and reliable government without a revolution. The Big Short would have you believe that this system is broken and needs to be fixed. This is false. This system is working perfectly; it’s just not working for you.