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Is the Big Short the Film that the Financial Crash Deserved?

Film critics and audiences love it; one leading financial journalist, who reported the US financial crash for the Financial Times, knows what The Big Short really represents.

Any self-respecting journalist or banker hates Michael Lewis. Bankers are scumbags and reporters are morons, says Lewis; sometimes with more grace than that, sometimes not. Then there is the fact that Lewis is himself a journalist and author whose income puts most bankers’ in the shade, thanks to an uncanny ability to sell millions of books about finance and then flog the movie rights.

Most galling of all, of course, is the fact that he is very good at what he does. The Big Short, whose film adaptation is now nominated for a Best Picture Oscar, managed to take the story of three sets of unknown hedge fund managers taking short bets on mortgage securities and turn it into an international bestseller.

I covered the fire-fighting efforts of the US government after the financial crisis and in 2010 the glazed looks on lawmakers eyes suddenly dropped away. A book had been published, which they could understand, and it was less than 300 pages. They waved The Big Short around in congressional hearings like it was holy scripture.

The movie version aspires to similar glaze reduction but it resorts to some cheap tricks. The most notorious is breaking from the narrative to have an actress in a bubble bath ‘explain’ the mortgage market, while drinking champagne. Two women I know who have seen the film found it offensive. Even if you find the scene titillating, it is a distraction. Lewis’s great skill with words is to explain complex subjects simply with the help of colourful characters. The fact that the director could not manage the same thing within the movie is a failure.

The film is usually not too black-and-white. Brad Pitt’s wonderfully understated older financier points out that real people are losing their homes

The film is best when it abides by the old narrative adage to “show it, don’t tell it”. And it is funny. The humour helps it rise above more portentous financial dramas of recent years such as Margin Call or Arbitrage. The best gags are incidental to the plot. One character asks, rhetorically, what kind of company would treat customers badly yet succeed. After a short pause, the answer: “Fine, Goldman.”

There is even an instructive scene containing a more legitimate display of female flesh. Steve Carell’s hedge fund manager, who is considering shorting the housing market, pays for a dance from a stripper to interview her about her loans. In a nice irony, he successfully explains “teaser rates”. Most often, the movie does not make mistakes. The robust and colourful vernacular of Wall Street is generally well captured.

That is essentially, the movie’s mission, perfectly laudable but the punches do not always land. In one that does, to an extent, a credit rating agency employee confesses that banks will be given whatever ratings they want because otherwise “they will go to [the competition], right down the block”.

Inevitably, the film goes after the sleepy journalists and happily it portrays them as working at the Wall Street Journal. But irritatingly I found myself sympathising with my rivals. The Journal reporter is depicted turning hedge fund managers out of his office (he has an office?) and rejecting a story about the rotten mortgage market because “it took years to build my relationships on Wall Street” and he has a “three-year-old and a wife”. There were plenty of failures – and the odd success – among journalists delving, or failing to delve, into the pre-crisis problems of the financial system but reporters do not tend to reject information because it might irritate sources. A more accurate diagnosis might be that they spend too much time with bank executives and not enough with the financial system’s heretics. But that is a more nuanced story.

The film is usually not too black-and-white. Brad Pitt’s wonderfully understated older financier scolds the young hedge fund upstarts for celebrating when their positions turn good – he points out that real people are losing their homes. But arguably this reality check does not go far enough. Sheila Bair, the former US regulator, recently pointed out that some people with shorts were working to actively impede efforts to modify mortgages of struggling homeowners. This sits uncomfortably with the hedge fund managers as the story’s geniuses and heroes.

The blind arrogance of the Wall Street banks is a perfectly fair target as is the complaint that almost no one was prosecuted despite rampant mismarking of positions. But the neat summing up resorts to some simplifications. “Banks took the money the American people gave them and used it to pay themselves big bonuses,” a narrator intones. It’s not really true. At best, you can argue the banks were saved by the government and able to stay in the game long enough to pick up big profits in 2009 when markets turned up.

And what of the American people themselves – the homeowners who lied about their income or just took on more debt then they could afford? The movie lets them off the hook for their complicity at the same time as patronising them utterly. “And what do they care about? The ball game or which actress went into rehab?” muses one of the fund managers. In reality, there is a spectrum of scumbags and morons, and we are all on it

Tom Braithwaite covered the financial crisis and its aftermath for the Financial Times in Washington and New York, and now writes for its Lex column.