1) The Movie Depicts Bankers As Merely Clueless, Not Frauds.
For most of the movie, we are led to believe
that Wall Street bankers only made one rather innocent mistake: they naively believed the
mortgage industry would keep going strong, as it had for decades. In this telling, Wall Street bankers were oblivious, not sham artists.
Our guide throughout the movie, Jared Vennett (Ryan Gosling), makes this point in no uncertain terms. He understands the worsening credit quality of Wall Street's mortgage bundles (called mortgage-backed securities or bonds), but says none of the other bankers on Wall Street do. He says they're all "asleep at the wheel" and "No one is paying attention." When he's asked point blank whether it's illegal for the banks to lie to investors about the "dog shit" that's inside these mortgage bonds, he screams, "Nobody knows what's in the bonds!" Similarly, the bankers at Goldman Sachs think Dr. Michael Burry (Christian Bale) is crazy for betting against their solid mortgage bonds.
Here's the problem: This depiction of clueless bankers is an appalling lie of omission, a failure to recognize the legally proven fact that Wall Street committed systematic acts of fraud that led to the meltdown in 2008. The movie doesn't show that bankers knowingly lied to investors about the rising default rates and debased loan standards on the mortgages inside the bonds they were selling. These lies weren't a matter of banker cluelessness, they were illegal acts of financial fraud. The banks were like a company advertising that their juice boxes contain 20% "real juice" when they actually contain no juice at all, just water and carcinogens.
The massive, systematic fraud committed by Wall Street banks has been proven over and over again by historic Justice Department settlements for billions of dollars. Just search terms like “bank settlement financial crisis,” and you’ll find loads of articles, such as this one in the Wall Street Journal about the 2014 settlement with Bank of America. The title of the press release for that settlement sums it up: "Bank of America to Pay $16.65 Billion in Historic Justice Department Settlement for Financial Fraud Leading up to and During the Financial Crisis." The settlement showed that Bank of America lied to investors about the quality of the mortgages they were buying, the same fraud shown in the "$13 Billion Global Settlement with JP Morgan for Misleading Investors About Securities Containing Toxic Mortgages," and the one in which "Citigroup acknowledged it was aware that 'significant percentages' of sample loans did not comply with underwriting guidelines but the bank pooled them into securities anyway."(1)
Unfortunately, though, "The Big Short" doesn't show any of this. It only shows oblivious bankers at the point of sale who think Dr. Burry is crazy. This is like showing friendly salespeople at the local car dealership who don't have any contact with the automaker's engineers or safety managers, so they don't realize what defects are inside the cars they're selling and how likely they are to blow up on impact. Not everyone at the banks knew about and committed this fraud, but key bankers did, and this film leaves them completely out of the story. Nor does it mention, even in a cut-away celebrity scene, that if the banks had not continued to lie to investors, those with the most skin in the game, the investors could have prevented or at least softened the crash by reducing their purchases of mortgage bonds before everything spun out of control. What a gift to Wall Street.
Obviously the accusations of fraud in the last part of the movie inject an angry, moral tone, but even here the movie blows it. The alleged fraud in these final scenes is a separate issue, not the fundamental fraud at the heart of the system. Burry, for example, is referring to bank valuations of his own unusual "shorts," not the more far-reaching, devastating fraud later proven by all those Justice Department settlements, the lies about the mortgage bonds themselves. And even these late, bait-and-switch accusations of fraud don't get explained in any detail.
Worse, these unexplained accusations of fraud get directly contradicted by Gosling, our all-knowing narrator and guide through this other world. He repeats what he said in the first half of the film: the bankers’ problem is "stupidity," not fraud. In a memorable line, Gosling flat out rejects the possibility of identifying fraud when he scoffs, “Tell me the difference between stupid and illegal and I’ll have my wife's brother arrested.” How can we doubt Gosling? After all, he's the film's omniscient narrator and guide. With voice-overs and direct addresses to the camera, he sees into the past and the future, telling us the meaning of what just happened on screen or is about to happen. Sadly, the movie doesn't show that actually you can tell when certain key people at these banks committed fraud, and here's how they did it.
A "Vox" reviewer was therefore right to conclude that the movie's "ultimate villain isn't 'the government' or 'the evil bankers.' No, its ultimate villain is the combination of incompetence and stupidity..." As Ben Hallman of the "Huffington Post" noted, “the loaded word 'fraud’ is tossed out without adequately explaining what…was actually criminal. …[T]he movie does not stretch to show how bankers were purposely misleading clients.” I don't think any of us is missing anything. In fact, we're perceiving exactly what the screenwriters said they wanted us to see. Co-screenwriter Charles Randolph stated that after doing some reading and talking with a few friends in finance, he concluded that the bankers were clueless, that "no one had any understanding of the real underlying product."
The screenwriters did some great work in making finance come to life, but it's a shame they got suckered in by this notion of clueless bankers. Michael Lewis didn't have this Justice Department settlement news in hand when he published the book that the movie was based on, but the screenwriters certainly had access to these crucial, public facts well before they released the movie, and unfortunately they chose not to include any of it.(2)
2) Bank Fraud Never
Gets Embodied in a Central Character
This movie has many compelling characters played by fantastic actors—yet we never get one
central character who puts a face on banker fraud. We get a
few suggestive, fleeting characters, such as the mortgage brokers in Florida and the
smug guy that Steve Carell talks to in the restaurant at the Vegas convention,
but there is no ongoing, primary character shown knowingly lying to an
actual investor, or even just someone high up in a bank taking in huge bonuses
and fees from clear investor fraud. Director and co-screenplay writer Adam McKay agrees that he never put a human face
on banker fraud, but he sees that as a virtuous move, whereas I see it as an egregious omission and missed opportunity to get audiences to understand what went wrong. At least we agree on one thing: this lack of a human face for banker fraud helps explain why McKay's friends in finance loved this movie. As McKay told Terry
Gross in a radio interview,
“My financial advisor loved the movie. He really loved the movie. I have a
cousin who’s in private equities, too, and he’s in private equities, and I had a
little conversation with him before I saw it. I go…you know, this movie is not
actually targeting bankers. …So we really went out of our way with the movie never to point the finger at any one individual; we really believe it’s a systemic issue. So, so far all the banking
and finance people in my life have really enjoyed the movie.”(3)
Sure, why wouldn’t finance people love this movie? They can
safely assume that it will be hard for most viewers to focus their anger on an abstract “systemic issue”
with no major characters on screen to make it real and comprehensible. On top of that, the bankers get to imagine they're Ryan Gosling…
 |
Ryan Gosling’s character, the
only banker who gets developed into a full character, is not just
handsome and smart, he's powerful, decisive, and omniscient. Sure, he's smug and self-interested, but, at a gut level, most viewers probably do not feel that Gosling's character is the real villain. In fact, by portraying Gosling's character as an underdog, outsider, and confidant who guides us through this other world, the narrative is designed to make us root for him.
As always, reactions vary, and some viewers may find Gosling's character more distasteful. But my overall sense, based on what viewers are saying online, is that the majority of viewers come away from the movie with fundamental, ongoing confusion about what exactly the bankers did wrong. Even those predisposed to condemn "greed" don't come away from this film with greater understanding of what specifically went wrong here. With viewers having a hard time understanding the fraud committed by an unseen, faceless banking system, Wall Street doesn't have anything to worry about with this film.
As always, reactions vary, and some viewers may find Gosling's character more distasteful. But my overall sense, based on what viewers are saying online, is that the majority of viewers come away from the movie with fundamental, ongoing confusion about what exactly the bankers did wrong. Even those predisposed to condemn "greed" don't come away from this film with greater understanding of what specifically went wrong here. With viewers having a hard time understanding the fraud committed by an unseen, faceless banking system, Wall Street doesn't have anything to worry about with this film.
Why It's Fair to Ask this Movie to Do Better
I'm not asking for a fundamentally different film. Exposing banker fraud would have easily and squarely fit within this film's chosen narrative structure: namely, a story about outsider
investors fighting against Wall Street bankers. For example, the film could have dramatized the sections in Michael Lewis's book
on Wall Street's role in housing scams going back to the 1990s, as well as the evidence of fraud in the Financial Crisis that Lewis didn't have access to when he published his book in 2010. In fact, adding one
nasty, compelling banker who knowingly engaged in investor fraud (instead of or alongside Gosling's character) would have
enhanced the story by providing an actual character for these underdogs to rail against.
Such a modification to Lewis's book would have fit within the creative license the filmmakers took in adapting it for the screen. Having already deviated from Lewis's book by adding new dialogue, a banker narrator, and explanatory scenes with Margot Robbie and Selena Gomez, the screenwriters certainly could have managed to add some explanations of Wall Street fraud. Instead, we got a movie that only insinuated fraud, but never exposed or explained it. That's a real shame because this brilliantly crafted film was one of our best hopes for widespread public understanding of what Wall Street did wrong.
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P.S. If you'd like to read a true story about the Crisis from the perspective of a first-generation immigrant who in 2006 had perfect credit, unbounded love for America, and no idea the crash was coming, you can check out my book, Corner-Store Dreams and the Financial Crisis of 2008. The book tells the story of our unlikely friendship and this man's plan to buy a small bakery in Oregon with his first-ever business loan, putting at risk his family and life savings after working in the fields for many years. It delves into the personal side of this Crisis for innocent citizens and small business owners.
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P.S. If you'd like to read a true story about the Crisis from the perspective of a first-generation immigrant who in 2006 had perfect credit, unbounded love for America, and no idea the crash was coming, you can check out my book, Corner-Store Dreams and the Financial Crisis of 2008. The book tells the story of our unlikely friendship and this man's plan to buy a small bakery in Oregon with his first-ever business loan, putting at risk his family and life savings after working in the fields for many years. It delves into the personal side of this Crisis for innocent citizens and small business owners.
*******
FOOTNOTES:
(1) If you've only got time to read one journalist report about just how much the banks (again, meaning certain key people in them, not every single banker) knew they were committing fraud, check out this magazine article about a whistle blower at JP Morgan Chase who witnessed repeated dishonesty and debasing of quality control in the mortgage securities being bundled and sold to investors.
(2) The major Justice Department settlements for mortgage fraud started coming out in 2012 (with some even earlier) and the movie was released in 2015, so the screenwriters had enough time to make the script reflect these legally proven facts about Wall Street fraud. They also clearly took the creative license to add features that were not in Lewis's book (such as adding an omniscient narrator), so they had the "narrative space" to address this proven fraud, yet they chose not to.
It didn't help that Adam Davidson, the primary finance consultant during the movie's script writing and production, was in bed with the banks and finance world at this time. Ally Financial, one of the largest subprime mortgage lenders before the Crisis (later bailed out by taxpayers), was the sole sponsor of Planet Money, the NPR show that Davidson co-founded during the Crash in 2008 and where he was still employed while consulting on "The Big Short." Davidson has also apparently taken big speaker fees from Wall Street banks like JP Morgan and Goldman Sachs, a violation of standard media ethics (see Observer). Following screenwriter Adam McKay's own stated ethics, Davidson should not have been hired to work on "The Big Short." McKay tells audiences that one of the primary lessons of this movie is that you have to ask who's paying who: "I always say, look at your candidate: If they’re taking money from banks, oil companies or billionaires, don’t vote for them." By that sensible rule, and knowing the movie was supposed to be a critique at some level, Davidson shouldn't have been allowed on the movie set, yet apparently Davidson was the movie's primary finance consultant. In fact, Davidson is the only person listed in the movie credits as "Technical Consultant," and as Davidson himself later said, "There was a moment when the movie was locked, when it was done, and I was the only person with a finance background who had seen it...." (Elsewhere Davidson said, "Adam McKay [the director] did talk to a variety of economists. I'm not an economist.") So it seems fair to say that Davidson was the single most influential consultant on this film; and, based on his prior views and vested interests, he wasn't likely to encourage the screenwriters to focus on bank fraud.
As for Michael Lewis, he finished his research and published his book in 2010, well before the major bank settlements and DOJ investigation results started coming out in 2012. In fact, Lewis had chosen his basic storyline even earlier, as you can tell by looking at the striking overlap between his book and the "Portfolio" magazine article he published in 2008.
(3) In a separate interview for Variety, McKay clearly states that he believes there was corruption at all levels, but he doesn't include lying to investors in his three different examples of fraud, or comment on how he tried to convey all this in the movie.
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