The Big Short (2015) Movie Review

The 2015 film 'The Big Short' directed by Adam McKay takes us back to the mid-2000s, a period when the United States housing market was experiencing an unprecedented boom. This dark comedy-drama sheds light on the true events that led to the financial crisis of 2007-2008. While the movie provides an entertaining and thought-provoking narrative, it is important to separate the facts from the fictional elements portrayed on the screen. 

At the center of 'The Big Short' is Michael Burry, a brilliant hedge fund manager played by Christian Bale. Burry was one of the few individuals who foresaw the impending housing market collapse and bet against the high-risk subprime loans that were being issued at an alarming rate. His investment strategy involved purchasing credit default swaps (CDS), which are financial instruments used to protect against the default of mortgage securities.

The film accurately highlights the chaos surrounding the housing market during this time. Lenders were approving loans to borrowers with poor credit histories, often without requiring proper documentation. These high-risk subprime loans were then bundled together and sold off as mortgage-backed securities to investors. The demand for these securities was high, as they were perceived as a safe bet due to the historically stable nature of the housing market.

However, the movie does take some creative liberties when it comes to certain characters and events. For instance, the character of Mark Baum, portrayed by Steve Carell, represents a group of hedge fund managers rather than an individual. This amalgamation of characters allows the film to portray different perspectives within the industry. Additionally, certain dialogues and scenes are fictionalized for dramatic effect.

One of the critical takeaways from 'The Big Short' is the lack of transparency that existed within the financial industry at the time. The complexity of mortgage-backed securities and the associated derivatives made it difficult for even seasoned investors to fully understand the risks involved. This lack of understanding contributed to the widespread belief that the housing market was invincible, leading to the eventual crash.

The film also sheds light on the role of credit rating agencies in the crisis. These agencies were responsible for assigning ratings to mortgage-backed securities, giving investors an idea of their risk level. However, the conflict of interest within the industry, as depicted in the movie, resulted in these agencies giving higher ratings to risky securities, ultimately deceiving investors.

'The Big Short' serves as a reminder of the importance of informed investing and the need for regulatory oversight in the financial industry. The events portrayed in the film have had a lasting impact on the real estate market and the global economy as a whole.