February 27th 2016

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Articles from this issue:

COVER STORY SSCA: Check out this inversion of the Parental Control system

CANBERRA OBSERVED Barnaby Joyce likely to give Cabinet a kick-along

ALCOHOL Studies confirm benefit of earlier nightclub closures

HISTORY OF TAIWAN Post-WWII Japan's loss is Chiang Kai-shek's gain

SPEECH IN PARLIAMENT Welfare of children at heart of surrogacy inquiry

EDITORIAL Syria agreement first step to ending the carnage

EDUCATION Discounting Christianity in schools denies history

WORLD CONGRESS OF FAMILIES Diversity's American dream: genderless parenthood and apple pie

ENVIRONMENT Harry Butler: a victim of deep-green politics

EUTHANASIA Legitimate denial of choice at end of life (Part I of two)

ACTIVISM Safer schools or a radical Marxist sexual revolution?

UNITED STATES Big Brother v the Little Sisters: Obama takes nuns to Supreme Court

MUSIC Oppositions reconciled in logical harmony

CINEMA Of heists and hedge funds: The Big Short

BOOK REVIEW Alarms and arms

BOOK REVIEW The human factor


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Of heists and hedge funds: The Big Short

by Symeon J. Thompson

News Weekly, February 27, 2016

The Big Short is an angry film, a hyperactive rage against the perfect storm of stupidity, shortsightedness and fraud that sparked the 2008 financial crisis. The film seeks to explain what happened through the stories of those few individuals who saw the crisis coming and saw a way to profit from it.

The movie opens with Jared Vennett (Ryan Gosling) letting us know about the boringness of banking in the 1970s, and how one clever man, Lewis Ranieri (Rudy Eisenzopf) developed the mortgage-backed security. These ‘bonds’ had the security that comes with a mortgage, but the payoff that comes with putting thousands of them together. And the banks made lots of money from their fees. As Vennett tells it, banking became America’s number one industry, spurring massive growth until it all came crashing down, with only a few weirdos and misfits seeing the lie at the heart of the economy.

Michael J. Burry M.D. (Christian Bale) is a hedge fund manager in California with a glass eye, an awkward social manner, a taste for heavy metal, and a tendency to wear a t-short and shorts to work, but no shoes. He has a knack for investing, and he’s become interested in housing. He analyses the contents of the top mortgage bonds, finding plenty of problems with individual mortgages, and realises that if he can “short”, or bet against the bond, he can make a lot of money.

Burry approaches the banks to make credit-default swaps, which act like insurance on the bonds, and that will pay out if the bonds fail. The banks happily take his money, but his investors, represented by Laurence Fields (Tracy Letts) are not comfortable with such a risky bet.

And this is how Vennett comes onto the scene. He’s a trader at Deutsche Bank and he sees there’s lots of money to be made, and goes looking for people to buy more swaps. Thanks to a wrong number he ends up speaking to “America’s Angriest Hedge Fund”, run by Mark Baum (Steve Carrell) a cynical man with a non-stop rage against the world. Baum and his team are intrigued by the potential returns - and gleeful at the possibility of profiting off the big banks’ stupidity.

Meanwhile, the “garage band hedge fund” of Jamie Shipley (Finn Wittrock) and Charlie Geller (John Magaro) are trying to get an agreement with the big banks so that they can make bigger and riskier trades. They are mockingly rebuffed by JPMorgan Chase, but discover a copy of Vennett’s briefing notes on shorting mortgage bonds. Excited, they contact the one man they know who might be able to help them - Ben Rickert (Brad Pitt) a former JPMorgan Chase trader with an apocalyptic and paranoid streak, who is preparing for the end of capitalism.

Barry Ackroyd’s cinematography is claustrophobic and jerky, and Bryan Corwin’s editing is frenetic and choppy. Blending this together, director Adam McKay turns what could be a dry and dull piece of infotainment into a tightly wound heist caper, laced with profanity and the tang of bitter farce. McKay, who directed Anchorman, uses many tricks to make the film work, such as celebrity cameos to explain financial concepts and frank admissions from the characters when what’s depicted isn’t quite what happened.

The Big Short is based on Michael Lewis’ acclaimed book of the same name, and while some names have been changed and certain events dramatised it is a reasonably faithful adaptation; which means it’s a substantially accurate picture of the crash from the perspective of its protagonists. Of course other factors played a part, but this film is not about them. It’s about some of the guys who “shorted” the market, and what they thought of it all.

That the tension remains so palpable to the end is because their bet was not as sure as the film implies. While the view that there was a housing bubble was widespread, how to short it was a different matter entirely, and the costs involved in such a bet could be astronomical - which is why there’s so much pressure on them not to do it, and it’s so necessary for them to succeed.

There’s a lot of yelling about fraud in this movie, and while there certainly was fraud, the bigger problem was stupidity. In his sequel of sorts, Boomerang, Lewis explores the global financial crisis, and sees similar issues: debt being used to create the illusion of wealth, for instance, or the intricate intertwining of government and business. He argues that the deeper problem is that people, and organisations, and even countries, have sacrificed their long-term interest in favour of short-term gains. This problem is not so easily resolved, but it is one that deserves reflection – if we are not to short our future.

Symeon J. Thompson is a member of the Film Critics Circle of Australia (FCCA).

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TRANSGENDER: one shade of grey, 353pp, $39.99

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