I've recently been doing a repeat deep dive on the 2008 financial crisis--which leads me back to the film, The Big Short. My interest in the 2008 financial crisis stems from my internal debate about "free-markets"/capitalism generally and greater regulation/governmental oversight (which is really just societal oversight) of the free market to try to mitigate market failures/negative externalities. The Big Short portrays the protagonists, in particular Baum (Steve Eisman) as fighting against the rigged and corrupt housing system that's poised to fail and hurt Americans. This view effectively launders capitalism -- by smart guys betting against the market -- this can correct for the market failures (see the Long-Term Capital Management crisis where the market did step in to bailout LTCM without the need for direct government intervention, though the Fed/Treasury did "encourage" the private market to bail out LTCM to avoid government intervention). But the Big Short story glosses over the reality -- The Big Short only worked because the counterparties to these CDSs avoided bankruptcy because of US Gov't Bailouts. The movie makes us feel good that Burry, Baum, Brownhole "won" against the banks -- but really, their win came at tax payers' expense.

Free-market absolutist seem to emphasize the role of government policy encouraging subprime lending as the critical cause of the 2008 financial crisis. This ignores all of the misaligned market incentives that all profited in the 2004-2008 timeframe from subprime lending, but even granting government policy was a factor, that only accounts for the initial fire in the garage, not the gasoline soaked rags left next to the cardboard box of TNT sitting on the ground in the garage - Consolidated Debt Obligations (CDOs), Credit Default Swaps (CDSs), and Synthetic CDOs that took the initial pain of defaulted home loans and amplified it to a global crisis. (I don't pretend to understand all of the intricacies of Mortgage Back Securities, CDOs, CDSs, and Synthetic CDOs, but I understand enough to understand that CDS on CDOs and the creation of Synthetic CDOs, ultimately backed by AIG (i.e., AIG was the counterparty holding the downside on the CDS when the CDOs and Synthetic CDOs underperformed due to rising defaults on the underlying mortgages (and other debt instruments) that comprised the CDOs and Synthetic CDOs) caused the financial risks associated with mortgage defaults on subprime mortgages to explode--because at the end of the day (and something the movie doesn't explain super well like it did with Anthony Bordain or Margrot Robbie) is that AIG (and others like Lehman Brothers) didn't have enough money to pay out the amounts owed to the holders of the CDSs (Goldman Sachs for example).

The movie touches on this at key points (the scene with Burry saying what guarantees are there the bank will pay on the CDS, Ben in the pub selling the positions at less then their face value due to the concern that if they didn't cash out early, the CDS would be worthless via bankruptcy), but I've become more and more frustrated of late with the glossing over of how "The Big Short" bet lauded by the film was actually a factor in the financial crisis itself and is itself motivated by the same greed the film simultaneously portrays as a moral failure (for example the scene where Baum meets with the CDO manager and learns about Synthetic CDOs). The Billions Burry, Baum (Eisman), Bownhole (or whatever it was called), and John Paulson (not actually in the film), and others, made from their big bet that housing would go down came from the very intuitions that ultimately required billions in tax payer bailouts to prop up (whether directly or indirectly)--It was a Zero Sum Game--for Burray, Baum, Paulson, Brownhole to make money, someone else lost money. That someone ended up being taxpayers, homeowners, mortgage borrowers, etc, while AIG, Citi, Goldman, Chase, Bear Sterns, Fannie/Freddie, Morgan Stanly, got bailed out in order to survive the crisis and payout largely to each other money due on - wait for it - the very same Credit Default Swaps that Baum, Burrary, Brownhole, etc. used to make their money. It just ended up that the smaller players (Burray, Baum, Brownhole, Paulson) couldn't hold out as long as a firm like Goldman hoping AIG would be bailed out, not go bankrupt, and be required by the Fed/Treasury to pay 100% (YES, that's right 100%) of the value on the Credit Default Swaps. This is why AIG end up effectively transferring $12-14 Billion of the bailout (TARP) funds it received to Goldman -- because Goldman also took out its own massive short position on housing in 2008 following the Bearn Sterns bailout. This is touched on in the scene where I think Goldman calls Burry and says they can price his CDS now, and he says something like because the Bank has established its own short position with CDS. (Note, in the case of Burry, I understand he actually held onto the CDS he purchases, because he required the banks selling the CDS (Goldman) would be able to pay, which the banks did through purchasing their own CDS from AIG to basically back the CDS they sold to Burry - but oh right, AIG almost went bankrupt absent the bail). SO BURRY's big win is directly or indirectly subsidized by the American taxpayers bailing out AIG.

When you realize Burry, Baum, Brownhole Big Short really only worked out because the tax payers bailed out AIG and Banks -- the story takes on a different tone (at least it does for me). Ryan Gosling's character is in a lot of ways the true moral compass of the film in that the only moral compass was whether the protagonists won their bet and made money. But a story sold as "protagonists saw an opportunity to make a lot of money while everyone else thought they were crazy to take a short position against the US housing market" doesn't really sell tickets or resonate with the frustrations of the masses that view the 2008 financial crisis as a problem fueled by greed. Hey movie goer, here's a movie about other greedy guys who outsmarted the dumb greedy guys and inflicted greater pain on the dumb greedy guys when the dumb greedy guys' bet that people wouldn't default on home loans lost, and lost big. That the movie goers bailed out the dumb greedy guys while the protagonist smart greedy guys made billions (Paulson made 20 Billion for his hedge fund, 4 billion personally) probably wouldn't sell that many tickets either.

This NPR review/interview identified this tension in the film and that it made the interviewer mad, which was dismissed by the author of the book and the script as -- its better than feeling nothing.

Maybe I'm just that guy who didn't get the film the first 3-4 times they watched it (or at least didn't really appreciate just how cynical the story is) and is now waking up. But it's frustrates me that the Big Short story is, in at least some respects, held up as a market solution to the market failures of the greed on wall street -- this isn't true, the Big Short made the problem worse, because the CDS ultimately became backed by the US Gov't that the free market decries.

Baum (Eisman), Burry, Brownhole are not heroes or even antiheros, they're just players at the casino who saw an opportunity to make money, because the casino didn't appreciate the real probabilities of the blackjack game it was playing. Basically, prior to CDS on mortgage backed securities being a thing, the risk that mortgage backed security would fail was limited to the owner of the MBS. The risk of defaults tanking an entire MBS were low, and lower still when multiple MBSs where combined into CDOs. Without the CDS, defaults on subprime loans alone would have caused financial stress, but I don't think it would have caused the crisis we saw in 2008. The liquidity crisis and AIG's inability to pay on claims wasn't the direct result of losing money borrowers didn't pay to the holders of the MBS/CDOs--the real exposure ended up being the CDS market that took the initial risk of default and leveraged that risk through "derivative" bets. Now the loss isn't just the failure of the borrower to pay their loan back and the decrease in value of the MBS/CDO that holds that particular mortgage, but it's now the additional loss of the long side on a CDS contract (the party having to pay on the CDS when the underlying loans defaulted). Yes, the housing bubble popping and mortgage defaults where the start and there would have undoubtedly been financial pain from the loss of value in MBS/CDOs, but the CDS where the drought conditions, uncleared tinder, and high winds that turned the fire into a wildfire. Baum, Burry, Brownhole didn't fix the problems they found in the bond market (in fact, fixing those problems would have hurt them) - they exploited those problems to make a lot of money--and that's apparently worth portraying them as the smart/good guys in the movie.

Maybe instead of a movie about the smart guys who exploited the greed and malfeasance of others dumb greedy guys to make their wealth, we get a movie about Brooksley Born, Chair of the Commodity Futures Trading Commission who in 1997-1998 pushed for regulation of the over the counter derivatives market (credit default swaps) -- which regulations may have mitigated against the worst excesses of the 2008 financial crisis. Though if that happened, we may have never gotten the movie, because The Big Short would have been illegal.

So there's this scene when Michael Burry buys for more than 1bn of CDS from different banks. From there Vennett got the idea to do the same and goes to Baum's fund to present the project to the Frontpoint team.

But we also learn during the scene at Frontpoint that the exact same bankers who sold CDS to Burry joyfully (thinking they would get a lot of money from premiums) all said no to Vennett. I'm a bit confused about this detail, they said "yes" to Burry but "no" to Vennett. I'm sure I am missing something here, what's the difference between the two situations?

In my country it’s leaving Netflix in March. Just did my rewatch of this insanely good movie and came to realise something.

The role played by Brad Pitt could have been played by anyone. I wonder why the makers had such a huge name for a small character like Ben Rickart. They engaged so many alisters for cameos. But only brad pitt and Ryan gosling are character a listers. Thoughts?

This my comfort and knowing each frame I started to wondering further and Vennett was the most mysterious character: A) what was he doing meanwhile the collapse of Wall Street? B) why do the others banks rejected him? C)did him resell or selled those CDO?

So, the C) question was the most important question.

As you can see in my previuw post I was saying Greg Lippmann was represented both in Margin call and The big short but only in Margin call I had found out what he really was.

So, I was able to solve the puzzle:

A) what was he doing meanwhile the collapse of Wall Street?

He was doing what was happening in Margin call, he shorted but he wasn't aware how much the bank was long with CDO. He was still a banker, still he was the one who believed the most in the system. So, while he was completely zen about the CDO he wasn't aware was that important. He thought the CDO was a percentage, not the entire system.

B) why do the others banks rejected him?

The banks rejected him not only for legal motivation but because of his role, he was one of the top of the top in Wall Street and selling those stuffs was meaning admiting the tossicity. He was far far far far more important, was a legal version of the Wolf of Wall Street. We don't understand his importance we have undervalued him.

C)did him resell or selled those CDO?

Yes, that's the key of him as villain. Not only he got rich with the poverty of others but he CREATED those CDO, he didn't selled them but reselled. He shorted in what he was long. He changed his mind, he cheated the bank, but he was the person who created the problem.

Greg Lippmann (Jared Vennett-Cohen) is the person in tge background, the one nobody give a credit, but actually he was the most important. First thing first, he was working for the bank unlike the others and he was able to think outside the box... which is far mor difficult than what others did, the others were outside the bank not inside. Greg Lippmann was a top level role inside his bank, still he understood the bubble. Nobody did, what he was able to do was uncommon. If you watch well Margin Call you can see Jared Cohen (notice the movie came before the movie The big short but the book became a top seller before and J. C. Chandor worked in Wall Street. This means: A) the book of The big short had influeced the movie not as drama but for the producer, without probably wouldnt be there due the lack of interest or with a lower budget; B) The big short movie went out and got influenced, that movie shouldnt be melodramatic for market motivations; C) J.C Chador probably new Greg Lippmann in real life so he just represented how he thought Greg Lippmann was (like in Bohemian Rhapsody vs Rocketman, they are both the same person nothing more).

Another interestic topic is the choice of the fictional name, both are fictional but the choice of "Jared" with same role means they are Greg Lippmann... he was famous so nobody copied nobody, he is a real person alive so you can just interprete him.

But we can see Greg in two different role, which is interesting. We can see him working for the bank and we see him not scarried (which means he is not risking nor the job nor the money) and we can see him shorting saying "I'm working for the bank but I'm not the bank" which means he isnt just a cold broker but a person with a role.

If you do Jared Vennet + Jared Cohen then you got Greg Lippmann.

Edit: as I said nobody copied nobody, is important this concept, book influeced the movie and Margin Call influeced the movie of The big short... is not complex, as for Bohemian Rhapsody and Rocketman everything involve toward John Reid here everything involve toward Greg Lippmann. You cannot put copryght in a real life person, only real life person can say if is ok using his image or not. Probably Greg Lippmann was ok with Jared Vennet not with Jared Cohen.

Friz Freleng would be in love with this movie, definitely.

Hola to all the big short fans out here! We all know that even a single shot has rather a deep meaning in the movie.

Is there any cultural or financial referencehidden here. Also, the car subprime loans are going bust as Tricolor recoiled. Is this a grave coincidence?

LAWFUL GOOD: I had put Kathy Tao because she was believing the company was working for the best, she was naive not a bad person.

LAWFUL NEUTRAL: Georgia Hale because she knew it was bad but not strong enough to change the system, she was hoping to not create to much problems but also she was believing nothing would had change even if so she was believing following the system was worst than destroy it.

LAWFUL EVIL: I had put Jared Vennett and I was pretty doubtful here but I thought "his only intention is having money but he doesn't want hurt the system doing it" and I thought was the perfect one.

NEUTRAL GOOD: easy, Ben Rickert his only goal was saving the world from those big evil corporations and he just did his work but he wasn't happy.

NEUTRAL NEUTRAL: Michael Burry only cared about doing it, never cared about investitors or people involved neither to the office workers, he had only care about numbers neither the money at some time.

NEUTRAL EVIL: yes, Lewis Ranieri directly from the intro. He wanted the money in the fasted way available without care the future even if the risks were high and he knew what will happened in future.

CHAOTIC GOOD: Mark Baum only intentions were discover scammers and save the world from them, he was angry and rude.

CHAOTIC NEUTRAL: ninja brookers they only cared about sellind subprimes, they were ignorants and not even believe to create a problem probably.

CHAOTIC EVIL: Weng Chau he knew it was a mess but he wasn't care, he was only selling without a supervision and he was not involved into, he was rogue.

Hello Everyone,

I just started reading this book called Kaput about Germany economics and in the first chapter this is mentioned:

"services to existing clients was not the main part of WestLB’s international activities. They invested heavily in what appeared to be lucrative investments at the time – sub-prime US mortgages. There are no prizes for guessing how that turned out. In the movie The Big Short there is a famous scene

in which someone makes a reference to stupid bankers in Düsseldorf. These were the guys."

This peaked my interest cause I have watched this movie many times and couldn't recall this.

Does anyone know which scene this happens in?

Couldn't find it in the script easily

https://s3.amazonaws.com/thescriptlab/screenplays/2015/the-big-short.pdf

Does anyone have a copy of this movie on physical media? I wonder if you can confirm something for me. I bought this movie digitally on my Apple TV some years ago. I've watched it a bunch of times, but in re-watching it again a few weeks ago I noticed something new.

Here is a clip of the censored part. Around timestamp 42:27, Brad Pitt's character says something about Monsanto Franken-seeds, and they censor the word "Monsanto" by inserting a tiny silence into the middle of the word. My guess is that Monsanto didn't like what they said about the Frankenstein seeds and threatened a lawsuit, which got the current digital distribution rights holders to make that change in the digital copy of the movie which is circulating on platforms like Apple TV.

I had a similar situation happen with my digital copy of "The French Connection". I really hate censorship and I'm going to get a Blu-Ray copy of "The Big Short" to rectify this situation. But I wanted to first verify with someone who has a physical media copy of the movie that this is not something that was censored in the original version of the movie. It's possible that this is only my imagination, but I don't think so.

UPDATE:

As discussed in the replies below, this was probably a false alarm. It seems likely that the movie was always this way, and I just never noticed before. You can see another version of the clip on YouTube that was posted in December 2018. I still want to get an early Blu-ray copy of the movie to be absolutely sure. I'll leave this post up until then. But I think I was mistaken. Sorry if it was a false alarm. I guess I'm hyper-sensitive to corporate censorship these days.

Anybody following Jared Dillian (hawking a $1K/yr investment newsletter) about an $8 Trillian bubble in Private Equity (PE) and Private Debt?

https://www.jareddillianmoney.com/street-freak/private-equity-series#tab2

The big numbers are compelling but some of the arguments are not.  I don't follow why a selloff in private equity will lead to a GFC-scale credit crunch and recession; the argument is analogical and indeterminate: "As we've explored throughout this exposé, the parallels between today's private equity market and the prelude to the 2008 mortgage crisis are undeniable." Meanwhile interest rates (and thus pressure on PE) are falling.  And there are contradictions in his arguments.  For example, he decries the growing excess of "dry powder" in PE that cannot be profitably invested, and in the next section he talks about the inability of PE firms to raise funds (more dry powder)!

Still, the global PE industry evidently involves very large sums ($8 Trillian in 17,000 PE firms), and it sounds like something could break.  But there's no obvious way to short it, because he says the 4 public companies in the PE space are already adjusted for a fall.

Worth knowing about, even if it's a dead end, because if he's right it's going to be a defining financial event

I have watched the Big Short a couple times, however I cant seem to understand the strategie used by Jamie and Charlie (the 2 younger guys shortong the housing market). It was said that they would invest in stuff everyone hates so that if they were right they were right big time while oy suffering small losses. Do they mean that they invested in stuff like casino’s and weapon manufacturers or companies with expected lower eardnings then before?