Cast: Christian Bale, Steve Carell, Ryan Gosling, Brad Pitt, Melissa Leo, Hamish Linklater, John Magaro, Rafe Spall, Jeremy Strong, Finn Wittrock, Marisa Tomei
Oscar Wins: Best Adapted Screenplay (Adam McKay, Charles Randolph)
Oscar Nominations: Best Picture, Best Supporting Actor (Christian Bale), Best Director (Adam McKay), Best Film Editing (Hank Corwin)
SUMMARY: Michael Burry (Christian Bale) is a hedge-fund manager in 2005, when he realizes that the U.S. housing market, which has been booming, is actually very unstable. This is because many people have bought houses with high-risk subprime loans, which have adjustable-rate mortgages. In 2007, many of these interest rates would rise, and the people with the loans (who are considered high-risk, for various reasons) wouldn’t be able to pay the increased rate. Therefore, they would default on the loan; if they continued to be unable to pay, the house would go into foreclosure. Burry comes up with an idea to make a huge profit: he will buy credit-default swaps, which essentially allows him to bet on the failure of the loans (if the loans fail, he makes money). Burry takes the idea to several large banks, all of whom believe that the housing market is extremely secure. They are sure that Burry is wrong in his analysis, and sell him huge amounts of the “swaps”. However, the trade-off is that Burry must pay the banks as long as the loans are good. In the long-term, this will amount to over $1 billion, which angers the hedge fund investors. Despite their objections, Burry sticks to his guns and refuses to sell back the swaps. In 2007, the rate-increase occurs, but the market does not immediately collapse due to some strategic maneuvering by the banks. Again, Burry’s investors want their money back, and again he refuses. Finally, the market does collapse, and Burry is vindicated. His fund increases by 489%, making over $2.5 billion in profit. However, Burry is tired of dealing with doubting investors and the manipulative industry, and he shuts down the fund. Meanwhile, one of the bankers Burry dealt with reveals the strategy to a salesman named Jared Vennett (Ryan Gosling). After conducting his own analysis and coming to the same conclusion about the housing market, Vennett begins to act as a middleman, buying swaps and then selling them to firms. By accident, another hedge fund manager named Mark Baum (Steve Carell) finds out abou this, and decides to buy some of the swaps.
In addition, Vennett learns that bad loans are being grouped together in order to get AAA ratings, which will help bring about the market collapse. Baum begins looking into the housing market in Miami, where he discovers questionable practices by credit rating agencies that allow mortgage brokers to make money. When the market collapses in 2007, Baum fully understands this practice, which leads some team members to question Vennett and his motivation. Vennett responds by introducing Baum to a representative of an investment bank. As this man explains his practices, Baum slowly realizes that the widespread corruption will actually cause the entire global economy, not just the U.S. housing market, to collapse. When he gets back to his team, Baum convinces them to buy more swaps. Young investors Charlie Geller and Jamie Shipley are also buying swaps, and set themselves up to make even more money that other hedge funds. When they are able to successfully negotiate a large number of swaps, the two go wild with excitement. However, a friend reminds them that in order for them to make the money, the economy will have to collapse, which will in turn throw people out of work and actually result in deaths. Geller and Shipley have not considered this angle, and now try to make up for it by telling everybody they know about the bank fraud and upcoming collapse. When the failure does happen, the two make a huge amount of money, but have lost all faith in the system.
MY TAKE: Before I watched this movie, I did not expect to be able to understand it, as I know next to nothing about finance and Wall Street. However, I thought that if the movie was nominated for Best Picture, it must be decent. Despite the film’s attempts to explain terms and concepts for know-nothings like me, I still didn’t understand most of what was going on. Basically, here’s what I got: banks started giving crappy loans out to unsuspecting customers, who couldn’t pay when the rates went up. The banks also engaged in a lot of shady, if not illegal, practices to gouge customers out of money. A few people realized what was going on, and that sooner or later the economy would collapse. They then bet on this happening with some complicated banking moves: when the housing market and economy collapsed, they won the bet and got paid big time. Unfortunately, most of them were so disillusioned by the crap the banks were doing they quit the business. I didn’t understand the specifics, but I got the general idea, that the banks were screwing people over. To make things worse, a lot of people were aware of this screwing-over (particularly within the banks), and did nothing. I was left with my head spinning a bit at the end of the film, as I didn’t understand any more about finance than at the start of the film, but I was horrified at the scale of the corruption and fraud in the banks and markets.