14 June, 2024 Siobhan Marie Day 0 Comments 7 categories

The Big Short; directed by Adam McKay; screenplay by Charles Randolph and Adam McKay; based on The Big Short by Michael Lewis; starring Christian Bale, Steve Carell, Ryan Gosling, and Brad Pitt; produced by Brad Pitt, Dede Gardner, Jeremy Kleiner, and Arnon Milchan for Regency Enterprises and Plan B Entertainment and distributed by Paramount Pictures. (2015)

A Frauded Bubble…

The Big Short is a 2015 biographical crime comedy-drama film directed and co-written by Adam McKay. Co-written with Charles Randolph, it is based on the 2010 book The Big Short: Inside the Doomsday Machine by Michael Lewis detailing how the 2007–2008 financial crisis was triggered by the United States housing bubble. The film stars Christian Bale, Steve Carell, Ryan Gosling, and Brad Pitt, with John Magaro, Finn Wittrock, Hamish Linklater, Rafe Spall, Jeremy Strong, and Marisa Tomei in supporting roles.

Director and screenwriter Adam McKay attends the "The Big Short" New York premiere at Ziegfeld Theater on November 23, 2015 in New York City. Photo by Andrew H Walker/Variety/Penske Media via Getty Images

Screenwriter Charles Randolph attends the "The Big Short" New York premiere at Ziegfeld Theater on November 23, 2015 in New York City. Photo by Jim Spellman/WireImage

"The Big Short: Inside the Doomsday Machine" is a nonfiction book by Michael Lewis about the build-up of the United States housing bubble during the 2000s. It was released on March 15, 2010, by W. W. Norton & Company. It spent 28 weeks on The New York Times best-seller list, and was the basis for the 2015 film of the same name. Photo Credit: Google Images

Michael Monroe Lewis (born October 15, 1960) is an American author and financial journalist. He has also been a contributing editor to Vanity Fair since 2009, writing mostly on business, finance, and economics. He is known for his nonfiction work, particularly his coverage of financial crises and behavioral finance. Lewis was born in New Orleans and attended Princeton University, from which he graduated with a degree in art history. After attending the London School of Economics, he began a career on Wall Street during the 1980s as a bond salesman at Salomon Brothers. The experience prompted him to write his first book, Liar's Poker (1989). Fourteen years later, Lewis wrote Moneyball: The Art of Winning an Unfair Game (2003), in which he investigated the success of Billy Beane and the Oakland Athletics. His 2006 book The Blind Side: Evolution of a Game was his first to be adapted into a film, The Blind Side (2009). In 2010, he released The Big Short: Inside the Doomsday Machine. The film adaptation of Moneyball was released in 2011, followed by The Big Short in 2015. Lewis's books have won two Los Angeles Times Book Prizes and several have reached number one on the New York Times Bestsellers Lists, including his most recent book, Going Infinite. Photo Credit: Wikipedia Commons

The 2007–2008 financial crisis, or the global financial crisis (GFC), was the most severe worldwide economic crisis since the Great Depression. Predatory lending in the form of subprime mortgages targeting low-income homebuyers, excessive risk-taking by global financial institutions, a continuous buildup of toxic assets within banks, and the bursting of the United States housing bubble culminated in a "perfect storm", which led to the Great Recession. Mortgage-backed securities (MBS) tied to American real estate, as well as a vast web of derivatives linked to those MBS, collapsed in value. Financial institutions worldwide suffered severe damage, reaching a climax with the bankruptcy of Lehman Brothers on September 15, 2008, and a subsequent international banking crisis. The preconditioning for the financial crisis was complex and multi-causal. Almost two decades prior, the U.S. Congress had passed legislation encouraging financing for affordable housing. However, in 1999, parts of the Glass-Steagall legislation, which had been adopted in 1933, were repealed, permitting financial institutions to commingle their commercial (risk-averse) and proprietary trading (risk-taking) operations. Arguably the largest contributor to the conditions necessary for financial collapse was the rapid development in predatory financial products which targeted low-income, low-information homebuyers who largely belonged to racial minorities. This market development went unattended by regulators and thus caught the U.S. government by surprise. After the onset of the crisis, governments deployed massive bail-outs of financial institutions and other palliative monetary and fiscal policies to prevent a collapse of the global financial system. In the U.S., the October 3, $800 billion Emergency Economic Stabilization Act of 2008 failed to slow the economic free-fall, but the similarly-sized American Recovery and Reinvestment Act of 2009, which included a substantial payroll tax credit, saw economic indicators reverse and stabilize less than a month after its February 17 enactment. The crisis sparked the Great Recession which resulted in increases in unemployment and suicide, and decreases in institutional trust and fertility, among other metrics. The recession was a significant precondition for the European debt crisis. In 2010, the Dodd–Frank Wall Street Reform and Consumer Protection Act was enacted in the US as a response to the crisis to "promote the financial stability of the United States". The Basel III capital and liquidity standards were also adopted by countries around the world. Photo Credit: Google Images

The 2000s United States housing bubble or house price boom or 2000s housing cycle was a sharp run up and subsequent collapse of house asset prices affecting over half of the U.S. states. In many regions a real estate bubble, it was the impetus for the subprime mortgage crisis. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reached new lows in 2011. On December 30, 2008, the Case–Shiller home price index reported the largest price drop in its history. The credit crisis resulting from the bursting of the housing bubble is an important cause of the Great Recession in the United States. Increased foreclosure rates in 2006–2007 among U.S. homeowners led to a crisis in August 2008 for the subprime, Alt-A, collateralized debt obligation (CDO), mortgage, credit, hedge fund, and foreign bank markets. In October 2007, Henry Paulson, the U.S. Secretary of the Treasury, called the bursting housing bubble "the most significant risk to our economy". A bubble had the potential to affect not only on home valuations, but also mortgage markets, home builders, real estate, home supply retail outlets, Wall Street hedge funds held by large institutional investors, and foreign banks, increasing the risk of a nationwide recession. Concerns about the impact of the collapsing housing and credit markets on the larger U.S. economy caused President George W. Bush and the Chairman of the Federal Reserve Ben Bernanke to announce a limited bailout of the U.S. housing market for homeowners who were unable to pay their mortgage debts. In 2008 alone, the United States government allocated over $900 billion (~$1.25 trillion in 2023) to special loans and rescues related to the U.S. housing bubble. This was shared between the public sector and the private sector. Because of the large market share of Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (both of which are government-sponsored enterprises) as well as the Federal Housing Administration, they received a substantial share of government support, even though their mortgages were more conservatively underwritten and actually performed better than those of the private sector. Photo Credit: Wikipedia Commons

Christian Bale as Michael Burry in "The Big Short" (2015) Photo Credit: Paramount Pictures

Steve Carell as Mark Baum in "The Big Short" (2015) Photo Credit: Paramount Pictures

Ryan Gosling as Jared Vennett in "The Big Short" (2015) Photo Credit: Paramount Pictures

Brad Pitt as Ben Rickert in "The Big Short" (2015) Photo Credit: Paramount Pictures

John Magaro as Charlie Geller in "The Big Short" (2015) Photo Credit: Paramount Pictures

Finn Wittrock as Jamie Shipley in "The Big Short" (2015) Photo Credit: Paramount Pictures

Hamish Linklater as Porter Collins in "The Big Short" (2015) Photo Credit: Paramount Pictures

Jeremy Strong as Vinny Daniel in "The Big Short" (2015) Photo Credit: Paramount Pictures

Rafe Spall as Danny Moses in "The Big Short" (2015) Photo Credit: Paramount Pictures

Marisa Tomei as Cynthia Baum in "The Big Short" (2015) Photo Credit: Paramount Pictures

To explain the complicated financial information that factored into the crisis, the film features cameo appearances by actress Margot Robbie, the late chef Anthony Bourdain, singer-songwriter Selena Gomez, economist Richard Thaler, and others who break the fourth wall to explain complicated financial concepts to the film viewer, such as subprime mortgages and synthetic collateralized debt obligations. Several of the film’s characters directly address the audience, most frequently Gosling’s, who serves as the narrator.

Margot Robbie as herself in "The Big Short" (2015) Photo Credit: Paramount Pictures

Anthony Bourdain as himself in "The Big Short" (2015) Photo Credit: Paramount Pictures

Selena Gomez as herself in "The Big Short" (2015) Photo Credit: Paramount Pictures

Richard Thaler as himself in "The Big Short" (2015) Photo Credit: Paramount Pictures

Stanley Wong breaking the fourth wall in "The Big Short" (2015) Photo Credit: Paramount Pictures

In finance, subprime lending (also referred to as near-prime, subpar, non-prime, and second-chance lending) is the provision of loans to people in the United States who may have difficulty maintaining the repayment schedule. Historically, subprime borrowers were defined as having FICO scores below 600, although this threshold has varied over time. These loans are characterized by higher interest rates, poor quality collateral, and less favorable terms in order to compensate for higher credit risk. During the early to mid-2000s, many subprime loans were packaged into mortgage-backed securities (MBS) and ultimately defaulted, contributing to the financial crisis of 2007–2008. Photo Credit: Investopedia

A synthetic CDO is a variation of a CDO (collateralized debt obligation) that generally uses credit default swaps and other derivatives to obtain its investment goals. As such, it is a complex derivative financial security sometimes described as a bet on the performance of other mortgage (or other) products, rather than a real mortgage security. The value and payment stream of a synthetic CDO is derived not from cash assets, like mortgages or credit card payments – as in the case of a regular or "cash" CDO—but from premiums paying for credit default swap "insurance" on the possibility of default of some defined set of "reference" securities—based on cash assets. The insurance-buying "counterparties" may own the "reference" securities and be managing the risk of their default, or may be speculators who've calculated that the securities will default. Synthetics thrived for a brief time because they were cheaper and easier to create than traditional CDOs, whose raw material—mortgages—was beginning to dry up. In 2005, the synthetic CDO market in corporate bonds spread to the mortgage-backed securities market, where the counterparties providing the payment stream were primarily hedge funds or investment banks hedging, or often betting that certain debt the synthetic CDO referenced – usually "tranches" of subprime home mortgages – would default. Synthetic issuance jumped from $15 billion in 2005 to $61 billion in 2006, when synthetics became the dominant form of CDOs in the US, valued "notionally" at $5 trillion by the end of the year according to one estimate. Synthetic CDOs are controversial because of their role in the subprime mortgage crisis. They enabled large wagers to be made on the value of mortgage-related securities, which critics argued may have contributed to lower lending standards and fraud. Synthetic CDOs have been criticized for serving as a way of hiding short position of bets against the subprime mortgages from unsuspecting triple-A seeking investors, and contributing to the 2007-2009 financial crisis by amplifying the subprime mortgage housing bubble. By 2012 the total notional value of synthetics had been reduced to a couple of billion dollars. Photo Credit: Investopedia

The Big Short began a limited release in the United States on December 11, 2015, followed by a wide release on December 23 and was distributed by Paramount Pictures. A critical and commercial success, the film grossed $133 million on a $50 million budget and received critical acclaim for the performances of the cast (particularly that of Bale), McKay’s direction, editing, and the screenplay. The film won the Academy Award for Best Adapted Screenplay in addition to nominations for Best Picture, Best Director, Best Supporting Actor for Bale, and Best Film Editing.

Adam McKay directing Steve Carell in "The Big Short" (2015) Photo Credit: Paramount Pictures

Screenwriter-director Adam McKay (L) and screenwriter Charles Randolph accept the Best Adapted Screenplay award for 'The Big Short' onstage during the 88th Annual Academy Awards at the Dolby Theatre on February 28, 2016 in Hollywood, California. Photo by Kevin Winter/Getty Images

Screenwriters Adam McKay, left, and Charles Randolph winners of the Best Adapted Screenplay for 'The Big Short,' pose in the press room at the 88th Annual Academy Awards at Hollywood & Highland Center on February 28, 2016 in Hollywood, California. Photo by Dan MacMedan/WireImage

Actor John Krasinski and President of the Academy of Motion Picture Arts and Sciences Cheryl Boone Isaacs announce 'The Big Short' as a nominee for Best Motion Picture of the Year during the 88th Oscars Nominations Announcement at the Academy of Motion Picture Arts and Sciences on January 14, 2016 in Los Angeles, California. Photo by Kevin Winter/Getty Images

Actor John Krasinski and President of the Academy of Motion Picture Arts and Sciences Cheryl Boone Isaacs announce Adam McKay as a nominee for Best Directing in the film 'The Big Short' during the 88th Oscars Nominations Announcement at the Academy of Motion Picture Arts and Sciences on January 14, 2016 in Los Angeles, California. Photo by Kevin Winter/Getty Images

Actor John Krasinski and President of the Academy of Motion Picture Arts and Sciences Cheryl Boone Isaacs announce Christian Bale as a nominee for Best Actor in a Supporting Role in the film 'The Big Short' during the 88th Oscars Nominations Announcement at the Academy of Motion Picture Arts and Sciences on January 14, 2016 in Los Angeles, California. Photo by Kevin Winter/Getty Images

The film consists of three separate but concurrent stories, loosely connected by their actions in the years leading up to the 2007 housing market crash. The three stories revolve around Scion Capital, FrontPoint Partners, and the Brownfield Fund.

The TED spread (in red), an indicator of perceived credit risk in the general economy, increased significantly during the financial crisis. The TED spread spiked up in July 2007, remained volatile for a year, then spiked even higher in September 2008, reaching a record 4.65% on October 10, 2008. The 2007–2008 financial crisis, or the global financial crisis (GFC), was the most severe worldwide economic crisis since the Great Depression. Predatory lending in the form of subprime mortgages targeting low-income homebuyers, excessive risk-taking by global financial institutions, a continuous buildup of toxic assets within banks, and the bursting of the United States housing bubble culminated in a "perfect storm", which led to the Great Recession. Photo Credit: Wikipedia Commons

Jeremy Strong, Rafe Spall, Hamish Linklater, Steve Carell, Jeffry Griffin, and Ryan Gosling in "The Big Short" (2015) Photo Credit: Paramount Pictures

Finn Wittrock and John Magaro in "The Big Short" (2015) Photo Credit: Paramount Pictures

The Big Short is the Featured Film Blog of the month for June for its real life history of the 2007 housing market crash. You can expect to read a critique of the 2015 film, The Big Short, with a breakdown of the themes and messages from the film. You can also read a recommendation for the film that includes a brief history of the 2007 housing market crash. There is also a review of the 2010 book that the film was based off of, The Big Short: Inside the Doomsday Machine by Michael Lewis. You can also watch a classic interview from Good Morning America with The Big Short director Adam McKay, and stars Christian Bale, Steve Carell, and Ryan Gosling discussing how they brought the complicated 2007 housing market crash and Lewis’ equally complicated 2010 book to the big screen. There is also a Top Ten List to commemorate the film being a Featured Film Blog of the month, and for The Big Short, the topic of the list is My Top Ten Wall Street Movies! And finally, as a Featured Blog of the month, you can watch the Official Trailer for the 2015 film and then plan on watching The Big Short tonight on Hulu!