I didn’t think I would be interested in this story. It wasn’t that long ago that all of this occurred and we lived through it. At the time it was sickening to hear about the wheeling and dealing of big banks, the subsequent bail-outs and the bonuses to bigwigs all on the tax payer’s dime. The other day I was flying back from Orlando after visiting my daughter, and this was available to watch via the in-flight entertainment system. A movie about the banking system, subprime mortgages, SEC ratings, something called synthetic CDO’s, does not seem like the type of thing that would be riveting entertainment, but in fact it was. How many of us really understood what happened and why? Didn’t you wonder how close we really were to a collapse of the entire world’s economy? It turns out, we were pretty damn close.
The movie is the story of a handful of people that understood what was happening, two years before it actually occurred. They could see the handwriting on the wall and when it just seemed too implausible to be real, one character Michael Baum, a sort of savant played by Christian Bale, read through a thousand mortgage documents to see if it was actually possible. Others took to the streets and visited neighborhoods, interviewed borrowers and found the situation to be more appalling and dire than they could ever have imagined. Steve Carell is fantastic as New York hedge-fund manager Steve Eisman and in one scene in particular is so incensed by the arrogance and ignorance of one particular manager of investment products, Wing Chau, that you wonder why Eisman didn’t strangle the guy right in the middle of a high-priced, Japanese restaurant.
Some unscrupulous lenders gave mortgages to dogs. You heard me….a legal and binding document in the name of someone’s dog. The fraud was so enormous and so widespread, and it boggles the mind as to why lending institutions would loan money to people who had no hope of paying it back when the low interest rate period ended and the new adjusted rate kicked in. But each mortgage required upfront fees and banks were cashing in, big time. Life was good.
But as we know, it wasn’t long before towering investment banks Bear Stearns and, later, Lehman Brothers and others had been declared virtually insolvent, having gambled away many, many times their own worth. The entire global financial system was poised to follow suit.
What was most unsettling, is that so few of them realized the enormity of the situation, even as it was spelled out to them. Those that did peer into the abyss, could see the societal collapse that was imminent when the world’s economies failed, ATM's ran dry and chaos ensued. The effect was felt world wide. No one was more clueless than George W. Bush, although his role in the debacle is not explored in the film. Though the government bailout was far from ideal, the alternative would most certainly have been worse. Despite the government handout to big banks, 8 million people lost their jobs and 6 million lost their homes in the U.S. alone. Pension funds, retirement savings and 401(k) plans dried up and disappeared. Where was our bailout?
Although clearly fraud had occurred, only one banking official served any time. Most of the big banks took the bailouts and later awarded huge bonuses to their CEO’s while the rest of us paid for their massive fuck-up. At least they learned something from their arrogance and stupidity, right? Surely this could never happen again?