Uncle Bardie’s Movie of the Week: A Little Comedy about Finance

Once a week on Monday, Uncle Bardie shares a movie with his Readers he gives a big two thumbs up. It will simply be a short excerpt or a trailer. Uncle Bardie might even throw in a reflection on the movie. If so, it will make an appearance below the video. So pop some popcorn and give yourself a treat. This week’s movie is “The Big Short” (2015).

On the short list for a best picture Oscar for 2015 was the comedy, “The Big Short”. If you see no other movie this year, see this one. It is the story of what happened to the economy in 2007. Based on Michael Lewis’ book, the move gives you the scoop of how we all were screwed. Pardon my language but we were screwed.  Adapted by Adam McKay and Charles Randolph, their screenplay is to be lauded for taking a lot of complex stuff and not only making it understandable but entertaining as well.

Pretend the economy was the Titanic. Nobody was piloting the ship. Not the SEC. Not the Fed. Not the Treasury Department. Nobody saw the iceberg. And believe me there was an iceberg.

There was one guy who saw this iceberg coming. He figured out that the Titanic was heading into iceberg water. He went and bet that the ship would sink big time. His name was Michael Burry. He’s played by Christian Bale. Along the way, Steve Carell, Ryan Gosling and Brad Pitt get in on the action.

You see, the banks were bundling lots and lots of mortgages together into securities. Then selling them. Originally this was a good idea. Because the mortgages were given to people with good credit. So 99.9% of the borrowers would not default on their mortgages.

However, and there is always a however, the banks got greedy. They wanted more and more and more. So the finance companies started giving anybody who could breath a mortgage. And maybe even a few dead stiffs. A lot of these borrowers didn’t have jobs, much less good credit. Some were immigrants just off the boat.

Because they were risky loans, the borrowers got subprime mortgages. Problem was these subprime mortgages were bundled into securities with the good stuff and sold to customers like pension funds. Pretty soon there was 90 % crap in these securities.

How come these securities were not given C ratings by the ratings agencies, Standard & Poor’s, Moody’s and Fitch. Because the banks did business with the ratings agencies, and you know what that’s called. A conflict of interest. But who cared? Everybody was rolling in dough. It was win-win until it was lose-lose. All of a sudden the big bad wolf huffed and puffed and blew the little piggy’s house down.

How did Michael Burry figure all this out? See “The Big Short”. It makes it pretty darn clear. Because it’s a comedy, you’ll be laughing all the way to the bank. But watch your wallet. Your pocket might just get picked.

Advertisements

3 thoughts on “Uncle Bardie’s Movie of the Week: A Little Comedy about Finance

  1. “So the finance companies started giving anybody who could breath a mortgage. And maybe even a few dead stiffs. A lot of these borrowers didn’t have jobs, much less good credit. Some were immigrants just off the boat.”

    Uh-huh, and a lot of us, older and wiser people remember the day when activists chained themselves to the door of banks demanding that people without stable income be given loans. We also remember people with stable jobs telling us how much in equity they gained by borrowing more than they could afford.

    Pointing the finger at banks is fair – but it is only half the story. The other half of the story is told when the thumb, next to that finger, is pointed back at us.

Join the Fun and Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s