28 December 2015 | JackCerf
Harry Knowles once wrote a review of Das Boot that said the movie was so well made that you'd find yourself rooting for Nazi sailors trying to sink American ships. So here. You find yourself rooting for clever "outsiders and weirdos," as one of them puts it, who saw what nobody else wanted to see -- that an immense structure of mortgage based securities was doomed to collapse because it rested on the backs of subprime borrowers who couldn't support the weight and should never have been loaned the money. We have been taught by generations of fiction to identify with characters who are outsiders and rebels. Because these guys are smart, because they are antisocial and because they were laughed at by smug fools who believed the conventional wisdom, you identify with them, and you wait anxiously for their vindication. Then you realize that their vindication means the collapse of the American economy. They were the guys on the Titanic who knew what the iceberg meant.
Michael Lewis, from whose book the movie was adapted, got his training at Salomon Brothers in the mid-80s, as mortgage based securities were being invented. (There's an early shout-out to Lew Ranieri, the Salomon trader who invented them.) As anyone knows who's read Lewis's memoir of those days, Liar's Poker, the culture at Salomon was that your job was to be smarter than everybody else in the bond market, understand values better, and know what other traders were going to do before they knew it themselves. If you were smart enough, you deserved whatever you took away from somebody less smart on the other side of the trade. That's why Lewis admires his protagonists and that, despite a thick coating of moral outrage, is the heart of the movie. The guys who shorted the housing market weren't any more virtuous or less greedy than the great majority of complacent, conventionally minded bankers who believed that the trees would keep growing all the way up to the sky. They just saw more clearly and had plenty of nerve and faith in their own judgment. If they had been wrong, as shorts often are, they and their clients would have been wiped out. When they turned out right, they took the money and kept it, even if some of them felt guilty about it.
I know somewhat about this area, having litigated some of the aftermath. The celebrity cameo explanations of subprime debt, collateralized debt obligations, and synthetic CDOs are not only simple but accurate -- the two involving Anthony Bourdain and Selena Gomez are downright elegant. The key concept of the credit default swap comes out nicely through the dialogue -- a chance to buy fire insurance on the house down the street just before it catches fire. There are a couple of more points that could have used the same thing, especially when people start talking about "FICO scores." It could also have been a little more clear that the eventual collapse was delayed because the smarter investment banks like Goldman finally woke up, saw it coming, unloaded their CDO inventory on investors who were still asleep, and cut their losses by buying swaps themselves. But this is a smart, entertaining telling of an outrageous true story. It deserves all the praise it has gotten, and maybe an Oscar for best adapted screenplay. If it teaches people without a financial background a little of what went on, it will be more than a momentary entertainment. But it will certainly entertain.