Adam McKay’s Oscar-nominated The Big Short teaches a salutary lesson, writes Paul Finch
Recommending films is a tricky business, but if you have not already seen The Big Short, it is well worth the effort. A brilliant adaptation of the Michael Lewis book, it sets out in all its squalid finery the venality, corruption and stupidity that the financial sector inflicted on the world for a decade.
Really it should not have come as a shock, but amnesia is a significant part of financial and governmental culture, especially in the USA. In some ways, the world of credit default swaps and their synthetic offspring was not so different from the one that produced the Savings & Loans scandal of the 1970s, which took the American public 30 years to pay off.
In both cases the basis on which illegal and corrupt activity took place was the selling of mortgages to people who could not possibly afford to pay them (something President Clinton indirectly but disastrously encouraged), and selling loans on the same property many times over. Of course commission was paid and realtors got rich, though not nearly as rich as the banks and other institutions that ‘bought’ what was supposedly profitable debt, only for the whole thing to come crashing down on the taxpayers’ heads.
Curiously, I find no speeches from the Prince of Wales railing against the crooks who wrecked economies
Four decades later, the difference was ever more sophisticated financial packages, based on securitising what turned out to be toxic debt. Needless to say, virtually nobody from the financial sector has paid any sort of legal price for what went on, mostly too big to fail or too influential to be prosecuted.
Unfortunately, the professionals who were supposed to act as the Praetorian Guard of capitalism were actively and knowingly conniving in corrupt practices, whether they were auditors or credit rating agencies, their reputations now in ruins. However they never did jail time and now lecture the rest of us about prudent economics.
For a change, it has been bankers and the financial community in general that has lost its reputation with the public, not architects. But curiously, I find no speeches from the Prince of Wales railing against the crooks who wrecked economies and lives as a consequence of their behaviour. By contrast, even if architects made mistakes, it was not because they were engaged in that classic definition of a profession: ‘a conspiracy against the public’. That would in fact be an excellent description of the thieves who infested Wall Street and the City of London, mis-selling mortgages, pressure-selling inappropriate insurance policies to pensioners and rigging any market they could get their grubby hands on, knowing the bosses upstairs would turn a blind eye as long as regulation stayed light-touch and money kept rolling in.
The Big Short is a great film, and better than its Wall Street-style predecessors, because it places the activity of the sector in a more general context, telling the story of the handful of people who knew the market was rotten and bet against it. I wonder just how many of the really big players knew that, too, and made their private arrangements accordingly.
In the end the story is a sad one, and I couldn’t help reflecting that it represented not just the total abandonment of the best values of the United States in favour of greed and anarchy, but the awful consequences of the trendy rejection of old-fashioned notions of trust, honesty and fairness. The well-oiled marketing-speak and prognostications of some participants in the EU debate are already starting to sound like the identical corporate platitudes of the promoters of funny mortgages in Florida, except they called them something else. Maybe there are bigger shorts yet to come.