If you look at the tumultuous decade at the beginning of this century, a number of very notable events stand out. September 11th, 2001 certainly rises above the rest as the defining moment of the decade. With it stand the US invasions of Afghanistan and Iraq. Bush’s election in 2000 and Obama’s in 2008 are certainly notable. Then sometime in the Fall of 2007 or Winter of 2008 Wall Street investors stopped buying Subprime Mortgage Backed CDO’s. The trillion dollar market entirely disappeared. . .and for months nobody admitted it. The bankers behind the CDO’s covered it all up, still valuing their CDOs as if people were buying them but in September of 2008 5 trillion dollars disappeared out of the US GDP in a single week and suddenly everybody knew.
Since then several politicians, bankers, investors, reporters, authors and even Hollywood studios have tried to explain to the average U.S. citizen what went wrong. What happened was so incredibly complex that your average voter with an undergrad degree in Art History will never take the time to understand it and your average banker still is not able to understand it.
Michael Lewis offers one of the most successful explanations in the “Big Short.” He tells the story of the 2008 collapse through the real stories of four investment firms who made billions in 2007 and 2008 because they knew what was happening and shorted the whole market.
The producer of “Anchorman” (yes, the Anchorman starring Will Ferrell) picked up the book and turned it into a movie which came out last year. My wife rented the movie and we watched it last week and after viewing the film I just had to read the book. It was one of those rare cases where I was delighted to watch the movie first because there is no way I would have followed the book without picturing Steve Carrell and Brad Pitt as their various characters.
Both the book and movie are a must read and a must watch, albeit for adult audiences. There is a high amount of language and a bit of nudity. To be honest, I was okay with the language because after studying the factors behind the 2008 recession I want to spew profanity too!
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In that vein, both the book and the movie start out as comedies. The four heads of the investment firms can be pulled from the stereotypes of your average CBS lineup. Michael Burry, who was the first to discover the absurdity behind the subprime mortgage market has Asberger’s and doesn’t understand sarcasm, which means everyone thinks he is a sarcastic jerk. He wears shorts and baggie T-shirts and listens to heavy metal music while trading and absolutely hates people.
Steve Eisman is a very blunt, very rude, prone to anger banker whom you either love or hate. At one point right before the crash he was attending a conference workshop where he jumped up in the middle of the presentation and accused the presenter of being stupid. In the middle of his tirade his cell phone started ringing, to which he yelled, “I have to go take this call. It’s my wife!” and stormed out of the room.
Greg Lippman is a conman’s conman. He is totally honest by being ridiculously smarmy. He plants ideas in your head by using the form, “I’m not saying you’ll make so much money you’ll be sleeping with Penelope Cruz but. . .” Steve Eisman’s employees hated Greg but Eisman loved him because, “his self interest is so obvious. I respect that about him.”
There was also two college grads who started trading out of their neighbor’s shed and took 110,000 to millions with the help of an apocalyptic, doomsday forecasting banker who not only foresaw the 2008 economic collapse but the as yet not happened collapse of San Francisco bay into the Pacific Ocean. “I have to hang up now. I just realized I need to sell my house.” And he did and they didn’t hear back from him for 3 months, after he had moved further inland.
Along the way they met strippers with 5 subprime mortgages, a nanny who owned a 750,000 home, and the chief investor of Goldman Sachs who was participating in a debate with Steve Eisman arguing that his Goldman’s stock was sound while the stock plummeted to $2 a share. One brave college kid asked him, “Would you still invest in Goldman’s stock now that it has halved in the time you were speaking.” The investor had zero idea it was happening because he had turned his phone off. When he said, “of course” the audience booed him and stormed out of the room. The only person left was Alan Greenspan who was scheduled to be the next speaker.
That was the only problem with the “Big Short.” I felt like I was reading a fantastically well done novel only to research various tidbits and find out all this stuff did actually happen. Our world is so much more absurd than you can ever imagine.
Even the short traders, Eisman’s clan in particular, always assumed there was someone sitting atop the pile of corruption who knew what they were doing. They really believed there was a moral voice at the top governing the whole thing and when that person emerged , they would lose all their money but the U.S. economy would win. So far that person has not materialized and the U.S. economy is still losing.
Michael Lewis, the author, records that they all knew Wall Street was corrupt. It was when they realized Wall Street was also stupid that they decided to short the whole market.
As the book and movie end, comedy turns to tragedy and the absurd becomes aggravating instead of entertaining. After all, nothing has changed since 2008. The government bailed out Wall Street with zero stipulations or demands for change. The banks who were given the billions of taxpayer and Chinese dollars used no small amount of that money to hire lobbyists and invest in political campaigns that would maintain the status quo. Yes, your read that right. They are using our taxpayer dollars and nations ballooning debt to pay politicians to continue to empower their corrupt stupidity.
And Bernie Sanders, one of only two national politicians who seems to care about this (the other being Elizabeth Warren) just lost the primary to an opponent who gives speeches to Goldman Sachs for hundreds of thousands of dollars.
I don’t know what to do about all of this as I sit here alone in my kitchen taking a break from writing a sermon on Joel. I do know the prophet Joel’s repeated calls for us as a society to “lament” and to “mourn” are certainly resonating. I am not so much angry as I am sad because in the words of the movie version of Steve Eisman:
“We live in an era of fraud in America. Not just in banking, but in government, education, religion, food, even baseball… What bothers me ins’t that fraud is not nice. Or that fraud is mean. For fifteen thousand years, fraud and short sighted thinking have never, ever worked. Not once. Eventually you get caught, things go south. When the hell did we forget all that? I thought we were better than this, I really did.”
Go-Before Grace 