“In the accuracy department, however, The Big Short falls far short. The movie suggests that bankers securitized subprime loans and passed off this dross as gold simply because they ran out of higher-quality paper. But it ignores the fact that blame for the housing bubble begins not with Wall Street but with Washington –

…in particular, the Clinton administration, which sought to make mortgage financing “more available, affordable, and flexible,” thereby encouraging borrowing by people ill-equipped to repay their loans. Clinton’s policies were embraced by his successor, George W. Bush, who was equally intent on promoting “the American dream” of homeownership among minorities and the poor.”, Robert Teitelman and Avi Salzman, “Review: The Big Short Falls Short”, Barrons, December 19, 2015

Review

The Big Short Falls Short

The movie scores high as entertainment, but fails the truth test by ignoring the government’s role in creating the housing bubble and bust.

By Robert Teitelman and Avi Salzman

December 19, 2015

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Short Shrift: “The Big Short” fails to acknowledge the government’s outsize role in creating the housing crisis. Illustration: William Waitzman for Barron’s

As entertainment, The Big Short merits its rave reviews. Based on Michael Lewis’ book of the same title and directed by Adam McKay, this tale of the housing bubble that begot the financial crisis of 2008 is funny, fast-paced, and graced with appealing stars, including Christian Bale, Ryan Gosling, and Steve Carell.

In the accuracy department, however, The Big Short falls far short. The movie suggests that bankers securitized subprime loans and passed off this dross as gold simply because they ran out of higher-quality paper. But it ignores the fact that blame for the housing bubble begins not with Wall Street but with Washington—in particular, the Clinton administration, which sought to make mortgage financing “more available, affordable, and flexible,” thereby encouraging borrowing by people ill-equipped to repay their loans. Clinton’s policies were embraced by his successor, George W. Bush, who was equally intent on promoting “the American dream” of homeownership among minorities and the poor.

Incredibly, those who lost their homes are represented in the movie by a family of renters; it’s their landlord who defaults on the mortgage. Evidently, Hollywood dares not suggest that people who bought houses they couldn’t afford were responsible, even in a small way, for their fate. The movie’s creators might argue that their aim is entertainment, not education. But they are shaping perceptions of historical events in ways that could produce inadequate policy responses to future crises affecting the economy and markets.

— Martin Fridson

Martin Fridson is chief investment officer of Lehmann Livian Fridson Advisors.

Posted on December 23, 2015, in Postings. Bookmark the permalink. 2 Comments.

  1. yes, people evicted from homes that they paid for via robo-signing are the real villains. Right?

    Shill.

    • Your comment is a lie. No one was evicted from a home that they paid for or paid their mortgage and nearly everyone who could make some reasonable payment, even if it was well below the contractually agreed upon amount, were allowed to stay in their home. You’re an idiot. mp

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