Director Adam McKay and economics experts on what “The Big Short” got right about the financial crisis – and what it didn’t

If anything can shape the public’s understanding of the complexities of the recent housing bubble and global financial crisis, it’s a Hollywood movie.

Together with its all-star cast, 2015’s blockbuster “The Big Short”—based on the bestselling book of the same name by Michael Lewis —has been nominated for five Academy Awards, including Best Picture and Best Director. That’s a pretty good showing for a film with a plot driven by credit default swaps and collateralized debt obligations.

The film has provoked an intense discussion of whether arcane mortgage-backed securities were the primary driver of the crisis as opposed to broader economic forces, and whether those responsible were adequately punished.  To face these issues head on, the movie’s director Adam McKay recently joined a couple of economics experts, a journalist who worked on the movie, and one of the people behind a real-life short portrayed in the film at a Brookings Institution event.

The big question: Is the movie’s version an effective way to explain the wrenching financial crisis to the public? Below are some of the key points from the conversation, and you can watch the full event video here.

Movies have incredible power to create a narrative


“I think everyone who has seen the movie can agree that it is engaging and clever … but we know that in our society, movies can have incredible power in creating a narrative,” said David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at Brookings. “We know that we went through something devastating, and we know that there will be policy choices made, and sometimes policy choices will be made by politicians who get their information more from movies than from Brookings white papers, so we have to worry about that,” he said.

The tone of the movie captured the moment

Danny Moses, now a partner at Seawolf Capital, experienced many of the events depicted by the film first hand: He was a former head trader at FrontPoint Financial Services Fund, one of the firms made famous by the movie. In the film, he is portrayed by Rafe Spall.  

“I thought they did an incredible job,” said Moses. “While watching the movie you didn’t really have to know what a CDO was to understand the tone that was being portrayed in the movie.” When it comes to other aspects of the film, including the portrayal of how he and his colleagues canvassed parts of Florida to learn more about the foreclosure crisis, some things were not quite as accurate: “There was no alligator chasing us in Florida,” said Moses.

Stupidity, not criminality, might have played a greater role than the film suggests

Though he lauded the film for helping break down complex economic issues that make his own family’s “eyes glaze over,” Wall Street Journal Chief Economics Commentator Greg Ip had a slightly different take on the forces behind the crisis.

Where my interpretation differs from [Adam McKay’s] is that he has a very moralistic kind of undertone to the movie … and I think that’s kind of simplistic,” Ip said. He added that many of the people closest to the mortgage market were the ones who lost the most money—and that some of those broader forces were not so much grounded in malice as they were in  ignorance. “When the question comes down to, was it criminality, or was it stupidity? I guess, Adam, you are probably more on the criminality side, and I’m more on the stupidity side.”

“Our government is still completely captured by the banks”

The film’s ending, which Wessel said “leads the viewer to believe that we didn’t do anything,” sparked a particularly interesting debate. When pressed on why he didn’t refer to any of the new policies and protections implemented in the wake of the crisis, including the Dodd-Frank Act and the creation of the Consumer Financial Protection Bureau, director Adam McKay asserted his opinion that the key failures are that the big banks remain big and that fraud went largely unpunished.

“I’ve had no second thoughts [about the ending],”said McKay, “and I think at this point there’s no question that the banks continue to grow.” The big elephant in the room, he later added, “is that our government is still completely captured by the banks.”

We’ve gotten to a much better, safer, place

Donald Kohn, Economics Studies senior fellow and former vice chairman of the Board of Governors of the Federal Reserve, agreed with McKay that there is still work to be done, but also believes that the financial industry is moving in a better direction than the film’s ending suggests. “We’ve gotten to a much better, safer, place … but incentives are still there to go overboard,” said Kohn.

To watch the entire panel, click here.

Related Reading: Telling the narrative of the financial crisis: Not just a housing bubble, by Martin Neil Baily and Douglas Elliott.