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
The tone of the movie captured the moment
“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”
“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
Related Reading: Telling the narrative of the financial crisis: Not just a housing bubble, by Martin Neil Baily and Douglas Elliott.