The Big Short

The Big Short
Theatrical release poster
Directed by	Adam McKay
Screenplay by	Charles Randolph Adam McKay
Based on	The Big Short by Michael Lewis
Produced by	Brad Pitt Dede Gardner Jeremy Kleiner Arnon Milchan
Starring	Christian Bale Steve Carell Ryan Gosling Brad Pitt
Cinematography	Barry Ackroyd
Edited by	Hank Corwin
Music by	Nicholas Britell
Production companies	Regency Enterprises Plan B Entertainment
Distributed by	Paramount Pictures
Release dates	November 12, 2015 (2015-11-12) (AFI Fest) December 11, 2015 (2015-12-11) (United States)
Running time	130 minutes
Country	United States
Language	English
Budget	$50 million
Box office	$133.4 million

The Big Short is a 2015 American biographical comedy-drama film directed by Adam McKay. Written by McKay and Charles Randolph, it is based on the 2010 book The Big Short: Inside the Doomsday Machine by Michael Lewis showing how the financial crisis of 2007–2008 was triggered by the United States housing bubble. The film stars Christian Bale, Steve Carell, Ryan Gosling and Brad Pitt, with Melissa Leo, Hamish Linklater, John Magaro, Rafe Spall, Jeremy Strong, Finn Wittrock, and Marisa Tomei in supporting roles.

The film is noted for the unconventional techniques it employs to explain financial instruments. Among others, it features cameo appearances by actress Margot Robbie, chef Anthony Bourdain, singer-songwriter Selena Gomez, and economist Richard Thaler, who break the fourth wall to explain concepts such as subprime mortgages and collateralized debt obligations as a meta-reference. Several of the film's characters directly address the audience, most frequently Gosling's, who serves as the narrator.

The Big Short began a limited release in the United States on December 11, 2015, followed by a wide release on December 23 by Paramount Pictures. A critical and commercial success, the film grossed $133 million on a $50 million budget and received acclaim for the performances of the cast (particularly that of Bale), McKay's direction, editing, and the screenplay. The film won the Academy Award for Best Adapted Screenplay in addition to nominations for Best Picture, Best Director, Best Supporting Actor (Bale), and Best Film Editing.

Plot

The film consists of three separate but concurrent stories, loosely connected by their actions in the years leading up to the 2007 housing market crash.

Michael Burry

In 2005, eccentric hedge fund manager Michael Burry discovers that the United States housing market, based on high-risk subprime loans, is extremely unstable. Anticipating the market's collapse in the second quarter of 2007, as interest rates would rise from adjustable-rate mortgages, he proposes to create a credit default swap market, allowing him to bet against market-based mortgage-backed securities, for profit.

His long-term bet, exceeding $1 billion, is accepted by major investment and commercial banks but requires paying substantial monthly premiums. This sparks his main client, Lawrence Fields, to accuse him of "wasting" capital while many clients demand that he reverse and sell, but Burry refuses. Under pressure, he eventually restricts withdrawals, angering investors, and Lawrence sues Burry. Eventually, the market collapses and his fund's value increases by 489% with an overall profit (even allowing for the massive premiums) of over $2.69 billion, with Lawrence receiving $489 million alone.

FrontPoint Partners and Jared Vennett

Jared Vennett (based on Greg Lippmann), the executive in charge of global asset-backed securities trading at Deutsche Bank, is one of the first to understand Burry's analysis, learning from one of the bankers who sold Burry an early credit default swap. Using his quant to verify that Burry is likely correct, he decides to enter the market, earning a fee on selling the swaps to firms who will profit when the underlying bonds fail. A misplaced phone call alerts FrontPoint Partners hedge fund manager Mark Baum (based on Steve Eisman), who is motivated to buy swaps from Vennett due to his low regard for banks' ethics and business models. Vennett explains that the packaging of subprime loans into collateralized debt obligations (CDOs) rated at AAA ratings will guarantee their eventual collapse.

Conducting a field investigation in South Florida, the FrontPoint team discovers that mortgage brokers are profiting by selling their mortgage deals to Wall Street banks, who pay higher margins for the riskier mortgages, creating the bubble. This knowledge prompts the FrontPoint team to buy swaps from Vennett.

In early 2007, as these loans begin to default, CDO prices somehow rise and ratings agencies refuse to downgrade the bond ratings. Baum discovers conflicts of interest and dishonesty amongst the credit rating agencies from an acquaintance at Standard & Poor's.

As the subprime bonds continue to fall, Baum learns that Morgan Stanley, whose umbrella FrontPoint operates under, is facing severe liquidity problems from selling A and AA swaps, believing they wouldn't be affected. Despite high pressure from his staff to sell their position before Morgan Stanley collapses, Baum refuses to sell until the economy is on the verge of collapsing, making over $1 billion in their swaps. Even so, Baum laments that the banks, as well as the government, will not admit what caused the economy to collapse, but will instead blame "immigrants, poor people, and teachers."

Brownfield Capital

Young investors Charlie Geller and Jamie Shipley accidentally discover a marketing presentation on a coffee table in the lobby of a large investment bank by Vennett, convincing them to invest in swaps, as it fits their strategy of buying cheap insurance with big potential payouts. Below the capital threshold for an ISDA Master Agreement required to enter into trades like Burry's and Baum's, they enlist the aid of retired securities trader Ben Rickert. When the bond values and CDOs rise despite defaults, Geller suspects the banks of committing fraud. The trio also visit the American Securitization Forum in Las Vegas, learning that the U.S. Securities and Exchange Commission has no regulations to monitor mortgage-backed security activity. They successfully make even more profit margin than Burry and Baum by shorting the higher-rated AA mortgage securities, as they were considered highly stable and carried a much higher payout ratio.

Later, as default numbers rise, the value of the CDO's and mortgage bonds are not changing, and they realize the banks and the ratings agencies are maintaining the value of their CDOs in order to sell and short them before the inevitable crash. Horrified, they try to tip off the press about the upcoming disaster and the rampant fraud, but a writer from The Wall Street Journal exposes his own personal conflict of interest and will not listen because he is afraid to anger his relationships at the Wall Street investment banks. As the market starts collapsing, Ben, on vacation in England, sells their swaps. Ultimately, they turn their $30 million investment into $80 million, but their faith in the system is broken.

Epilogue

Jared Vennett makes $47 million in commissions from selling the swaps. Mark Baum becomes more gracious from the financial fallout, and his staff continues to operate their fund. Charlie Geller and Jamie Shipley go their separate ways after unsuccessfully trying to sue the ratings agencies, with Charlie moving to Charlotte to start a family, and Jamie still running the fund. Ben Rickert returns to his peaceful retirement. Michael Burry closes his fund after public backlash and multiple IRS audits, now only investing in water securities.

The banks responsible for the crisis escape any consequences for their actions. It is noted that as of 2015, banks are selling CDOs again under a new label: "Bespoke Tranche Opportunity".

Cast

• Christian Bale as Michael Burry: one of the first people to discover the American housing market bubble. Burry operates his own hedge fund, Scion Capital, and uses his liquidity to short the housing market.
• Steve Carell as Mark Baum: the leader of FrontPoint Partners, a small independent trading firm. Baum is in a state of constant disgust with the American banks.
• Ryan Gosling as Jared Vennett: a salesman from Deutsche Bank who decides to sell Burry's credit default swaps for his own profit.
• Brad Pitt as Ben Rickert: a retired former trader who helps Jamie and Charlie with their trades.
• John Magaro as Charlie Geller: one half of Brownfield Fund, who discover Vennett's prospectus and also decide to short the housing market.
• Finn Wittrock as Jamie Shipley: one half of Brownfield Fund, who discover Vennett's prospectus and also decide to short the housing market.
• Hamish Linklater as Porter Collins: one of Baum's team.
• Rafe Spall as Danny Moses: one of Baum's team.
• Jeremy Strong as Vinny Daniel: one of Baum's team.
• Marisa Tomei as Cynthia Baum: Mark Baum's wife.

Tracy Letts appears as Lawrence Fields, an investor in Burry's hedge fund, with Byron Mann appearing as Mr. Chau, a CDO specialist whom Baum interviews in Las Vegas, and Melissa Leo as Georgia Hale, an employee of Standard and Poor's. Adepero Oduye portrays Kathy Tao, an employee of Morgan Stanley, who oversees Baum's fund. In minor roles, Karen Gillan appears as Evie, an employee of the SEC Jamie meets with in Las Vegas. Max Greenfield and Billy Magnussen appear as mortgage brokers taking advantage of people looking for homes. Jae Suh Park features as Burry's wife, and Margot Robbie, Anthony Bourdain, Richard Thaler and Selena Gomez make cameo appearances as themselves in non-sequiturs to explain different financial aspects of the film. The real Michael Burry made a cameo in the film as a Scion employee. At the beginning of the scene in which the fictional Burry's investors confront him at his office, he is briefly shown standing near the front door, talking on the phone.

For the film based on the book, see The Big Short (film).

The Big Short: Inside the Doomsday Machine

Hardcover edition
Author	Michael Lewis
Language	English
Genre	Finance
Publisher	W. W. Norton & Company
Publication date	March 15, 2010
Publication place	United States
Media type	Print (hardcover)
Pages	320 pp.
ISBN	0-393-07223-1
OCLC	567188407
LC Class	HC106.83 L5 2010
Preceded by	Home Game
Followed by	Boomerang

The Big Short: Inside the Doomsday Machine is a non-fiction book by Michael Lewis about the build-up of the United States housing bubble during the 2000s. The book was released on March 15, 2010, by W. W. Norton & Company. It spent 28 weeks on The New York Times best-seller list, and was the basis for the 2015 film of the same name.

Summary

The Big Short describes several of the main players in the creation of the credit default swap market that sought to bet against the collateralized debt obligation (CDO) bubble and thus ended up profiting from the financial crisis of 2007–08. The book also highlights the eccentric nature of the type of person who bets against the market or goes against the grain.

The work follows people who believed the bubble was going to burst, like Meredith Whitney, who predicted the demise of Citigroup and Bear Stearns; Steve Eisman, an outspoken hedge fund manager; Greg Lippmann, a Deutsche Bank trader; Eugene Xu, a quantitative analyst who created the first CDO market by matching buyers and sellers; the founders of Cornwall Capital, who started a hedge fund in their garage with $110,000 and built it into $120 million when the market crashed; and Michael Burry, an ex-neurologist who created Scion Capital.

The book also highlights some people involved in the biggest losses created by the market crash: like Merrill's $300 million mezzanine CDO manager Wing Chau; Howie Hubler, known as the person who lost $9 billion in one trade, the second largest single loss in history; and Joseph Cassano's AIG Financial Products, which suffered over $99 billion in losses.

Reception

The book was shortlisted for the 2010 Financial Times and Goldman Sachs Business Book of the Year Award. It spent 28 weeks on The New York Times' non-fiction bestseller list.

It also received the 2011 Robert F. Kennedy Center for Justice and Human Rights Book Award.

Film

Main article: The Big Short (film)

Paramount acquired the rights to The Big Short: Inside the Doomsday Machine in 2013. On March 24, 2014, it was announced that Adam McKay would direct the adaptation. On January 13, 2015, Variety reported that Brad Pitt, Christian Bale and Ryan Gosling were set to star in the film, and Pitt would produce the film with McKay and Dede Gardner. Steve Carell then joined. Plan B Entertainment financed the film with Paramount handling the distribution rights.

Production started on March 23, 2015, in New Orleans, LA. The film was released on December 11, 2015, and was met with critical acclaim, winning the Academy Award for Best Adapted Screenplay, as well as receiving a nomination for the Academy Award for Best Picture.

See also

• CDO-Squared
• Collateralized debt obligation
• Credit default swap
• Mortgage-backed security
• The Greatest Trade Ever, a 2009 book by Gregory Zuckerman

External links

• The Big Short, at W. W. Norton (official book site)
• 'Shorting our Future', a review of The Big Short in The Oxonian Review