Tuesday, December 29, 2015

is the big short intended to hide a bigger story?


zerohedge |  Need some help with this movie. Seems like the movie created the idea that the system as a whole is corrupt and put most of the blame on the rating agencies, and totally bypasses the US government and Federal Reserve, with only a scant mention in the credits that Burry tried to contact the White House and tell them how he figured it out ultimately leading to him being audited four times and being visted by the FBI. 

The main scene that seems to dump the most blame came with Baum and his numbers guy pushing the old lady at Standards and Poor's into saying "if we don't give the banks the rating they want they go down the street to moodys". The movie makes alot of top people look like bafoons who didn't know what was going on like the Bear Sterns guy on stage with Baum as the stock is plumitting saying he would "buy moar". 

All three groups that the movie follows who made a bunch of money on the "big short" are all shown as doing so because of Burry who they portrayed as an idiot savant type who can single handidly digest unlimited numbers while everyone else (Government, Federal Reserve, Freddie Mae, Banks, Investment firms, hedge funds, regulators, etc) are asleep at the wheel. I'm sorry something seems amiss here!! 

Consider me totally ignorant about the finer details of banking, finance, housing, etc, but it seems almost comical that the Federal Reserve Bank whose primary function is setting the feds fund rate did not have a complete model of the impact that rate would have on mortgages in the US? A central theme in the movie is the cascadding effect of the default of sub prime mortgages.

The collapse happens in the last year of Bush's presidency with the most unpopular bill TARP being signed as he is leaving office with no hope of re-election. The bailout is presented only very briefly as Baum speaks in low key amazement that they are going to bail out the banks. Just lucky timing I guess that the largest financial bailout in history and the financial collapse happended a few months before a very unpopular president leaves office and is going to hand over the reigns to the first black president. 

Sure there is the revolving door between SEC and financial firms referenced in the film with the red head in vegas who is trying to bed goldman guys, but her cluelessness is tied to the SEC not being funded when she is asked why they are not paying attention to the ratings of MBS.

Seems like the point of this movie is to leave most watching it (the massess) with the impression that the system is just a mess and made up of greedy people. This just reinforces what I think most people already think. If there is a bigger story in regards to the timing of the collapse coming at the end of the Bush presidency, with the political capital of Obama to over see the coming QEs and the overall takeover of the economy that was provided by the TARP and related legislation, that story is burried in this story of Burry the savant. (I'm not attacking Burry, don't know a thing about him other than this movie)

Hollywoods story is that one idiot savant single handely figured out some corruption in the ratings of securities and made a big bet and won a billion or so as millions lost. Seems like this story, while significant and outrageous and interesting, is designed to hide a bigger story.