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Funny Money

Welcome back to Faith in Film! This week, we're talking about The Big Short, the informative and playful 2016 film about the 2008 Financial Crisis. You know, a lighthearted movie that's fun for the whole family! Kidding, of course. I have to say, though, for someone who was too young to understand what was happening when it went down, this film has taught me a lot!

The film follows 4 groups of people who successfully predicted the collapse of the economy (and made money off of it). They are FrontPoint Capital, led by Mark Baum (Steve Carell), Scion Capital, led by Michael Burry (Christian Bale), Cornwall Capital, led by Charlie Geller, Jamie Shipley, and Ben Rickert (John Magaro, Finn Wittrock, and Brad Pitt), and Deutsche Bank's Jared Vennett (Ryan Gosling).

Quite the star-studded cast, right? It's buoyed even more by cameos from Margot Robbie, the late Anthony Bourdain, and Selena Gomez to help explain the complex financial concepts that caused the crisis. This movie does an excellent job of explaining how 20+ years of predatory lending, risky investments, and good old-fashioned greed tanked the economy.

Just like in The Founder (find our review of it at, a central theme here is greed. I'll break it down for you in a rudimentary way, but read me loud and clear: I am not an authority on this subject. If you want the full story, go watch the movie (or read one of the many books written about the crisis)! With that being said, here goes:

Basically, in the 1970s, a guy named Lewis Ranieri devised a way to make money off of other people's mortgages by pooling a bunch of mortgages together and inviting Wall Street firms and private investors to bet that mortgages would continue to be paid on time. It was called a Mortgage-Backed Security (MBS). Because the default rate on mortgage debt at the time was incredibly low, it was a pretty sound investment! "Who doesn't pay their mortgage, right?"

This was all well and good...for a time. These MBS's were given ratings by agencies like S&P and Moody's. In the beginning, they were all rated extremely highly due to the perceived safety of betting on mortgages. After a while, however, Wall Street ran out of mortgages for people to purchase securities on. After all, only so many people have good enough credit and available cash to qualify for mortgages, right? So what did the banks do? They began giving riskier and riskier mortgages.

In the short-term, this didn't cause any major issues. However, it was the first domino to fall in a complex dumpster fire that would eventually cripple the world economy for years. Seriously, these loans were awful. In the film, we see an example of an exotic dancer who has 4 houses and a condo, all under her dog's name. No, that is not a joke.

After a couple of decades, these banks and mortgage brokers got so greedy and so reckless that they were giving these loans to just about anybody who wanted them. "Bad credit score? No worries! Past repossessions or foreclosures? We've got you covered!"

The mortgage brokers got their commission from selling the loans, the banks and firms got more mortgages to package into their MBS's, and the ratings agencies simply went along with it. Remember when I said that the ratings were high at the beginning because of the quality of the mortgages? Well, the ratings didn't go down when the quality of the mortgages did.

The ratings agencies were making tons of money off of this system, too. Why would they do anything to rock the boat? As a result, firms and private investors kept pouring money into these MBS's, completely unaware that they were buying a largely deficient product. The house of cards was about to crumble.

Important note: the majority of these bad mortgages were "adjustable-rate mortgages." To simplify a complex concept, think of them like deals on cable packages. The companies tease you in with a low rate for 6 months, a year, or 2 years, and then the monthly price goes up by quite a bit. The same goes for these adjustable-rate mortgages.

Now we get to the crash itself. In 2007, these adjustable rates kicked in, and hundreds of thousands of people were unable to pay their mortgages. They defaulted on their mortgages...which tanked the value of MBS's...which absolutely killed these Wall Street firms that had been pouring money into this supposedly ironclad investment.

This culminated with the bankruptcy of Lehman Brothers, one of the largest investment firms on Wall Street. It resulted in massive unemployment, billions of dollars of value lost around the world, and the destruction of many people's lives.

Burry, Baum, Geller, Shipley, Rickert, and Vennett saw it coming. They caught onto the fact that these mortgages were incredible risky before they defaulted, because they looked. They peered through the vast pile of money that this fraudulent system was making and saw what was coming.

Now to be fair, they didn't do anything to stop the crisis. They all made incredible amounts of money by betting on these mortgages to default. But they weren't blinded by the status quo, and they looked past the money at the garbage underneath. That wasn't easy to do!

The lesson here is, of course, that profits should never come before people. A large part of Catholic social teaching is centered on this idea, and I strongly recommend checking out the Catechism or the DoCat (from Ignatius Press) to see just how much the Church espouses it!

This financial crisis largely came about because banks gave loans to people they knew could likely never pay them. They absolutely put profits over people, and we all suffered for it. How do we fight it? Be generous with your time, talent, and treasure. Don't buy into the commercial mindset the world has adopted wholesale these days. Remember where true value is derived - from the grace and spark of Almighty God.

Here's hoping we never have another financial crisis like this one! Praying you are all safe and well.

God Bless,


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