The Big Short is a 2015 Oscar-winning film adaptation of author Michael Lewis’s best-selling book of the

same name. The movie, directed by Adam McKay, focuses on the lives of several American financial
professionals who predicted and profited from the build-up and subsequent collapse of the housing and
credit bubble in 2007 and 2008.

offer a deep dive into the lives, workplaces and psychology of several Wall Street professionals and the
financial world.

This article explores The Big Short, its main characters, and the stylistic tools used by McKay to explain
complex financial instruments engineered by the banks during the run-up to the subprime mortgage
meltdown.

The Big Short, however, is a character-driven piece that focuses not just on the events leading up to the
financial crisis but also the conflicted morality of several men who foresaw the crisis well in advance. The
film adaptation stars Christian Bale, Steve Carell, Ryan Gosling, and Brad Pitt.

The story chronicles the work of hedge fund manager Michael Burry (portrayed by Christian Bale), who
recognizes that the U.S. housing market of the early 21st century is virtually an asset bubble inflated by
high-risk loans. In 2005, Burry – the manager of Scion Capital — creates a credit default swap that would
allow him to short the housing market. However, his clients grow angry. When banks and creditors argue
that housing is stable, and the market in fact does keep on surging, his clients grow angry and fearful as
Burry continues his short plays. When they demand their money back, he places a moratorium on
withdrawals.

Meanwhile, Jared Vennett (Ryan Gosling) inadvertently discovers Burry’s goal to establish the credit
default swap. Hedge fund manager Mark Baum (Steve Carrell) joins Burry in investing in the credit
default swap market and recognizes that poorly structured loan packages known as collateralized debt
obligations (CDOs) have received AAA ratings and are exacerbating the mortgage crisis. After discovering
that questionable innovation in the CDO market has fueled massive risk in the markets, Baum concludes
that the housing bubble will ultimately lead to the collapse of the U.S. economy and bets big – shorting
the financial sector. (Baum was based on real-life hedge fund manager Steve Eisman. Vennett was based
on Greg Lippmann, a former bond salesman at Deutsche Bank.)

Finally, two investors – Charlie Geller (John Magaro) and Jamie Shipley (Finn Wittrock) – seek the
investment advice of retired banker Ben Rickert (Brad Pitt) after they discover a paper written by
Vennett. After Shipley and Geller make a series of successful bets against the housing market, Rickert
grows angry that they have profited off the downfall of the U.S. economy and Middle America’s financial
doom. Geller was based on Cornwell Capital founder Charlie Ledley, while Jamie Shipley was based on
Cornwell partner Jamie Mai. Rickert was based on Ben Hockett, a former trader at Deutsche Bank.

Though they make a fortune on their trades, the duo is left highly dejected about the amount of risk
taken and the moral hazard that ultimately would fuel the bailouts of several banks. Shipley and Geller
would later try – and fail – to sue the ratings agencies for their misleading rankings of mortgage-backed
securities and mortgages.

Burry, meanwhile, ends up producing nearly 500% returns for investors who stay with him through the
duration of the housing market's collapse.

Stylistic Approaches

Financial terminology and the chronology of the financial crisis is highly complex and difficult for a
traditional audience to comprehend in a two-hour movie. The film production team employs a simple,
yet stylistic approach to defining the tools, from collateralized debt obligations (CDOs) and tranches to
credit-default swaps and mortgage-backed securities, that helped sink the global economy.

For example, the film explains the origination and complexity of a synthetic CDO in a scene where
actress Selena Gomez plays blackjack. Joined by economist Richard Thaler, they explain how increasingly
larger side bets on Gomez’s hand of blackjack are great when she is winning – a metaphor for a rising
housing market. However, when Gomez loses the hand – or the housing market falls – those increasingly
larger side bets set off a domino effect that create larger losses at the table and the economy,
respectively.

Next, audiences receive a visual aid when learning the definition of a tranche. In one scene, Ryan Gosling
pulls blocks from a Jenga tower to display how tranches work in mortgage-backed securities (MBS) such
as collateralized mortgage obligations (CMO). By pulling out blocks in the lower part of the tower,
Gosling explains that the top-rated securities at the top end of the tower cannot stand when the lower-
rated securities fail and are removed from its base.
Other examples of visual cuts and props explain the complexity of financial innovation. One cutaway
features actress Margot Robbie in a bubble bath drinking champagne and explaining the frailty of
mortgage-backed securities. Meanwhile, TV food personality Anthony Bourdain explains how tossing a
two-day-old fish into a stew is similar to the subprime mortgages tossed into CDOs to hide their risky
nature from unsuspecting customers.

The Big Short offers a highly engaging exploration into the years preceding the collapse of Lehman
Brothers and the housing market, which led to the Great Recession. In the end, it concludes, Wall Street
greed sank the global economy for years.

________

Three storylines are developed in this film. The autistic portrayed hedge fund manager Michael Burry
(Christian Bale) discovers in 2005 that the U.S. housing market is extremely unstable. It is based on
‘subprime’ loans of high risk and providing fewer and fewer returns. He predicts the market to collapse
in around 2007 and decides to profit from this situation. He develops a short-selling investment strategy
and that is what catches the attention of stockbroker Jared Vennett (Ryan Gosling) and traumatized
hedge fund manager Mark Baum (Steve Carell). With the last two persons a second storyline develops. In
the third storyline two eager young investors decide to become involved in the credit default swaps and
they are successfully mentored by retired banker Ben Rickert (Brad Pitt). The three narratives are linked
by the shrewd Vennett who ‘informs’ the viewers of the film and confuses them intentionally.

________

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 is
extremely unstable, being based on high-risk subprime loans. 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 as it
requires paying substantial monthly premiums, it sparks his clients' vocal unhappiness, believing he is
"wasting" capital. Many demand that he reverse and sell, but Burry refuses. Under pressure, he
eventually restricts withdrawals, angering investors. Eventually, the market collapses and his fund's value
increases by 489% with an overall profit of over $2.69 billion.

FrontPoint Partners and Jared Vennett

Deutsche Bank salesman Jared Vennett, (based on Greg Lippmann)[8] the executive in charge of global
asset-back security trading at Deutsche Bank,[9] 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 hedge fund
manager Mark Baum, 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, prompting them 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. Baum's employees question Vennett's motives, yet he maintains his
position and invites Baum and company to the American Securitization Forum in Las Vegas. Interviewed
by Baum, CDO manager Wing Chau, on behalf of an investment bank, describes how synthetic CDOs
create chains of increasingly large bets on faulty loans – up to 20 times as much money as the loans
themselves. Baum horrifyingly realizes that the fraud will completely collapse the global economy. He
purchases as much as possible, profiting at the banks' expense and waits until the last minute to sell.
Baum's fund makes a profit of $1 billion, and he laments that the banks won't accept blame for the crisis
and that people will scapegoat immigrants and the poor.[10]

Brownfield Capital

Young investors Charlie Geller and Jamie Shipley accidentally discover a prospectus 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
Forum, learning that the U.S. Securities and Exchange Commission has no regulations to monitor
mortgage-backed security activity. They successfully make even more profit than other hedge funds by
shorting the higher-rated AA mortgage securities, as they were considered highly stable and carried a
much higher payout ratio.

Geller and Shipley are initially ecstatic, but Rickert is disgusted, citing the impending collapse and its
effects; when unemployment goes up 1%, 40,000 people will die. Furthermore, they realize the banks
and the ratings agency 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 and their families about the upcoming disaster
and the rampant fraud but nobody believes them. As the market starts collapsing, Ben, on vacation in
England, sells their swaps. Ultimately, they make a profit of $80 million, with their faith in the system
broken.

Epilogue

Jared Vennett makes $47 million in commissions selling off 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".

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.

Melissa Leo as Georgia Hale - an employee of Standard and Poor's

Hamish Linklater as Porter Collins - one of Baum's team.

John Magaro as Charlie Geller - one half of Brownfield Fund, who discover Vennett's prospectus and also
decide to short the housing market.

Rafe Spall as Danny Moses - one of Baum's team.

Jeremy Strong as Vinny Daniel - one of Baum's team.

Finn Wittrock as Jamie Shipley - one half of Brownfield Fund, who discover Vennett's prospectus and also
decide to short the housing market.

Marisa Tomei as Cynthia Baum - Mark Baum's wife.

Tracy Letts as Lawrence Fields - a banker who oversees Burry's hedge fund.

Jeffry Griffin as Chris - Jared Vennett's assistant.

Byron Mann as Mr. Chau - an immoral CDO specialist who Baum interviews in Las Vegas.

Adepero Oduye as Kathy Tao - an employee of Morgan Stanley, who oversees Baum's fund.

Karen Gillan as Evie - an employee of the SEC who quits her job to try and work for the banks.

Max Greenfield as Mortgage Broker - an immoral Florida broker who targets strippers.

Billy Magnussen as Mortgage Broker - an immoral Florida broker who targets immigrants.

Bernard Hocke as Coach

Aiden Flowers as Young Michael Burry

Peter Epstein as Paul Baum

Silas Cooper as Therapy Businessman

Garrett Hines as Deutsche Sales Rep

Stanley Wong as Ted Jiang

Dave Davis as Burry's Assistant

Wayne Péré as Martin Blaine (as Wayne Pere)

Billy Slaughter as Real Estate Agent

Al Sapienza as Option One CEO

Sophie Lee as Woman in Glasses

Michael Brooks as Angry Guy on the Phone

David Wyman as Pub Goer

Peter Anderson as Pub Goer

Lara Grice as Deutsche Auditorium Host

Tony Bentley as Bruce Miller

Tim Wilson as Lehman Employee

Jae Suh Park as Michael Burry's Wife

Rudy Eisenzopf as Lewis Ranieri

Margot Robbie as herself

Anthony Bourdain as himself

Richard Thaler as himself

Selena Gomez as herself