But the sheep are not innocent

There have been several attempts at making films about the 2007- 2008 financial crisis, notably Too Big To Fail, Inside Job, Margin Call, and Oliver Stone’s update of Wall St: Money Never Sleeps. The film version of Michael Lewis’s book The Big Short is probably the most entertaining and accessible and comes closer than the other films to broaching the financial crisis as part of a broader moral crisis in our society.

The Big Short is entertaining because of its cast of eccentric contrarians who sniffed out the housing bubble and bet it would implode. It is accessible to people without a detailed knowledge of finance because of its effective use of asides to explain some of the more exotic financial concepts, notably the economist Richard Thaler and actress Selena Gomez explaining synthetic Collateralized Debt Obligations (CDOs) as a series of side bets on the outcome of one blackjack hand. In the end, however, the film follows all the others in primarily blaming the banking system for the crisis, despite tentatively exploring how the financial crisis was symptomatic of a shortfall of morality on the part of borrowers as well as lenders.

The audience is warned against its natural tendency to sympathize too much with the protagonists, who after all “are betting against the American economy.” For them to win their bets, millions of lives must be ruined due to the loss of jobs, homes and retirement savings.

Near the end of the film, the character playing Mark Baum says the US housing market and financial system is emblematic of the fraud endemic in U. S. society that also infected “government, education, religion, food and even sport” ( embedded TV images highlight well-known drug cheaters Barry Bonds and Lance Armstrong). So it correctly situates the problems within the housing and financial sectors as symptomatic of a broader malaise, but is reluctant to state what that problem is.

The Big Short tentatively points a finger at a generational shift in values as the root of the fraud, along with a hefty dose of investor stupidity. At one point, a young banker asks “Who’s Warren Buffett?” highlighting how engineering exotic financial products like CDOs supplanted value investing as the prime motivation in the financial sector. Those few who possess moral values are confused by the amorality of others; listening to a couple of brokers talk about not verifying mortgage applicant credentials, one investor asks a colleague “Why are they confessing?” only to be told “They’re not confessing. They’re bragging.” But the film does not develop the full implications of the lack of morality and character on display throughout the film.

Americans are furious at two groups of people for the housing bubble and the ensuing carnage to the financial system. Topping the list are the banks and mortgage companies which lent the money irresponsibly, the focal point of the outrage in all films about the financial crisis, including The Big Short. How- ever, no film addresses directly the other group Americans hold responsible — the individuals who took these mortgages, knowing full well they could not repay them. This irresponsibility includes people who took out mortgages not caring about whether they could sustain the payments on enormous amounts of debt. These people accepted a short- term boost to their standard of living with no thought to how they were put- ting both the financial system and house values at risk of collapse, leaving the average person to foot the bill.

David Brooks recently wrote The Road to Character about how our society has lost its moral values and how they can be reconstructed. One symptom of what has gone wrong with post- war generations is that people are encouraged to look to their own feelings for moral guidance, rather than rely on external institutions (such as parents, school and church) that embody traditional values that help people overcome the inevitable self-delusion humans are susceptible to and better grasp what is truly right and wrong. Blaming banks and regulators for what was, at an individual level, a complete lack of both moral and financial judgment is just another example of how we increasingly blame the external world for our own failings. Tighter regulation and higher capital requirements might help strengthen the financial system, but are doomed to fail as long as we produce people with a better sense of morality. This applies to everything from applying and approving loans to getting an education, running a business, serving the public or playing sports. Without a proper moral compass, your actions will not result in you to becoming a better person or helping create a better world. What was really on short display during the financial crisis was moral clarity and values.

THE BIG SHORT BLAMES BANKS FOR WHAT WAS A COMPLETE LACK OF INDIVIDUAL MORAL AND FINANCIAL JUDGMENT.