The Big Short: Have we learned our lesson?

The Big Short

I saw The Big Short the day after Christmas, and I can say without reservation that it’s the best film I’ve seen in awhile.  The story is accurate, the acting is superb and complicated financial information is explained so even your grandmother could understand it.  If I had to come up with a single complaint, I’d say the film didn’t blame the Federal Reserve for the housing bubble.  But Michael Lewis didn’t suggest that in his book either.

I went to the 10am matinee at a local cinema, so I joined only two other people in the movie theater.  I found myself gesticulating at the movie screen several times since the environment felt like my own private viewing.  I wasn’t expressing outrage over what has happened in the past because we already know how artificially low interest rates, no income/no job (ninja) loans and fraudulent appraisals wrecked the U.S. housing market.  What infuriates me is that we are doing all of the same things again!

The house flipping shows are back in full force on HGTV with programs like Property Virgins and Flip or FlopInterest only loans are back and other subprime loans have returned while banks try to scrape the bottom of the applicant barrel.  Armando Montelongo is back on infomercials and he is ready to teach you how to become a house flipping millionaire just like him! And I still hear people saying that buying a house is a “good investment.” As Mark Baum (played by Steve Carell) says in the film, “We live in an era of fraud.”

The fraud continues today, and there is no one with the courage to stop it.  Since the housing bubble, our public servants have become feckless matadors allowing bulls of deceit to distort our financial markets with impunity.  Former Attorney General Eric Holder admitted as much in 2013 stating, “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.” Holder now works for Covington & Burling where he earns millions defending Wall Street firms.

Michael Blurry, played by Christian Bale in the film, now says that another crisis is looming thanks to the Federal Reserve’s money printing and ZIRP.  You don’t have to be a billionaire genius to know that, but his statements surely lends credibility to those of us who have been saying this for some time now.  The truth is that America has not learned its lesson, so we are commencing another financial crisis worse than 2008.  The collapse will gain momentum in 2016, and the worst of it should be revealed no later than 2018.  By the end of this decade, Michael Lewis will need to write another book, but hopefully he will get the real culprit right this time.