Derek Willie is a freshman at the University of Pennsylvania.
If there was one emotion that Adam McKay’s film The Big Short was designed to evoke in its viewers, it was anger. What could be more detestable than a gang of greedy bankers tricking Mom and Pop into taking out a faulty mortgage and subsequently profiting on their default?
The viewer further ponders how our government could watch such avarice bring down the entire U.S. economy and pursue so little punishment and such meager reform. Despite the indignation we feel as consumers touched by the crisis, it remains our responsibility to consider it carefully, unbeholden to the collective allure of Margot Robbie, Ryan Gosling and Brad Pitt. So before we run to pillage the nearest bank, let’s examine the central question the film attempts to answer: how did the Great Recession come to be?
According to Borod, there was very little chance the mostly low-income homeowners would be able to pay back the subprime mortgages they were offered by brokers, but because the mortgages’ low quality allowed the banks to buy them from brokers at lower prices, the banks bought a lot of subprime mortgages, pooled them together, and sold them to the market as CDOs. Furthermore, credit rating agencies such as Moody’s and Standard and Poor’s accorded these CDOs with AAA ratings, such that the banks could sell off CDOs derived from toxic mortgages (for which they paid quite little) at high prices, reaping considerable profits. Financial institutions even sold CDOs derived from the value of other CDOs, concocting the ultimate weapon of mass destruction, the synthetic CDO. When homeowners began defaulting on their subprime mortgages, the value of the CDOs came crashing down, along with the investment banks that bought them. Borod’s theory of the crash, which the film largely supports, is rather complicated. Yet it beckons a simple conclusion: a messy combination of greed and imbecility on the part of banks brought down the U.S. economy in 2008. 
However, we should note that there is not complete consensus on whom or what caused the financial crisis. The problem with the film’s accusation, claims the conservative leaning American Enterprise Institute, a think tank, is that, while the mortgage market did collapse, it was the doing of government, not Wall Street. Author Peter J. Wallison explains:
“In June 2008, just before the crisis, more than half of all US mortgages—31 million loans—were subprime or otherwise risky. Of these, 76 percent were on the books of government agencies, primarily the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. This shows, without question, that the government—a sophisticated buyer—created the demand for these deficient loans.” 
For Wallison, the Department of Housing and Urban Development’s pseudo-heroic campaign to make housing universally affordable established quotas mandating that mortgages be issued to low-income families that wouldn’t ordinarily qualify for “prime” mortgages. Once the federal government began underwriting these subprime mortgages, the banks followed, creating a housing price bubble and a resultant mortgage meltdown. Then, somehow, Wallison vaguely states that “government blunders turned it into a financial crisis,” after rescuing Bear Sterns from insolvency but foolishly leaving Lehman Brothers to die. 
Interestingly, Wallison never mentions the CDO in his analysis, the critical component of Borod’s essay, while neither the film nor Borod spends a moment examining the GSEs Wallison so surely indicts. Both sides boast volumes of literature supporting their theories of the financial crisis and its conception. Certainly conservatives would blame government and its unquenchable thirst for social justice for our past financial woes; liberals, Wall Street and its unbridled greed. The financial crisis spawned a political firestorm from its inception; The Big Short, as great a film as it was, has reignited the rancor.
 Baldwin, James Garrett. "The Big Short Explained | Investopedia." Investopedia. January 21, 2016. Accessed January 30, 2016. http://www.investopedia.com/articles/investing/020115/big-short-explained.asp.
 Borod, Ronald S. "Did Dodd-Frank Hit or Miss the Securitization Bull’s Eye?" Practical International Corporate Finance Strategies 38, no. 3 (2012): 1-4. Accessed January 30, 2016.
 Wallison, Peter J. "The Big Short - AEI." AEI. January 5, 2016. Accessed January 30, 2016. https://www.aei.org/publication/the-big-short/.
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