The financial concepts presented in the movie The Big Short are numerous and complicated. If you walked out of the movie thinking a) I’m not completely sure what happened in the subprime mortgage crisis or b) I want to read more about the crisis and the characters in The Big Short—this reading list is for you.
1. Michael Burry's 2010 New York Times op-ed describes how he discovered the U.S. housing bubble and the mortgage-market meltdown. He also has some pointed words for former Fed Chairman Alan Greenspan and what he feels the government could have done to minimize the crisis.
Recommended Reading
2. Before Michael Lewis published The Big Short, he wrote this piece on the financial crisis for Condé Nast’s Portfolio magazine—the most trafficked story ever for that magazine. It goes back to the story he first uncovered in Liar’s Poker and introduces some of the characters from The Big Short.
3. This five-article crash course from The Economist on the causes of the financial crisis is a commitment, but it’s also worth reading. It breaks down the multiple causes of the crisis without pizzazz, and it goes a lot further than the book and movie.
4. This short article from the Federal Reserve History archives provides a succinct and clear explanation of the subprime mortgage crisis from a consumer perspective. It also talks about how the mortgage crisis became an economic crisis, and what the Fed did to alleviate the damage.
5. Wing Chau, the investment advisor Steve Carell has dinner with in Las Vegas, was part of two The Big Short-related lawsuits, this short piece recounts when he unsuccessfully sued Michael Lewis for libel and this one describes the time the SEC sued Chau and his firm for violations in the CDO business. In January of this year, Chau was ordered by a judge to pay $3 million in fines.
6. Still blown away at the idea that no Wall Street executives were sent to prison? You should check out this piece by William D. Cohan, published here in The Atlantic, which asks whether or not justice was served in the wake of the financial crisis. Cohan examines the actions of the Justice Department, namely Eric Holder, as the country moves further and further away from the events of the mortgage crisis and prosecuting those at the helm of the big banks.
7. If you want to know where the ratings agencies—Moody’s, S&P, and Fitch—are at now, here’s an update from The Economist. The big three still control ratings, and unfortunately “ratings agencies are back to their profitable and controversial old selves.”
8. Many forget that an entire commission was tasked with figuring out what on earth brought about the financial crisis, but that was the main goal of the 10-member Financial Crisis Inquiry Commission (FCIC). In the end, the group put out a hefty report enumerating some of the problems that they believed led to the bank implosion. But not all members agreed on those reasons. In this dissent, Keith Hennessy, Douglas Holtz-Eakin, and Bill Thomas question the robustness of their fellow commissioners’ findings, arguing that the amount of regulation didn’t play a significant role, but that a credit-bubble that extended well beyond the U.S. housing market, did.
9. And if you still want to learn more, you can take this online Coursera class on The Global Financial Crisis offered by Yale and taught by former U.S. Treasury Secretary Tim Geithner and finance professor Andrew Metrick. According to the syllabus, week three has three lessons devoted to securitization and week 6 (titled Anxiety Part II) has three parts on Bear Stearns. Fun.