Well done, grossly misrepresents the real causes of the collapse

Rating: 8/10 (24 February 2016)

This movie is very entertaining. It does a good job of explaining some rather abstruse financial instruments. Overall it is informative. Unfortunately, it also is grossly misleading about what really caused the housing bust in 2007 and the financial turmoil of 2008. Both were almost entirely the result of misguided federal policies that accumulated over several decades and that reinforced each other. The movie, in contrast, makes it seem as if the only important cause was greed by the financial institutions.
Fannie Mae and Freddie Mac, which exist because of federal policy, funneled excessive funds into housing. They did it in response to federal policies of the 1990s that pushed or even required lower lending standards. They also did it to curry favor with Congress after they were found to have been lying in their accounting in the early 2000s. The Fed kept interest rates abnormally low, making loans cheap to take out. The Taxpayer Relief Act of 1992 reduced taxes on capital gains on houses, making houses more attractive investments, thus stoking demand still more. Federal law makes mortgage loans no-recourse, encouraging speculation. The SEC required big financial institutions to get bond ratings from only those ratings agencies approved by the SEC. That was bad enough because it prevented competition through entry, but the SEC's attention wandered and it allowed the original 7 approved agencies to dwindle to 3 by 2007 because of closures and mergers, further eliminating competition. The Community Reinvestment Act required financial institutions to make unsound loans. The SEC did not bother to investigate the new financial instruments (well-described in the movie) to see if they were sound. Eliot Spitzer (at last a non-federal player), using his office as Attorney General of New York as a springboard for the governorship of that state with his eye on an eventual run for the US presidency, abused his office to abuse financial institutions, leading directly to the destruction of the big financial institutions' research departments. Research personnel in 2007 were half what they had been in 2000, directly the result of Spitzer's shenanigans. There's more, but that's already perhaps too much.
The Big Short gets *NONE* of that right, except for a slight mention that the SEC fell down on its job. That's because The Big Short completely ignores all of it to push the easy but misleading drama of corporate greed.
The Big Short also misrepresents the housing collapse of 2007, presenting it as largely driven by sub-prime mortgages. In fact, default rates for prime mortgages were just as bad.
As of this writing, The Big Short is a leading contender for a Best Picture Oscar, largely because it portrays an event of considerable national importance. It doesn't deserve the award on those grounds (though it is in fact a fine movie) because it grossly misstates what happened and thus lays the foundation for subsequent bad public policy to fix the problem. That's why I give it an 8 rather than a 10.
The acting was very good throughout. Everyone is making a big to-do about Christian Bale's performance. It was OK but nothing special. I though Steve Carell turned in the best performance and deserved a nomination.
Oh, by the way, about that nasty Chinese guy in the movie who explains CDOs and CDOSquareds and who obviously was behaving in bad faith. He was real, and he was found guilty of gross professional misconduct, barred from working in the financial industry, and given a big fine. His company had to pay a separate big fine. He didn't go to jail, but at least he won't be deceiving the public again.