Friday night, I wanted to just shut down my brain and watch something that required no thought, no engagement, no need to actually actively pay attention. But there was nothing immediately appealing in my Netflix instant queue, my Netflix DVD (which I’ve had since the Carter administration, I think) is Life of Pi, and from everything I’ve heard, that requires a great deal of engagement, and there seemed to be little of interest either on TV that night or recorded on the TiVo.
Except this: Too Big To Fail. It’s an HBO produced docudrama about the beginnings of the 2008 financial collapse that basically set off the “Great Recession.”
Sure. Something light to entertain me for the evening. No problem.
The thing is that the movie accomplished a couple of things without being overly heavy: first, it’s paced remarkably quickly. I just started watching it thinking I’d duck out at some point and find a sporting event or Warner Brothers cartoon or something. But before I knew it, I was two-thirds of the way in, and I wanted to see how it ended–not because I didn’t know how things came out, but because I wanted to know where it went with the story. The second thing is that it’s fascinating because it simplifies and explains the things that were going on without feeling like it’s dumbing things down or treating the viewers like an idiot. The movie is based on a book by the same name, which, apparently, lays things out in pretty clear, easy-to-read detail.
The cast is remarkable: William Hurt, Paul Giamatti, Topher Grace, Cynthia Nixon, Bill Pullman, Tony Shaloob, James Woods, Ed Asner, among others. All play it with the requisite attention to detail while not going too far over the top–well, except Giamatti, but we’ll discuss that in a minute.
I think most of us know the story by now, or at least the basic framework: For several years, banks had been gambling on mortgages by loaning more and more money to less and less qualified borrowers at higher interest rates that would go nowhere but up over the course of the loan. Meanwhile, they backed their gambles with insurance policies in the form of mortgages backed securities which were sold to other banks and large insurance companies, most notably AIG.
Eventually, as the lower interest rates on these loans ratcheted upward and those homeowners were unable to pay the loans, they defaulted, leaving the bank with a house and less money than they counted on. The mortgage-backed securities that the banks bought and sold each other became nearly worthless, wiping billions of dollars off of their balance sheets. And in the meantime, there was a run on the insurance companies to try to recoup some of these losses, and AIG started running out of money itself.
In the movie, we almost have four sides to root for and against: Hurt’s Henry Paulson, the Treasury Secretary; and Giamatti’s wimpy Ben Bernanke, both of whom recognize the problem but feel that government doesn’t have a role in fixing the problem because they believe the banks should take care of themselves and the weaker ones should be bought by the stronger ones. Then there’s the stronger banks, who refuse to touch the weaker ones without being forced to because of the toxic mortgage assets that are being held. And then the weaker banks, run by a bunch of greedy men who found that the formula worked for a few years, but now everything they’d built is crumbling as they watched. And finally, there’s the rest of the government–President Bush and congress–who were unable to agree to any kind of hard-edged, pointed solution because that would have required more government regulation.
Paulson is treated as the hero here, mainly because he came to the Treasury position from the leadership of one of the eventually weaker banks, so he knows the people involved, and knows how things “should work.” But the problem is that things moved so far so quickly that decision-making quickly became a full-blown panic. None of the banks come off very well here, for obvious reasons. Bernanke is made to be a whimpering idiot for most of the movie, deferring to Paulson on all of the decisions. So it’s left to Paulson to make all of the decision as the financial system threatens to collapse over the course of a couple of weeks.
In the end, TARP is passed, giving billions of dollars to banks across the country, with the expectation that they’ll loan out the money, which they didn’t do.
The only thing I can’t quite work out is whether we’re supposed to feel any kind of empathy for Paulson: clearly he’s worried, as everyone would be in that situation. But the fact of the matter was that he was part of the problem for a while when he headed up one of the banks, and also that he now no longer understands the mindset of the CEOs of the banks so consistently underestimates their ability to make the decision that he expects them to.
Okay…I’ve rambled, but if you want a quick-moving recap of the near complete collapse of our banking system, then check this movie out. If not, watch a Three Stooges movie or something.
Oh…Four out of Five Stars.
See you tomorrow.