Big Short boasts a star studded cast and is – according to IMDB – about “four outsiders in the world of high-finance who predicted the credit and housing bubble collapse of the mid-2000s decide to take on the big banks for their lack of foresight and greed.”
Here’s why it couldn’t have been avoided.
Credit rating agencies knew fully well that their assigning AAA ratings to junk collateralized debt obligation’s (CDO) was wrong. They did it to please their customers, the equally crooked investment banks who fully exploited the gutting of Glass-Steagall. It’s not a mater for these agencies to “figure out” what should be done. They fully understood that to please the banks they have to continue pasting “AAA” to toxic mortgage packages or they’ll lose business to rivals.
Recently S&P recently tried to be a bit more honest, lost tons of business to Moody’s and Fitch, then returned to the status quo ante. The real problem was and is a crooked political system that gives carte blanche to criminal behavior on Wall street.
Back to the movie: a must watch.
The really important discovery the protagonists in The Big Short made was the extent of the lies, corruption, and outright underhandedness that the banks and companies like Goldman used to enrich themselves.
The protagonists discover that the banks were selling garbage and pretending it was gold. The complex vehicles they developed served no positive social or economic purpose. It was just a way to earn incredible fees and to ultimately create misery and terrible hardships for millions of people in the U.S. and throughout the world. And the protagonists also discovered that the bankers got away with it.
Even Robert Rubin (not in the movie) a special advisor to Citibank and former Secretary of the Treasury announced that he did not understand all of the instruments his own bank was peddling.