Plot The Big Short (film)

the film consists of 3 separate concurrent stories, loosely connected actions in years leading 2007 housing market crash.

scion capital storyline

in 2005, eccentric hedge fund manager michael burry (christian bale) discovers united states housing market extremely unstable, being based on high-risk subprime loans. anticipating market collapse during q2 2007, interest rates rise adjustable-rate mortgages, envisions opportunity profit. plan create credit default swap market, allowing him bet against market-based mortgage-backed securities. proposes idea several major investment , commercial banks readily accept. burry s huge long-term bet, exceeding $1 billion, entails paying substantial monthly premiums banks. requirement sparks clients vocal unhappiness, believing wasting capital, , many demand reverse , sell, burry refuses. later discovers banks collude major bond-rating company maintain ratings on worthless bonds, allowing them sell off losing positions before true values became known. under pressure, burry restricts withdrawals fund, angering investors. housing market collapses , fund s value increases 489% overall profit of on $2.69 billion.

front point partners storyline

deutsche bank salesman jared vennett (ryan gosling) 1 of first understand burry s analysis, learning actions 1 of bankers sold burry credit default swap. vennett uses quant verify burry s predictions true , decides put own stake in market, earning fee on selling swaps firms ll profitable when underlying mortgage bonds fail. misplaced phone call alerts front point hedge fund manager mark baum (steve carell) plans, , convinced buy credit default swaps vennett due own personal distaste banks. vennett explains market collapse being further perpetuated packaging of subprime loans collateralized debt obligations (cdos) large enough considered aaa ratings. baum sends staff investigate miami housing market , discover mortgage brokers making money selling risky mortgages wall street banks, created bubble. in 2007, these loans begin default, prices of cdos somehow rise. meanwhile, ratings agencies refuse downgrade ratings of these failing bonds. when baum questions acquaintance @ standard & poor s, discovers conflicts of interest , dishonesty amongst credit rating agencies. when baum s employees question vennett s motives, maintains position , invites baum , team american securitization forum in las vegas. baum interviews cdo manager wing chau, creates cdos on behalf of investment bank, claiming represent interests of investors. chau describes how synthetic cdos make chain of increasingly large bets on faulty loans, involving 20 times money loans themselves. baum horrifyingly realizes fraud collapse global economy , decides purchase many swaps possible, profiting situation @ banks expense. waiting until last minute sell position, baum s fund makes profit of $1 billion, laments banks won t accept blame crisis.

brownfield fund storyline

young investors charlie geller (john magaro) , jamie shipley (finn wittrock) accidentally discover prospectus vennett, convincing them become involved in swaps, fits strategy of buying cheap insurance big potential payouts. since below capital threshold isda master agreement required enter trades burry s , baum s, enlist aid of retired securities trader ben rickert (brad pitt). when bond values , cdos rise despite defaults, geller suspects banks of committing fraud. 3 visit american securitization forum, learn u.s. securities , exchange commission has no regulations monitor mortgage-backed security activity. manage make more profitable payout deal other hedge funds shorting higher-rated mortgage securities. these securities considered highly stable , banks willing sell swaps on them extremely cheaply. geller , shipley ecstatic, rickert disgusted, pointing out impending economic collapse , human effect s going come it, in particular, fact when unemployment goes 1%, 40,000 more people die. furthermore, realize banks have colluded ratings agency maintain value of cdo s in order sell worthless positions , short them before inevitable crash. horrified, try tip off press , families upcoming disaster , rampant fraud nobody believes them. housing market begins collapse, ben, while on vacation in england, able sell swaps, , points out europe starting feel effects of collapse. ultimately, make profit of $80 million, faith in system broken.

epilogue

jared vennett makes $47 million off selling of swaps. mark baum becomes more gracious financial fallout, , staff continue operate fund. charlie geller , jamie shipley go separate ways after failing sue ratings agencies, charlie moving charlotte start family, , jamie still running fund. ben rickert returns peaceful retirement. michael burry closes fund after public backlash , multiple irs audits, investing in water commodities. noted of 2015, banks selling cdos again under new label: bespoke tranche opportunity .