The Big Short and Our Current Political Climate
While the below reflection is lengthy, I feel it concretely summarizes my concerns about the current U.S. political climate. I imagine a lot of people in the U.S. are tired of politics, and wish we could talk about something more pleasant, but I do believe in my heart of hearts, now is the time to fully engage, not look away. I know people will not agree with some of my points, and that’s good. People have the right to disagree, voice their opinion, and fully express themselves. That is what democracy is all about. All this to say, I hope the following reflection provides an opportunity for others to also reflect, however similarly or differently on our society and may help engage others to participate in the political process (whether that be Republican, Democrat, Green, Libertarian, etc.). Thanks for your time.
Over the past Christmas holiday, I watched a movie with my family called The Big Short. For those who don’t know, The Big Short is about the 2008 financial crisis, and more specifically, the epic collapse of the housing and nearly the entire financial market.
Upon seeing the movie, I was inspired to read the book, which I received as a Christmas present several years ago. For one reason or another, I never got around to reading the book, but finally had a chance to do so over the past vacation.
In reading this book about the worst recession since The Great Depression (if not for the government to bailout Wall Street banks), and thinking about the current Trump administration, I see copious amounts of parallels.
Like a Credit Default Swap, CDO (Credit Debt Obligation), and the entire subprime mortgage market, The Trump Administration (and the POTUS himself) makes very little logical sense.
I’m no market expert by any means, but as far as I understand, the subprime mortgage crisis was made up of a bunch of crappy bonds that were rated AAA (supposedly the good rated bonds) to BBB (the higher risk bonds).
In actuality, the rating agencies such as Moody’s and Standard & Poor’s were being held hostage by Wall Street banks to rate these bonds as Wall Street wanted them to. Meaning, Wall Street banks could just say, “the heck to you Moody’s. If you don’t rate these bonds favorably, I’ll just go to Standard & Poors” and vice versa. As a result, the subprime mortgage bonds were never rated accurately and there was no real difference between subprime mortgage bonds rated AAA or BBB. Many of BBB bonds were fraudulently rated AAA (considered to be risk free). To be frank, all the subprime mortgage bonds (whether they were BBB or AAA) were more or less a bunch of mortgages put together in a pile of poop.
Similarly, as we didn’t know what was in these subprime mortgage bonds because of a lack of transparency and Wall Streets intimidation of rating agencies to produce faulty ratings (as well as financial institutions like NewCentury giving home loans out to people with no means of having them), I get the same fishy feeling in a lack of transparency from the Trump administration and their ties to Russia. In order to have our leaders be held accountable and to put the people’s needs first, we need more transparency and accountability! This is why Dodd-Frank was created from the worst recession since the Great Depression. Transparency and accountability is also why the public has a right for Trump to release his taxes. Trump would like you to think that he’s a self made billionaire. Well then, show me. Release your taxes. What do you have to hide?
This is not a matter of national security or what’s classified or unclassified information. Just as the truth about the DNC favoring Hillary over Bernie was “leaked”, we demand transparency from the Trump organization. In order for a democracy to function, we need to have an informed electorate. There are some government secrets which should remain government secrets, but when our elections may have been titled in favor towards Trump with Russian interference, the public has a right to expect honesty as to the degree of Russian interference. Senator McCain said it best recently in a New Yorker article stating, “In democracies, information should be provided to the American people… How else are the American people going to be informed?’”
Yes, Stephen Miller (Senior Advisor to Trump) was right to say, “The Powers of the Presidency are substantial,” but he was dead wrong to say we will not question those powers. To not question our leaders is the same as being ignorant, and being apathetic in our political process. When We The People are apathetic to politics, when we start caring more about the power of the Presidency than the Constitution, than the right to freedom the Press, than the right to equal protection under the law by our judges, we might as well start calling the United States a dictatorship rather than a democracy.
In the recent New Yorker article I previously alluded to, the article highlights Senator McCain’s recent remarks to go against the grain of his own party in looking into an independent investigation into the extent of the relationship between Trump and Russia. In the article, the author writes, “McCain takes Putin’s global bullying personally. He points at a picture of a Russian opposition politician he keeps next to his desk. ‘This here is Boris Nemtsov,’ he said. The physicist turned liberal politician was one of Putin’s fiercest critics and had become McCain’s friend. They last saw each other two years ago. ‘He sat on that seat there, and I said, ‘Boris, I don’t think you should go back because they’ll try and kill you.’ And he said, ‘I have to go back. I love my country.’ Upon his return, Nemtsov was shot four times from behind while crossing a bridge near Red Square. ‘He was murdered in the shadow of the Kremlin’, McCain said.”
Now, I hope to God that we would never see such a thing occur here in the U.S., but there are many parallels I see between two bullies like Putin and Trump. We have already seen how quick Trump is to turn on those who he perceives as critical of him, and he has already made moves to try and consolidate the Power of the Presidency. McCain is putting country above party, and if we are to remain the United States, we need more of our political leaders putting our country first. This starts with launching means an independent investigation into Trumps relationship with Russia.
There is a point in The Big Short where the people who shorted the subprime mortgage market (the “winners”) go to a Mortgage Summit at the Venetian in Las Vegas. Their main goal of attending this Mortgage Summit is to learn all they could about this sector of investing. They tried to learn what these terms CDO and credit default swap meant, and the validity of subprime mortgage bonds. They tried to learn from the experts. However, it quickly became apparent to them that the so called “experts” knew nothing about what was in these subprime mortgage bonds, and knew very little about CDOs or Credit Default Swaps. All these people knew is it was making them rich and they were selling bucket loads. They didn’t care that the people who bought these houses didn’t have the income to pay them. They were happy to give out loans to people who they knew could never pay them back. There were no balances to check the system. There was no Dodd-Frank.
Then when people started defaulting on their mortgage payments, and the housing market starting falling, the mortgage industry figured they would take their losses and the market would eventually rebound… Obviously it didn’t.
Since turning 21, I’ve never been to Vegas, and I don’t consider myself a gambler. However, I’ve read the Power of Habit and have a vague understanding of the addictive powers of gambling, and the vicious cycle it can take on a person and those surrounded by them.
Reflecting on this, it seems like the people involved in the housing market had a strong addiction problem. People were addicted to buying houses because everyone figured markets would continue going up as they had for decades. In one story in The Big Short, a farmer making $14,200 a year was buying a house worth $875,000. The idea that a person with this income couldn’t afford this house didn’t matter because the house value would go up and there was a profit to be made from this. When you multiply this logic to thousands of other people who had the same idea, it becomes pretty apparent how big of a cluster mess we were in.
When we see someone who has an addiction (whether it be gambling, drugs, alcohol, or in this case, shopping on the housing market) there are health networks and support groups to help them get clean. However, it’s tough to get clean when you don’t have the right environment. I imagine getting clean in Vegas is a tough thing to do. There are people all over the place trying to lure you in. “Make this bet, make that bet. If you play the odds right, you’ll be a winner.” That’s what Vegas wants us to believe, that’s what Wall Streets wants us to believe. That’s what Trump built Atlantic City to be before it came crashing down.
However, anyone whose truly been successful at anything knows it takes hours to become efficient in something (some say 10,000 hours to truly master a craft). This could be mathematics, computers, a language, temples, palaces, music, sports, cleaning up rivers, dams, oceans, etc. It takes a lot of time and patience to see growth.
In the United States, I fear that we are going into another period where economic growth will take priority over the disciplined approach of moderate growth to slower growth that may not make our country richer in the short term, but strengthens our terms and conditions for fair business practices and helps to ensure greed does not get the best of us. Under Trump, we may see a temporary economic boom with deregulation, but at what cost will it be to those who are most vulnerable to it? Deregulation may temporarily make everyone a little richer monetarily, but trickle down economics will most certainly create more wealth inequality within our society. Deregulation will most certainly mean that our environment will become more polluted, that we will continue to put off the effects of climate change, and put company profits over our health and well being.
All this to say, I don’t trust the casinos at Las Vegas or Atlantic City, and I certainly don’t trust the people who built those casinos (including Trump). Like Trump, the casinos all want your money and are willing to sacrifice your health and well being to get it. At a casino, as long as your having a great time and it’s fun, who cares about the money right? This is a delusional mindset which is bound to end up with destruction and people getting hurt. When we prioritize money over health, we’re in trouble, and that’s exactly what I see from Trump. Call it socialist, but I’d take my health any day over money. You can have your health and not much money (if you have a supportive and healthy environment), but you can’t enjoy your money without your health.
It’s been about 9 years since the recession, but if I was to learn anything from The Big Short it’s this:
. — Don’t prioritize health over money. It never ends well.
. — Don’t buy something if you don’t have the money (unless its an investment in education)
. — Don’t lend money to those who can’t pay it back (unless it’s education)
. — Have systems in place to hold institutions and their individuals accountable to bad loans (i.e. Dodd-Frank)
. — Don’t buy something you can’t understand like subprime mortgage bonds, credit default swaps, or CDO’s.