You need an economics degree to understand this movie.

I hear ya. I saw it in theaters and was overwhelmed. Saw it again at home and could follow it better. Best piece of advice I can give is to pay close attention to when the celebrities that are playing themselves are speaking directly into the camera. Like they say in the film, all the financial terms are confusing on purpose to throw the layman off, to make it so that the financial guys are the only ones that can understand it. If you don't pay attention to that and pay attention to the correct parts, it starts to make sense.
Hope this helps.

Yes, it is a difficult subject matter.

I read a 500 page book to understand this and only after about 6 books I start to think I am getting the full picture.

Putting it in a 2 hour movie is ambitious.

Also the author of the book Michael Lewis is known to resent financial institutions (He quit his job as a bond salesman to become writers). So you are offered a slightly biased view of what has happened.

A cynic is what an idealist calls a realist - Sir Humphrey Appleby

Here are the basics, ready?

Christian Bale plays a socially awkward genius who's great at noticing patterns. That's how he caught the big clue as to the housing bubble. The people he answers to, as well as everyone else didn't exactly trust what he was saying for a couple of reasons. One, because he was different and didn't play the game the way the other big wigs on Wall Street did. Two, because the idea of it collapsing was the same as how people felt about the Titanic sinking: it was IMPOSSIBLE because it's known as the unskinkable ship! All of the news media outlets, traders, and "experts" told everyone that everything was fine. Mostly because they couldn't fathom this happening. "It was impossible".

The problem was...the banks and lenders knew demand was high from WS to buy these loans, but the supply of strong buyers was dwindling. You see, these package deals were supposed to be a majority of SECURED loans, meaning people with a certain good credit history, strong score, a certain income, and a low debt to income ratio. They would throw in a few HIGH risk loans (below min credit score, high debt to income, not a strong candidate)into this giant sack and sell this sack for a huge amount of money to Wall Street. With so many strong loans, the few bad ones were worth it because they were only a few. Well, people only need so many homes, so if the majority of strong buyers already had a home, then these loan packages slowed down, meaning the demand almost came to a halt. There were fewer and fewer STRONG buyers for SECURE loans. Uh oh! This was not good for the banks. So what did they do? They started approving more and more of these HIGH risk loans, grouped them together with other ones, but sold them as the same STRONG SECURE mortgages before, even those these package deals were now considerably MORE high risk loans than secure. WS kept buying them, not realizing that they were risky purchases. (Think back to ENRON lying about their financial statements even though they were traded publicly).

Christian Bale went through the data, like the Good Will Hunting boy he was, and noticed the upswing in loan approvals for high risk people. He knew this meant there was a gigantic chance the housing market was going to crash soon, because there would be more defaults and foreclosures than ever before, even though the "experts" were swearing the market was great. So he took all of his clients' money and created a mutual fund similar to that of betting on the under dog in Vegas. Think 40:1 odds for argument's sake. This is where I'm a little fuzzy, because apparently he only had to take all of this money and go to a financial place like Goldman Sach's & they will set this up for you. GS's employees thought it was impossible too, which is why they laughed and opened it up for Christian Bale. Once everything started to go down the tube, GS's employees, as well as the other hedge funders who opened up the same "bet" against the housing market, they got nervous. They did whatever they had to do to sell those packages to prevent from having to pay out. So just like the banks were repackaging and selling these high risk loans to WS, the hedge funds repackaged and sold these "bets" against the housing market, trying to prevent from having to pay out on them.

It didn't work. Housing market crashed and the rich people who saw it coming became richer. Instead of the banks being held accountable, they were given bailout money and regulations. They're still doing the same thing, only they have to jump through more hoops to get it done.





 <---Bella's "Kiss Me" Face

I got by with just an accounting degree

In terms of understanding this film, I think a degree in finance would help more than a degree in economics. JMO

The movie spoonfeeds you every step of the way.

The simplest way to understand is to think of a store that is buying defective stereos from their supplier. They know the stereos are junk, but they still buy them. Why? Because they have a bunch of people lining up who will buy them.

Normally they might push back on the supplier, but in this case, they know they can quickly sell them, so they don't even care.

They also know that when the customers eventually figure out the stereos are defective, by that time they can get away with it by saying "there's no refunds", or they can change the store name and move across the street.

Reading Liar's Poker helped me understand this movie a lot more, actually. It's by the same author behind this movie.