The movie, I felt, was very different from the book, especially the last few minutes of the movie. While the book stressed stupidity and insanity, the movie stressed criminality.
First, prior to the movie, there was some discussion of whether there have been any nationwide crashes in real estate prices since the depression. I remembered looking at the nationwide Case-Schiller index of home prices, and prior to 2006, we do not see a decrease:
Unfortunately, the Case-Shiller index only goes as far back as 1987, so we don’t have any data prior to that. The smoothness of the curve, however, is remarkable. It is easy to see how people as late as 2005 an observer could think that the trend was a very reliable up, up, up.
I don’t think there had been a nationwide drop in real estate prices since the great depression, there had been drops within local markets when local industries got into trouble. This is why taking a bunch of A and AA bonds from different localities, and bundling them together into a CDO could lead to the CDO legitimately having a better rating than the individual bonds it contained. A diverse portfolio is less risky than a concentrated portfolio. The movie basically says this is fraudulent, like using old fish to make a stew so the customers won’t notice that it’s not fresh. I think the movie was wrong.
At one point, someone sells something for more than it was worth, and someone in the movie said something to the effect that that was criminal. No, it’s not criminal to sell something for more than it’s worth if you don’t lie in the process. There’s no law against charging whatever the market will bear.
The movie said that the banks were bailed out and used the bailout money to pay big bonuses. That’s true of AIG, but not of most of the banks. Most of the banks paid their bailout money back to the government, with a profit, as soon as they were permitted to, in June of 2009. One bank that didn’t (because they were in worse shape than the other banks) was Citi, whose CEO, Vikram Pandit, took $1 a year in total compensation until the organization resumed profitability. This is especially interesting as it was Pandit’s predecessor, not Pandit himself, who made a mess of things at Citi. AIG did eventually pack back the bailout money.
The repayment of the bailout money was one of the events least-covered by the media, relative to its importance, of the 21st century. Most Americans just think the banks kept the money and that was the end of it.
Near the end of the movie, someone says the bankers knew they would be bailed out. I don’t recall that from the book, and it’s inconsistent with most of the movie, which shows the bankers not being aware that a crisis was looming at all.
Many people feel the banks did not suffer at all due to the meltdown. That’s not accurate, the shareholders of the badly-managed banks lost most of their investment. Note that a lot of the management of the banks get paid in stock options, so they lost a lot too. Here are some plots of stock prices of the various financial organizations: Bailout Statistics