I had assumed from the comment that there were two shows, one a dramatization and one a documentary. Surely no one thinks that fiction was a documentary?!
And I was confused by that word choice, thinking I was/am unaware of HBO's Chernobyl documentary, which they must have produced to accompany the excellent film/miniseries.
I have friends who keep citing 'The Big Short' for what's wrong with our financial system.
A lot of people can't tell the difference between fact movies and fiction movies.
And that doesn't even get into clearly biased documentaries (but I assume that most documentaries are at least trying to be factual instead of entertainment...)
The book “The Big Short” is a documentary. The movie is based reasonably closely on the book. The movie is a fictional re-telling, but the people are real and their motivations and actions are accurate.
The Jenga scene to describe CBOs is quite cringe to me.
If a BBB tranche goes under, the investors in the BBB tranche get nothing to protect the AAA tranche (and above). In effect: BBB tranche can fail safely, that's the entire point of them.
That's why they only shorted the BBB tranche (with exception of Brownfield Capital, who did go all the way to the AA tranche). AA was safer and more reliable: so for a short its a riskier move to short.
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The scene does in fact lay the ground basis of tranches and CDOs, which is better than most Hollywood movies. But its still filled with misconceptions, and the Jenga tower (though dramatic) isn't helping at all.
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Synthetic CDOs was very poorly described. The "rating agency" scenes were pretty much purely fiction and just designed to enrage the audience and IMO unhelpful to the general discussion. Etc. etc.
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CDOs of CDOs were accurately described IMO. Hammed up by explaining the "yesterday's fish in today's soup), but that at least is somewhat of an accurate analog.
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I mean, it was a solid movie. But look, I know how reality works. I've actually taken the time to look at (some) of the Congressional Hearings and read some of the papers for how that whole thing worked back in 2008. And there are also some good Frontline Documentaries on the whole 2008 crisis in general.
AIG insured many of the AAA tranches. Once those started becoming at risk, AIG had to respond to a collateral call--which they couldn't (as the AAA tranches were so huge).
They were further hurt by the fact they kept a huge amount of their assets in AAA MBS. Which had now become illiquid and (temporarily) lost value.
AIG's bailout by the government was a critical inflection point; if they hadn't, the entire insurance/financial services industry was at risk.
That's beside the point...the movie is only two hours and can't include everything...the upshot that the AAA's were in a position to be unstable and possibly cause an economic collapse was in fact very true, and your comment is not very accurate.
Yes, it's a Hollywood movie, about a very technical subject. I would not expect someone to come away with a strong working knowledge of how credit default swaps work, any more than I would expect someone to come away from watching the miniseries "Chernobyl" and understand what caused the reactor explosion.
The Jenga tower should really be inverted. The BBB tranche gets knocked off the tower to protect the AAA tranche at the base.
The ratings agency scenes are fictional in the sense that no conversation actually happened, to our knowledge, but it's 100% true that the ratings agencies played right along with the industry, and were incentivized to give higher ratings, just like the FAA was incentivized not to ground Boeing after the first 737 Max crash.