Fed blog post: "Hey, Economist! What Did You Make of ‘The Big Short’?"

Jason Bram and Andreas Fuster

The Big Short has been making a big splash this year, racking up five Academy Award nominations and taking home the Oscar for best adapted screenplay. The movie provides a very entertaining way to gain an understanding about some of the underpinnings of the financial crisis, particularly through a few memorable cutaway scenes—such as when actress Margot Robbie explains mortgage-backed securities (MBS) from a bubble bath, chef Anthony Bourdain compares collateralized debt obligations (CDOs) to seafood stew, and singer Selena Gomez explains synthetic CDOs using the analogy of “side bets” made by people watching a casino blackjack game.
But how accurate is the film in portraying what actually happened? And what does academic research have to say about some of the issues highlighted in the movie? To get a better handle on these questions, research officer Jason Bram caught up with Andreas Fuster, a New York Fed economist who has conducted extensive research on housing, the mortgage market, and securitization.