Overall I would say that there were very few blatant falsities. </b>The main departures from reality came in the form of exaggerations and caricaturizations of the personalities featured.</div>


Parts that were absolutely spot on:</b></div>

  • The lay-person explanations of financial products like CDOs and RMBS were pretty accurate, though it was difficult not </i>to roll my eyes at the way they were presented (i.e. Anthony Bourdain and Selena Gomez. Really?</i>).</li>
  • The scene in which Michael Burry goes to the major investment banks to buy insurance (CDS) against the default of RMBS is really the way in which it was done. At that point, this was actually a bespoke product, and the way he met with and structured the product with the banks' exotic derivatives teams was actually the way in which it happened.</li>
  • The way in which Baum and his team conducted diligence by visiting the abandoned cul de sac and speaking with mortgage brokers is also accurate. That's really the way the neighborhoods looked!</li>
  • Also spot on were the ridiculously low bars that the brokers required to award subprime mortgages to potential homeowners. Since they could always</i> turn around and immediately market the mortgages to the banks, they didn't really care too much about the quality of the loans as they didn't hold them on their own books for more than a few days.</li>
  • The way that the CDS products marked to market so weirdly was also accurate. Since these products basically didn't trade at all, their prices didn't necessarily move "logically" with prevailing rates of default. Once the market for these products started to expand (i.e. Goldman started to short housing on its own book by buying CDS from AIG), the products started to more accurately reflect their underlying value and everything went belly up.</li>
  • The perverse incentivization of the rating agencies was also described quite accurately. They were (and still are) paid by the banks, and since these products were so complex, essentially Goldman could say something like "We'd like for you to rate the creditworthiness of this CDO. Oh by the way, here's the model you should use to determine how creditworthy it is. Oh, it says AAA? Great!"</li>

    Parts that were not so realistic:</b></div>

    • The investment bankers' diabolical cackling after they sold the CDS to Burry probably didn't actually happen. More likely they were just shocked.</li>
    • The quickness with which the hedge funds in the movie were able to conduct diligence and pull the trigger on their shorts was also just unrealistic. To build as much conviction in the trade as Burry did, I guarantee it wasn't as simple as scrolling through a spreadsheet for a few hours and muttering FICO scores under his breath.</li>
    • The conversations that the investors had with each other and the bankers surrounding the actual technical details of the short were also unrealistic. They were "dumbed down" quite a bit for the audience's benefit. Baum's team obviously doesn't need to be told how debt tranches work.</li>