Sheila Bair Says There's A Big Problem With ‘The Big Short’

She won't even watch it.
Actors Christian Bale, Steve Carell, Jeremy Strong and Finn Wittrock of "The Big Short."
Actors Christian Bale, Steve Carell, Jeremy Strong and Finn Wittrock of "The Big Short."

WASHINGTON -- "The Big Short" has one big problem, according to Sheila Bair, a former top regulator who battled to rein in banking abuse during the greatest financial catastrophe since the Great Depression.

Bair earned a reputation as one of the most respected bank reform advocates in the world for her work surrounding the 2008 financial crisis, when she was chair of the FDIC. At a panel hosted by HuffPost on Wednesday, Bair coolly dismissed both the Oscar-nominated film and the Michael Lewis book it is based on for making heroes out of villains.

"I haven't seen the movie and I didn't read much of the book," Bair said. "It kind of made me mad."

Wall Street investors who bet against the housing market, Bair told the panel, weren't just making money by fueling the housing collapse -- something the book and film both acknowledge. Many short sellers also actively opposed government efforts to fix the mortgage mess, because helping troubled homeowners would wreck their bets.

"I was an early advocate for trying to get mortgages restructured in a massive, systemic way, because we had a big problem," she said.  "And there were people who shorted the ABX index, who I assume are the ones being kind of backhandedly glorified in this book, who were actively opposing us because they made money. The more people who lost their houses, the more money they made."

Watch Bair's comments in the video below. 

The ABX index was an aggregate of securities tied to mortgages. "The Big Short" doesn't focus on the ABX index, but rather on short-sellers who helped create the securities that constitute it. By offering to bet against the housing market, these short sellers gave banks the ability to create new "synthetic" securities tied to risky mortgages. Others could then bet against these securities by short selling the ABX index.

"Even in a backhanded way, I don't like movies that glorify people who were pursuing that agenda," Bair added. "And I think they were more lucky than smart. But for that reason, I have not seen that movie and probably will not. Sorry."

Other former regulators on the panel Wednesday were more sympathetic to the film.

"It was a brilliant exposition of some very complex issues," said Brooksley Born, former chair of the Commodity Futures Trading Commission. "There's much more to the story. I thought it was a very good illustration of that slice of the story."

HuffPost organized the event to commemorate the fifth anniversary of the Financial Crisis Inquiry Commission's official report on the causes of the banking collapse. Born was a member of that commission.

"A real tragedy of this crisis is Alan Greenspan and the Federal Reserve were the one institution that had the ability to set mortgage lending standards, and despite enormous evidence … they did nothing," said Phil Angelides, former FCIC chairman.

"The Big Short" has received Oscar nominations for Best Picture, Best Director, Best Supporting Actor, Best Adapted Screenplay and Best Film Editing. Listen to HuffPost's interview with director and screenwriter Adam McKay here.