Dave Spends $5 Dollars on Future Human Capital

I recently showed my college writing class The Big Short-- we just finished a paper on Karen Ho's illuminating (but rather long and repetitive) essay on Wall Street culture in the aughts: "Biographies of Hegemony: The Culture of Smartness and the Recruitment and Construction of Investment Bankers" and I wanted to show them what happened to this insulated system that Karen Ho critiques-- and my son Alex saw the cover of the DVD and decided he wanted to watch it . . . I told him it was a great movie, but long and complicated, and he said, "My favorite movie is Inception, Dad, I think I can handle it" so  I sweetened the deal and told him if he endured a short lecture from me before the film started-- on mortgages and subprimes loans and stocks and bonds-- and then, at the end of the film, if he could explain the systemic failure and how the financial crash of 2008 actually happened, I would give him five dollars, and-- withour irony and in the spirit of the movie, he agreed to this; Ian also watched and endured several of my financial asides, but when it was all over (and they watched the entire thing last night) Ian declined to try to explain it for five dollars (though he claimed to understand the plot) and also declined to make a sidebet on whether Alex would be able to successfully explain the origins and nature of the crash, but Alex rose to the challenge and gave me a fairly accurate portrayal of the crisis, including mortgage backed securities, CDOs, credit default swaps, fraudulent ratings, how to short the market, premiums eating into your account, the big pay-out and the bail-out . . . the only thing he had trouble with (which the movies glosses over) is the idea that the banks were unloading toxic securities they had created onto investors before they accurately marked the price, then shorting those same investments in order to attempt to balance their books -- creating a crazy conflict of interest feedback loop . . . you can learn about it in this special episode of This American Life, "Inside Job," which details the arbitrage, fraud, and corrupt strategies and tactics that Magnetar used during the crash-- and Alex was suitably annoyed with the result, a taxpayer bailout that funded the very institutions that created the crash and paid big bonuses to many of the engineers of the bubble, a bailout that so enormous that it might be incalculable and probably resulted in the election, oddly, of Donald Trump . . . because, as Jared Vennett clairvoyantly explains at the end:

In the years that followed, hundreds of bankers and rating-agency executives went to jail . . . the SEC was completely overhauled, and Congress had no choice but to break up the big banks and regulate the mortgage and derivative industries . . . just kidding! . . . banks took the money the American people gave them, and used it to pay themselves huge bonuses, and lobby the Congress to kill big reform . . . and then they blamed immigrants and poor people, and this time even teachers . . .

the end of that little bait and switch speech surprised both my students and my children-- but it makes sense, as it too boring and complicated to completely understand the forces tearing apart our economy-- so it's much easier to blame the other, the barbarians at the gate and the freeloaders within; anyway, I'm proud of both my kids for making it all the way through-- Ian could have defaulted to The Walking Dead and Alex has decided he's going to read the book . . . maybe if enough youngsters understand what went wrong, they'll vote some people into office that will enact some policy to prevent this kind of thing . . . or maybe they'll blow all their savings on cryptocurrency and we'll all have another great movie to watch.