Wall Street, “The Big Short,” and the Crime That Shook the World

see http://fortune.com/2015/12/27/big-short-wall-street-movies/

No film — unless it were as long as Shoah — could ever fully capture the corruption, greed, and destruction unleashed by Wall Street’s securitization machine. But a few films have tried. Among them, The Big Short comes closest to showing the enormity of what remains the largest financial crime in human history.

The fallout has been staggering: more than 20 million people displaced from their homes, stripped of their investments, and forced to rebuild shattered lives.

Why “The Big Short” Resonates

The film, based on Michael Lewis’s book, has provoked renewed outrage. Audiences leave with a sense of seething anger — not just at the banks, but at the realization that those institutions effectively seized control of global economics and politics.

The distortion of domestic policy, foreign policy, and even electoral politics is part of the legacy of this fraud. For many, it’s hard to process without revulsion.

The Scheme, in Plain Words

Here’s the short version of how the con worked:

• Empty Trusts: Banks created trusts in name only. They sold shares (mortgage-backed securities) in these empty vehicles to pension funds and institutional investors.

• Investor Money Stolen: Instead of funding the trusts, banks kept the investors’ cash. At best, they originated a handful of loans just to keep up appearances.

• Toxic Loans by Design: To ensure defaults (and big payouts on bets against the loans), banks pushed the worst possible loan products — guaranteed to fail.

• Servicer Illusion: “Servicers” appeared to collect payments, but the trusts they claimed to serve never actually bought the loans. The money flow came from hidden slush funds controlled by the investment banks.

• Fabricated Defaults: Even when borrowers were current, modifications and accounting tricks were used to manufacture defaults — fueling the foreclosure machine.

• Foreclosure Frenzy: With courts confused and borrowers overwhelmed, banks foreclosed en masse, positioning themselves as lenders when in fact they were mere brokers (or outright thieves).

The Harsh Reality

This wasn’t simply sloppy banking. It was deliberate. Investors were always being paid from back channels, labeled “servicer advances,” even though the so-called servicers neither advanced funds nor had any authorization. Behind the scenes, the hidden Master Servicer — the same bank that created the sham trust — controlled it all.

The endgame was predictable: foreclosures in record numbers, enriching intermediaries while erasing wealth from both homeowners and investors.

Why It Still Matters

Understanding this scheme is more than an academic exercise. It explains why foreclosure defense remains critical, why courts struggle with standing, and why homeowners are so often blindsided by fabricated documents and false claims of ownership.

The truth is simple: the banks were never lenders. They were middlemen who pocketed the money, engineered failures, and then cashed in again by taking homes.

Final Thought

The Big Short shines a light, but even it can’t cover every angle of this complex Ponzi scheme. The real story — the one still unfolding in courtrooms and living rooms — is even darker.

As one observer put it: “The banks weren’t lenders. They were brokers at best — and thieves at worst.”

The rest, as they say, we’ll leave to the movies…

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