The Wolf of Wall Street
“Falling into trouble doesn’t come from not knowing something. It comes from the illusion that you know something for certain. Wall Street managers are convinced that all those derivatives built on subprime assets are firmly under their control.”
“Oh! That makes perfect sense.” At Yoo Jae-won’s words, the young man with black hair and round black horn-rimmed glasses nodded vigorously. He had been about to spear a perfectly cut piece of steak with his fork when the remark made him pause mid-motion—an oddly comical sight.
The man enthusiastically agreeing was Adam McKay. A Hollywood director who had been developing a new comedy film, he had accepted ID Group’s secretary office invitation to dinner without a moment’s hesitation. Formerly a writer for SNL, he had debuted as a film director a year and a half earlier with Anchorman. The response had been more than favorable—it had been outstanding. The comedy, set against the 1970s broadcast world and centered on an anchor delivering news in an entirely new format, grossed $96 million worldwide. Critics had praised it as well, allowing McKay to capture both commercial success and critical acclaim.
“Ah, please continue eating while you listen.” Yoo Jae-won added the remark as he watched Director Adam McKay nod with his fork still poised over the juicy steak. Only then did McKay finally place the meat in his mouth, his face lighting up with satisfaction. The beef vanished after just a few chews—an experience even the director, who never skimped on fine dining, found novel.
Yet the satisfaction on Adam McKay’s face did not last long.
“Um, Chairman, the Wall Street anecdotes are fascinating, but I’m not sure why you’re telling me all this.”
Visiting Yoo Jae-won’s mansion had been intriguing enough, and the interior of the dining room—with its sweeping view of the San Francisco Bay bathed in golden light—had been impressive. The man himself, whom McKay had only heard rumors about, had been remarkably gracious, and the subprime mortgage story he shared had been compelling. Still, McKay could not fathom why a mere comedy director was being told such things.
“Ah, I got ahead of myself. I heard you’re preparing your next project, Director McKay.”
“That’s right!” Adam McKay, always expressive with his gestures, nodded emphatically. Following the success of Anchorman, he had fully committed to the director’s path and was now slowly preparing his next film.
“In that case, how about challenging yourself with a completely different genre for your next film—straight drama?”
“Drama?” Adam McKay’s expressive face hardened instantly. It was understandable. His choice to debut with a comedy had been unavoidable. His background as a writer for NBC’s flagship comedy program SNL had made it difficult to secure funding for anything else once he entered the film industry. Yoo Jae-won was the first person to suggest he try drama.
“Ideally, it would be a film that examines how Wall Street has built nothing more than a flimsy house of cards on subprime mortgages—and how catastrophic the collapse at the end will be.”
With that explanation, Adam McKay finally understood the purpose behind the subprime mortgage discussion that had accompanied their meal. At the same time, he recalled the news that Chairman Yoo Jae-won had invested a staggering three billion dollars in put options tied to subprime mortgages. He wondered if the goal was to create a film critical of subprime lending in order to trigger a crash, but that didn’t align either. ID Investment and Yoo Jae-won had been warning about the dangers of expanding subprime mortgages since early last year—long before the put option investment. Their position had remained consistent. If anything, the three-billion-dollar bet seemed designed to prove their warnings to skeptical analysts who had demanded concrete evidence rather than mere words.
“Sounds interesting.”
Adam McKay felt his interest stir. Yoo Jae-won’s track record of extraordinary achievements was almost too vast to recount. To an outsider, it would seem impossible for any single person to accomplish so much. It was no wonder the U.S. federal government had considered granting him honorary citizenship. If someone like Yoo Jae-won said there was danger, then the threat was real.
McKay’s confidence didn’t rest solely on Yoo Jae-won’s reputation. He had personally witnessed numerous colleagues in Hollywood who had purchased homes with subprime loans. Though the dream factory appeared dazzling and prosperous from the outside, many staff members were little more than cogs in the machine. With irregular incomes, they often relied on loans to buy homes—and because their credit was poor, they ended up with high-interest subprime mortgages. Yoo Jae-won’s warning, combined with what McKay had seen firsthand, convinced him that a crisis driven by subprime lending was inevitable.
At the same time, the story of those who had spotted the crisis early and turned it into opportunity would undoubtedly captivate audiences. And if that story could be filmed and released in advance? The impact would be enormous. If the film came out before the crisis erupted, it would become a prophetic work. If it premiered afterward, it would resonate with everyone. Already drawn to serious drama, Adam McKay found himself completely captivated by Yoo Jae-won’s proposal.
“If you decide to proceed, I’ll support you fully. I’ll provide high-level information on subprime-related matters, and if needed, you can use this mansion and other ID Group facilities as filming locations.”
At those words, there was only one thing Adam McKay could say.
“I’ll do it! I’ll make this film no matter what!”
Without a shred of hesitation, his hand shot up. Seeing the director’s enthusiastic response, Yoo Jae-won felt a quiet sense of relief as he shook McKay’s hand. With this, the film that had once been known as The Big Short before his regression would reach the world far earlier than before. Much would change as a result, but one thing was certain: the shock the movie would deliver would be far greater than in his previous life.
Hollywood was a place where rumors spread like wildfire. Word that Director Adam McKay was making a film about Wall Street’s moral hazard quickly reached those around him and even appeared in brief news items. Yet no one reacted with particular alarm. Adam McKay was no Martin Scorsese or Steven Spielberg. While his debut film Anchorman had done well, it was still a comedy, and his prior career as a writer for SNL hardly seemed threatening to those closely monitoring Yoo Jae-won’s moves.
Instead, they mocked him, claiming that Yoo Jae-won—now facing the likely failure of his put option investments—was desperately trying to spread crisis theories by any means necessary. The worst of these attacks targeted the three-billion-dollar put options he had purchased through Lehman Brothers, AIG, and Citigroup. ID Investment’s purchase had come with special contractual terms due to its massive scale—most notably exclusivity and payment guarantees.
Exclusivity meant the put options could only be sold to ID Investment. Since ID Investment had designed the product, they could demand this, and the banks had agreed because they deemed the likelihood of exercise near zero. As a result, the put options ID Investment acquired had only one quoted price on the day of the transaction. Had ID Investment sold any portion midway, the quote would have fluctuated and altered the valuation—but that never happened. The only outcome that mattered was whether the options would be exercised at maturity.
Yet financial magazines closely tied to Wall Street had recently calculated and publicized an estimated loss of over five hundred million dollars for ID Investment, citing the rise in MBS and CDO yields following interest rate cuts and the corresponding decline in related put options. “ID Investment’s put options expected to lose over $500 million! The 0.75% rise in CDO yields has caused the value of the put options to plummet, amplified several times over by leverage.”
“Let them laugh all they want. We’ll see who’s laughing at maturity.”
—Of course. Derivatives are ultimately settled at maturity. That was why the second special clause ID Investment had secured was the payment guarantee. If the banks failed to pay out at maturity due to financial difficulties, ID Investment would become their senior creditor and could claim physical assets. There was no cap on the guaranteed amount—because no one knew how enormous the payout would be if the put options paid off spectacularly. The banks had signed the contracts willingly, convinced the probability was zero percent.
Vincent, the president who had relayed Wall Street’s sentiments, fully agreed with Yoo Jae-won. Just as frogs in a pot fail to notice the water gradually heating until they are boiled alive, Wall Street had become intoxicated by the astronomical profits from subprime-related derivatives and could no longer think clearly. It wasn’t only the investment firms—media outlets insisting the economy was solid and urging people to invest in homes and stocks were equally problematic. It felt eerily familiar, like watching Korea’s conservative newspapers before the IMF crisis declare the economy unshakable.
“Besides, our media group has decided to respond aggressively as well. The battle for public opinion is only just beginning.”
When it came to shaping public opinion, Yoo Jae-won had no reason to back down. Half of the massive media conglomerate Time Warner Nextcom belonged to him, and he held management rights over NBC. NBC operated CNBC, a dedicated economics channel with millions of paying subscribers despite being a premium service. Yoo Jae-won intended to leverage the full power of his media assets to confront Wall Street head-on.
However, it was impossible for an owner’s single decision to instantly align every channel and newspaper under the media group. In Korea, a powerful owner could intimidate editors into whipping reporters into line, but this was America. That was why Yoo Jae-won chose to strike with facts. He first educated the executives and journalists within his own media group using dozens of reports and academic studies detailing how dangerous subprime mortgages and their derivatives had become, and how devastating the aftermath of a collapse would be. Many changed their minds immediately after reviewing the materials, while others developed serious doubts. As a result, the tone of coverage across ID Media Group outlets began to shift. Though most had already been cautious and had never actively promoted investments in MBS or CDOs, negative reporting increased significantly after that day.
Of course, a few quick thinkers who reviewed the released materials began betting against the subprime market. But their numbers remained very small. Even when a decline seemed certain, few were willing to risk money on instruments that offered no principal protection.
“Now it’s time to deal with the yellow press.”
Having aligned his own media outlets, Yoo Jae-won moved to his next target: the mainstream mass media. With exactly one week remaining until Thanksgiving 2005, an original piece of content appeared on Timeflex, ID Group’s massive streaming platform. Titled KING OF POP or Scandal, the two-hour documentary carried a provocative name. As the title suggested, it examined the King of Pop, Michael Jackson, and the persistent child sexual abuse allegations that had dogged him.
Produced with the full support of Time Warner Nextcom and ID Group’s covert intelligence team, the documentary took a completely different stance from previous media coverage. While past reports had fixated on determining whether the scandals were real or fabricated, this film focused on how mass media outlets obsessed with viewership could destroy even the world’s greatest star overnight—and how such fake news was created and disseminated.
Naturally, the moment the video was released, the impact was immediate. Timeflex, which had grown to nearly ten million paying subscribers through relentless expansion, had uploaded the film at 10 p.m. on a Friday—the peak viewing hour. Viewers flocked to watch it, and the backlash was enormous.
Meanwhile, news of Adam McKay’s new film entering production—a project he had been preparing tirelessly upon returning to Hollywood—was completely buried beneath the Michael Jackson storm.