Not among the very best of Scorsese's work, but easily his best movie since Goodfellas.
The Massachusetts State Police are out to bring down crime lord Frank Costello (Jack Nicholson), and as part of their effort, they manage to plant young trooper Billy Costigan (Leonardo DiCaprio) in Costello's organization. What they don't know is that the head of their special investigative unit, Colin Sullivan (Matt Damon), is actually working for Costello.
This movie couldn't have been made without the development of the cell phone. Colin makes secret calls to Frank, Billy makes secret calls to his police bosses -- everyone slips secret information back and forth constantly. Eventually, both Frank and the police figure out that they've been infiltrated by the other side, and the race is on to see which side can find the other's spy first. This is particularly awkward for Colin, who's now in charge of finding himself.
Damon and DiCaprio are a well chosen pair for these leads; their shared boyishness emphasizes the mirror-image quality of the characters, and makes it easy to believe their increasing panic as they come ever closer to being caught. Nicholson isn't hamming it up quite so badly as usual, but the performance is still a bit too large; villains are far more interesting when they aren't screaming "Look at me! I'm EEEEEEEEEEE-VIL!" at every turn.
There are fine supporting performances from Alec Baldwin as Colin's superior officer and Martin Sheen as Billy's police contact; Mark Wahlberg steals his every scene as a cop who turns every conversation into a pissing contest. Vera Farmiga is stuck with the role of The Girl; she's the dullest character in the movie, which is partly because she's a dull actress and partly because the character isn't given much to do.
William Monahan's screenplay, adapted from the Hong Kong thriller Infernal Affairs, is sharp and funny; the complicated story is laid out clearly, and we never lose track of who's crossing who, or what any character's motives are. The movie's a bit on the long side, especially in the final act, and could easily be cut by 20 minutes or so.
Not a perfect movie, but in its best moments -- DiCaprio chasing Damon through the streets of Chinatown, for instance, or Sheen's final scene -- terrifically exciting.
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