Margin Call

The movie Margin Call depicts the 2008 market crash from the perspective of an investment firm built on a multi-leveled pecking order – from the $86 million-a-year CEO to the $250k-a-year fledgling trader. Similar to the market, the firm is its own house of cards as the day starts out with layoffs resulting in an 80% reduction in staff. That same day, one of the remaining junior analysts cracks the code surrounding the financial tidal wave approaching the markets. Projections are off the charts, nullifying historical trends, as mortgage-backed securities have been built on unsound principles over several years.

“It’s a long ways down.” Words eerily spoken by one of three traders standing outside on the top of the building’s roof in the dead of night. It’s a subtle announcement of what the coming day has in store for the markets. Meanwhile, down below in a conference room, the real decision-makers are doing their damnedest to make sure they stay in the game of unearned wealth and to live to steal another day. Therefore, “Sell! Sell! Sell!” will be the mantra once the opening bell rings. There’s no hint of panic from these operators, as alarms were sounded months earlier. So it appears to be second nature what must be done. The only thing in doubt is which one of them should be thrown under the bus. Back on the roof, the manager tells his two underlings how easy it is to blow through last year’s salary of $2.5 million – a big mortgage, sporty imports, expensive food and tailored suits. And come the end of the next business day, the only thing that might retain its value is the memories from $75k spent on dancers and hookers.

As morning approaches, power suits show no signs of wrinkling from the all-night fire drill. Like many products, it’s the packaging that makes the sale. And the only guarantees are those made once the firm relieves itself of all its toxic holdings. $1.4 million for each employee for today’s work. And then you’re fired. Those remaining will start anew, helping to keep the ship afloat. Such is the way of capitalism. Save the ship at the expense of the passengers and crew.

Across town, an investment manager, sacked by the firm earlier that day, reminisces about the bridge he helped design decades ago and how many years, in travel time, were saved from having to go from Point A to Point B. The ‘bridge’ story could be viewed as a double-edged metaphor. Sure, building the bridge was productive, and people saved time going from Point A to Point B as a result of the bridge, but they most likely used that time to go further into debt. Expediency reduces hardship while creating more leisure time. Mortgages are refinanced and equity is transferred back to the lender who repackages it to sell to some hedge fund junkie. Ultimately, from plumber to power broker, there’s plenty of blame to go around.

There’s much to like about this movie – the acting, the dialogue, the tension – and only one sure thing to dislike about it: that it actually happened. At the end of the day, the CEO is dining at a table, overlooking the cityscape, and still appearing on top of the world. His go-to-guy for the day’s acts of deceit tells him he wants out. There’s talk of how ditches could have been dug and how there would have at least been something to show for the effort. But in the end, he’ll take the money, earned or not. Don’t we always?


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