There has been a lot of commentary on the movie Margin Call, so I might as well add my two bits worth (and a new category called Arts and Entertainment).
A margin call is what happens when a company invests with borrowed money and finds its investments losing value. It has pledged to maintain a certain “margin,” meaning a certain ratio of its own money to borrowed money. When its investments lose value, lenders make a margin call, telling it to put up more of its own money. The company is forced to sell assets to meet the margin. If it has to sell its assets at fire sale prices and cannot raise enough money, it is toast. There are no margin calls in Margin Call, or even mention of a margin call, but it is presumably the fear of a margin call that leads the characters to do what they are doing.
An unnamed financial company in New York in 2008 is clearly in trouble from the very start. A major downsizing is underway, with the comment, “These are extraordinary times.” The senior risk manager on the floor is called away from his urgent research, offered their severance packet, and told all his access is cut off as of now, and their security guard will escort him out; we hope you understand you recognize this is not punitive. He says he is working on something important and can he finish it? The answer is no. Asking who is behind this, his higher-ups deny everyone, but hesitate at Sarah Robertson. Despite the security guard leaning over his shoulder, he manages to download his important research onto a USB key and hand it off to a young floor level analyst on the way out. Once out the door, he picks up his cell phone to call the analyst, only to find he has already been cut off.
All of this, of course, is a well-worn movie trope and raises the suspicion that he was fired because he Knew Too Much. The suspicion is strengthened when the young floor-level employee sticks around after everyone else leaves and discovers that the company has invested in a huge pile of crap (in the form of mortgage backed securities, although that gets relatively little emphasis) at extreme leverage. If it falls below a certain value, it will wipe out their entire assets several times over – and it already has several times, but no one has noticed so far. No one mentions margin calls, but if they get one, they are toast.
A margin call is what happens when a company invests with borrowed money and finds its investments losing value. It has pledged to maintain a certain “margin,” meaning a certain ratio of its own money to borrowed money. When its investments lose value, lenders make a margin call, telling it to put up more of its own money. The company is forced to sell assets to meet the margin. If it has to sell its assets at fire sale prices and cannot raise enough money, it is toast. There are no margin calls in Margin Call, or even mention of a margin call, but it is presumably the fear of a margin call that leads the characters to do what they are doing.
An unnamed financial company in New York in 2008 is clearly in trouble from the very start. A major downsizing is underway, with the comment, “These are extraordinary times.” The senior risk manager on the floor is called away from his urgent research, offered their severance packet, and told all his access is cut off as of now, and their security guard will escort him out; we hope you understand you recognize this is not punitive. He says he is working on something important and can he finish it? The answer is no. Asking who is behind this, his higher-ups deny everyone, but hesitate at Sarah Robertson. Despite the security guard leaning over his shoulder, he manages to download his important research onto a USB key and hand it off to a young floor level analyst on the way out. Once out the door, he picks up his cell phone to call the analyst, only to find he has already been cut off.
All of this, of course, is a well-worn movie trope and raises the suspicion that he was fired because he Knew Too Much. The suspicion is strengthened when the young floor-level employee sticks around after everyone else leaves and discovers that the company has invested in a huge pile of crap (in the form of mortgage backed securities, although that gets relatively little emphasis) at extreme leverage. If it falls below a certain value, it will wipe out their entire assets several times over – and it already has several times, but no one has noticed so far. No one mentions margin calls, but if they get one, they are toast.
He calls his colleague and their superior (who speaks with a British accent) from their favorite strip club. They call in their boss (played by Kevin Spacey, who is older than when I last saw him). They take this to Robertson, the head of risk management who fired the senior risk manager who found this out. Robertson and her team then proceed to allay our suspicion that he was fired because he Knew Too Much by appearing to be surprised and caught off guard. They need some time to confirm, but it does, indeed, turn out to be true, so they call in the CEO, John Tuld (accent I can’t place), who arrives by helicopter. Tuld says he sees only one option – dump (or, as they say in the financial world, unwind) this load of crap* before anyone else figures out it is crap. Kevin Spacey objects. If they are only selling and not buying, how long can it be before everyone else figures out what is going on. And if they trick other companies into buying a load of crap, no one will ever trust them or do business with them again. But Tuld is firm, and Spacey yields.
All the higher-ups seem shocked by this development, and we are just about to conclude that the senior risk manager really wasn’t fired because he Knew Too Much. But as soon as Robertson and Tuld are alone, she says she warned him but he didn’t listen. The risk manager had been warning her for some time, so we get definite confirmation that he was, indeed, fired because he Knew Too Much. And Tuld tells Robertson someone has to get the ax for this, and she has been chosen.
The next morning, Spacey tells his floor traders, in effect, that he is asking them to destroy their careers forever for the sake of the company by dumping a load of crap on unsuspecting buyers who will never forgive them for it. He offers special bonuses if they succeed – they will need them, given that they are being asked to kill their careers. So they start making calls, pretending they are offering a great deal. The day goes buy and we see them sitting in front of their computer screens, watching returns go down and down as buyers figure out what is going on. Apparently all-out market panic looks a lot different than it used to. The senior risk manager is paid an outrageous bribe to sit in a closed room and not tell anyone. After the successful unload, Tuld comforts Spacey by telling him that crashes like this are normal and happen quite regularly.
The movie ends up feeling unsatisfactory for at least two reasons. One is that ultimately Man Who Knew Too Much movies don’t work so well on Wall Street. Traditionally the Man Who Knew Too Much and manages to hand it off to someone else usually turns up dead shortly afterward and the recipient is soon on the run for his life. By contrast, the worst Wall Street can do is threaten to withhold money. The effect is rather like what I had watching The Lives of Others, about the soul-destroying totalitarian regime of Communist East Germany. Except it was a soul-destroying totalitarian regime that no longer tortured or killed, and that only imprisoned if there was sufficient evidence of an actual crime. Granted, publishing embarrassing stories about the skyrocketing suicide rate was a crime that carried a prison sentence, but the usual threat to a dissenter was no more than a ruined career. And likewise money means a lot to people on Wall Street, especially if they have debts. We even fear for characters’ lives, though always at their own hand, and never with justification. And it can be telling that a threat to career or money can be as intimidating in the end as the threat of something more dire. But somehow it takes a lot of the dramatic tension out of a Man Who Knew Too Much movie to know that only money is at stake.**
The other unsatisfying thing about the movie was that it doesn’t correspond to any real event. Although the CEO is named for Lehman Brothers CEO Dick Fuld, the company can’t possibly be Lehman. After all the movie appears to end with the company dumping its load of crap and thereby dodging the bullet. Lehman famously did not dodge the bullet. More realistically, it might be equated to Goldman-Sachs, which did survive (and is much resented for it). Except the movie not only ends with the company dumping its crap first and surviving, it certainly implies that this was the catalyst that brought the whole house of cards crashing down. Except that neither Goldman Sachs nor any other finance company (so far as I know) survived by dumping its crap first. Nor was the catalyst that turned growing anxiety into all-out panic anyone unloading its toxic waste on everyone else. It was the failure of Lehman Brothers.
The next morning, Spacey tells his floor traders, in effect, that he is asking them to destroy their careers forever for the sake of the company by dumping a load of crap on unsuspecting buyers who will never forgive them for it. He offers special bonuses if they succeed – they will need them, given that they are being asked to kill their careers. So they start making calls, pretending they are offering a great deal. The day goes buy and we see them sitting in front of their computer screens, watching returns go down and down as buyers figure out what is going on. Apparently all-out market panic looks a lot different than it used to. The senior risk manager is paid an outrageous bribe to sit in a closed room and not tell anyone. After the successful unload, Tuld comforts Spacey by telling him that crashes like this are normal and happen quite regularly.
The movie ends up feeling unsatisfactory for at least two reasons. One is that ultimately Man Who Knew Too Much movies don’t work so well on Wall Street. Traditionally the Man Who Knew Too Much and manages to hand it off to someone else usually turns up dead shortly afterward and the recipient is soon on the run for his life. By contrast, the worst Wall Street can do is threaten to withhold money. The effect is rather like what I had watching The Lives of Others, about the soul-destroying totalitarian regime of Communist East Germany. Except it was a soul-destroying totalitarian regime that no longer tortured or killed, and that only imprisoned if there was sufficient evidence of an actual crime. Granted, publishing embarrassing stories about the skyrocketing suicide rate was a crime that carried a prison sentence, but the usual threat to a dissenter was no more than a ruined career. And likewise money means a lot to people on Wall Street, especially if they have debts. We even fear for characters’ lives, though always at their own hand, and never with justification. And it can be telling that a threat to career or money can be as intimidating in the end as the threat of something more dire. But somehow it takes a lot of the dramatic tension out of a Man Who Knew Too Much movie to know that only money is at stake.**
The other unsatisfying thing about the movie was that it doesn’t correspond to any real event. Although the CEO is named for Lehman Brothers CEO Dick Fuld, the company can’t possibly be Lehman. After all the movie appears to end with the company dumping its load of crap and thereby dodging the bullet. Lehman famously did not dodge the bullet. More realistically, it might be equated to Goldman-Sachs, which did survive (and is much resented for it). Except the movie not only ends with the company dumping its crap first and surviving, it certainly implies that this was the catalyst that brought the whole house of cards crashing down. Except that neither Goldman Sachs nor any other finance company (so far as I know) survived by dumping its crap first. Nor was the catalyst that turned growing anxiety into all-out panic anyone unloading its toxic waste on everyone else. It was the failure of Lehman Brothers.
Granted, Margin Call is a work of fiction and is going to heavily fictionalize what happened. But fictionalizing characters and companies is one thing; fictionalizing events that brought down the system is quite another. In effect, the movie portraying as history events a mere three years old, events that still have major repercussions today. Presumably the audience has a fair idea what actually happened. This makes historical accuracy especially important. More than anything else, I left the movie uneasy because I could not place it in real time.
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*Tuld calls it "a bag of the most odorous excrement ever assembled in the history of capitalism."
**This is not to deny that you can make a good movie with lots of dramatic tension about Wall Street. You just have to find some other way to go about it.
**This is not to deny that you can make a good movie with lots of dramatic tension about Wall Street. You just have to find some other way to go about it.
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