Movie Margin Call (2011)
Michael S. Rozeff
by Michael S. Rozeff: Distortion
of Dorner Manifesto by Mainstream Media
takes us into the world of an investment bank that has taken on
too much risk. Consequently, it is skirting insolvency. The bank
doesn't know this, until a sharp analyst discovers it, because its
risk model doesn't allow for the kind of volatility that the assets
actually can experience.
who is in the process of finding this out has been fired. His successor
finds it out. He warns his superiors. The problem then makes its
way up the chain of command in one evening and all-nighter. This
leads on the following day to the liquidation at fire sale prices
of a large portfolio of mortgage-backed securities. The firm survives
but the traders lose their stock-in-trade, which is the capacity
of the firm to make a market in these securities. The traders lose
their jobs, but get bonuses for having liquidated the securities.
The movie focuses
on the reactions of many of those involved in this scenario. In
so doing, we get a glimpse into how they feel about their high earnings
in the bubble years, because this event signals the end of the game
when the music stops.
almost steals the picture, playing the top man in the company who
makes the decision to liquidate and then must motivate his subordinates
to deliver this effectively. Kevin Spacey holds his own as the head
of the trading floor who has been with the firm 34 years. He comes
across as a man "in between" conscience and necessity,
who opts to survive. Paul Bettany makes a mark as a middle manager
of trading who works with Spacey. Simon Baker scores as an administrator
whose knowledge of the trading models and realities is doubtful.
Demi Moore plays the "go-along to get-along" risk manager
who adopted the risk model that doesn't work and then failed to
heed earlier warnings.
Most all these
players in the firm and the market do not have a full grasp of why
they have become so highly paid. They doubt their value added. They
doubt that finance has a positive payoff for society. Irons has
the largest view. He realizes the risk involved, the market uncertainties,
and the tendency of markets to lose their liquidity at times. But
he also does not fully comprehend why the markets tend to go to
extremes at times, or how the real world can suddenly change its
capacity to deliver positive returns.
As a study
of character, Margin Call to me didn't seem anything out
of the ordinary, but I rate it as somewhat above average for its
portrayal of this specialized world. It did this accurately, as
far as it went. There was another way out for the firm than liquidation,
which was not explored in the screenplay, and that was the BAILOUT.
The picture never mentioned going to the Federal Reserve and getting
its support for the securities that needed disposal. This is what
actually occurred as the crisis of 2007-2008 eventuated. Lehman
Bros. was let fail, but only it. After that, the Federal Reserve
At the end,
Irons contemplates making money out of the crash and attempts of
other firms to survive, he having steered his firm to be first at
liquidating and surviving. He can pick up the pieces. This is true
to life. Goldman Sachs did this, with the aid of the Federal Reserve.
Also not explored
are two important causes of the speculative market in mortgage-backed
securities. These include the government's push, through Fannie
Mae, for below-par housing loans, and the Federal Reserve's easy
money policies. The screenplay didn't go deep enough in these respects.
It would have had to reduce some of the peripheral scenes with so
many characters. This was certainly possible. The entire sub-plot
with Stanley Tucci getting fired and then replaced by Zachary Quinto
was not really necessary to the story, other than to show that the
firm had a history of cutting back on positions at times.
If the film
had depicted the firm's survival as depending, not on being first
to liquidate, but on making use of the Fed and the too big to fail
notion, that would have made the film far more realistic and hard-hitting.
As it stands, the movie's messages about the place of investment
banking and the housing boom are at best ambiguous and at worst
non-existent. The screenplay focuses instead on the effects of the
fall of this investment bank on those working for it. That drama
was not particularly gripping because the character arcs were so
screenplay direction would have been to live up to the title Margin
Call, which was not done in the movie. That possibility arises
from the real-world case in which JP Morgan initiated contested
margin calls on Lehman Bros. That case is discussed
at length here.
S. Rozeff [send him mail]
is a retired Professor of Finance living in East Amherst, New York.
He is the author of the free e-book Essays
on American Empire: Liberty vs. Domination and the free e-book
The U.S. Constitution
and Money: Corruption and Decline.
© 2013 by LewRockwell.com. Permission to reprint in whole or in
part is gladly granted, provided full credit is given.
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