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The Market Stars in Margin Call

Mises Daily: Monday, October 31, 2011 by

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Margin Call
While Oliver Stone has had two cracks at the subject, J.C. Chandor bests him on his first try.

The 99 percent occupying Wall Street won't get much satisfaction from J.C. Chandor's Margin Call.

The occupiers want to believe that the 1 percent is Gordon Gekko stepping on their throat. Half the protesters are aged 20–29, highly educated, in hock up to their ears in student-loan debt, and unemployed. Surely this is someone's fault. The 99ers want what Wall Street has to offer: money, power, and a black town car to pick them up and shuttle them to and from work each day.

Forget peace on earth: these folks want to be Masters of the Universe. And they don't understand why their freshly minted diplomas haven't made that possible. However, the money, power, and lifestyle only percolates to a few; and when the asset bubbles pop, the party is over, and the falls from grace severe.

Margin Call opens with corporate soldiers being carried out on their shields, dismissed in the open, while those who remain nervously wonder if they are next.

Young members of the risk-management department of the mythical firm, Seth Bregman (Penn Badgley) and Peter Sullivan (Zachary Quintro) are told to hide their eyes and go back to work as their boss, Eric Dale (Stanley Tucci), and 80 percent of those employed on their floor are let go, each escorted from the building by security with all of their work-life personal possessions crammed into a couple of banker boxes, cell phones and email access disconnected instantly.

Guard at his side, Dale, seemingly as an afterthought, hands Sullivan a flash drive with partially completed data as to the worth of the firm's mortgage-backed securities portfolio and utters the words, "Be careful." (In real life the guard might have intercepted the flash drive.)

While the rest of the floor heads out on the town to celebrate their survival with high-priced cocktails, the curious Sullivan opens up the analysis his boss started and works into the night to complete it. Sullivan is a rocket scientist, and after completing his advanced degree in propulsion science he quickly figured out that he could add up numbers on Wall Street for lots of money or in the laboratory for a pittance.

For those toiling away in Margin Call — or on real-life Wall Street for that matter — the securities business isn't a conspiracy to oppress the little people; it's just a way to make a living. For some a good living, but one never knows when it can all end.

"The money, power, and lifestyle only percolates to a few; and when the asset bubbles pop, the party is over, and the falls from grace severe."

Sullivan calls his buddy Seth at the bar and tells him to bring their new boss, Will, with him. They must see his completed analysis. After Peter explains to his boss what the data means, Will sobers up enough to call the weathered corporate warhorse, trading-floor manager Sam Rogers (Kevin Spacey), who then calls in his boss, the suitably smarmy Jared Cohen (Simon Baker), and Sarah Robertson (a very understated and unneeded Demi Moore).

By this time it's the wee hours of the morning, but instead of sleeping, everyone is occupied with wondering who will get the blame — or in the case of Seth, obsessing over how much everyone makes and worrying about being fired. All the while, no one can seem to find Eric Dale: "The firm disconnected his cell phone today," we are repeatedly reminded.

The call finally goes out to the big boss, John Tuld, played by Jeremy Irons (Tuld's name is a hybrid of Merrill Lynch's ex-CEO John Thain and Lehman's ex-CEO Dick Fuld). Once he copters in, a boardroom full of people is assembled to hear Sullivan dumb down his (and Dale's) analysis for the sarcastic-yet-self-deprecating Tuld.

As mortgage default rates skyrocketed in the fall of '08, suddenly the model the values were marked to was broken; MBS values began circling the drain, and extreme leverage was causing the market record to skip.

Gazing out at the night sky, Tuld concludes, "I can't hear any music playing at all."

What's left to do to save the firm falls on Sam's sagging shoulders. He reluctantly rises to the occasion as he has for years: not for the satisfaction, not because he thinks it's the right thing to do, but because it's his job, and he needs the money.

Tuld must place the blame for the mess and lower the boom on someone. He delivers the news in matter-of-fact fashion. He won't be talked out of it. It doesn't matter who offered warnings about the toxic portfolio months ago. The scapegoat will be well compensated but cannot leave the building until after the trading day is over.

Margin Call will inevitably be compared to Oliver Stone's Wall Street movies. While Stone has had two cracks at the subject, Chandor bests him on his first try.

The sustained tension and believability (trading jargon and all) makes the movie gripping from beginning to end, reminiscent of Glengarry Glen Ross, also starring Mr. Spacey and another high-powered cast. Spacey told the Wall Street Journal the story "was done in such a way that it was like a ticking clock."

Ironically, while Spacey, Irons, and the rest played characters making millions, they worked for the union minimum of $65,000 to get the picture made and will only do well if the film does well. The film's total budget was $3.4 million and only a quarter of that was paid to the cast.

As the drama unfolds, there is no talk about cheap money, the Federal Reserve, or business-cycle theory. The movie depicts individuals grappling with the unwinding of a bubble and the inevitable fallout that takes place. Fortunes are lost, jobs are lost, and relationships destroyed.

But after the pain, when markets clear, new opportunities emerge. And life goes on. The occupying 99ers should pack up and get on with theirs.