Margin Call: A Small Movie Unveils Big Truths About Wall Street — ProPublica
spoiler alert: this article looks at key scenes from the film.
jc chandor has adopted rahm emanuel’s saying “never let a serious crisis go to waste”. The 37-year-old writer-director used the financial crisis as a springboard to create the most insightful Wall Street movie ever made. Margin Call captures a day in the life of a bank as Lehman Brothers as it strives to avoid falling into the early cracks of the financial crisis. With a brisk pace and wonderful acting, the film reveals how large financial institutions operate and the motivations of the people who work in them.
the call to the side should not be confused with journalism. it is not an accurate overlay of the financial crisis. you will never hear the words collateralized debt obligations uttered in the movie. As the reporting I did with my colleague Jesse Eisinger showed, the Wall Street behavior that helped create the financial crisis was often much worse than what was depicted on film. Chandor is not looking for villains or long explanations. it is extracting deeper truths than the complexities of credit default swaps. the social costs of high finance, the power of self-rationalization, and the easy acceptance of personal corruption is his turf.
As reporters covering the subject know, Wall Street is a reluctant participant in introspection. investigative journalists on the street have to pierce a code of omertà, born of fear of lawsuits and federal investigations. No one wants a reputation for being a whistleblower in an industry where hiring and bonuses are based as much on relationships as quarterly results. the truth is even stricter when it hides the origins of financial disaster, but even in the best of cases, these are not, by nature, navel-gazers. traders and market makers are like sharks, always wanting to move on, to the next deal. there is no percentage in looking back.
Everything you need to know about the moral universe Margin Call inhabits is shown in the opening scene of the film. the recession has started. the firing squad, represented by two women in identical business suits, arrives on the floor followed by subordinates carrying cardboard boxes to remove their personal effects. When they appear, a series of quick reactions play out on the face of Will Emerson, a senior merchant played brilliantly by Paul Bettany. first fear. then dismay. and finally, relief and dismissal. After 80 percent of the floor is removed, Emerson’s boss Sam, a Wan Kevin Spacey, gives a pep talk to the remaining merchants standing. “They were good. You are better. Now they are gone. You must not think of them again.”
Among the flaws is the trading group’s risk manager, eric dale, played by stanley tucci. Walking out the door, Dale tells his young protégé, Peter Sullivan, that he’s been working on something important. As the elevator closes, he hands Sullivan a zip disk, saying cryptically, “Be careful.”
Sullivan, played by Zachary Quinto, who also helped produce the movie, waits until the office clears for the night and then dives into the figures. To his horror, he discovers the bank is massively overleveraged. If trends continue, projected losses are much greater than the value of the firm. Upon learning how dire the situation has become, the CEO John Tuld, portrayed by a scene-chewing Jeremy Irons, says, “So what you are telling me is that the music is about to stop and we are going to be left holding the biggest bag of oderous excrement ever assembled in the history of capitalism.”
sullivan is the questioning heart of the margin call. he has a doctorate in engineering with a specialty in propulsion, literally a rocket scientist. And like so many of the best and brightest of his generation, he turned to Wall Street, where Chandor clearly believes his gain is society’s loss. When one of his superiors asks Sullivan why he has dropped out of engineering, he replies, “It’s really just numbers, it just changes what you’re adding, and to speak loosely, the money here is considerably more attractive.” .
sullivan operates in the restricted space of the wall street risk manager. risk managers and accountants are among the few who really know what the numbers mean. they see the whole picture. It’s a running joke throughout the film that Sullivan’s bosses, right down to the CEO, don’t understand the financial wizardry behind the products they make and sell. When he is confronted with Sullivan’s analysis, Sam says, “Oh Jesus, you know I can’t read this stuff. Just talk to me in English.”
The risk manager is not in sales, which is the heart and soul of the institution. he or she only offers recommendations. Throughout the margin call there are a number of references to disregarded warnings. and indeed, in the real world, how successful investment banks were in subverting their risk management rules correlated very well with how poorly they did when the crisis hit. In the ultimate irony, when it comes time for someone to take the blame for the company’s risk-taking, it’s the head of risk management, played by Demi Moore, who is pushed onto the scaffold.
Sullivan and his sidekick Seth, played by Penn Badgley, are still new enough to the system to doubt their usefulness. Seth is in love with the money Wall Street has to offer and particularly impressed by his boss Will Emerson, who made $2.5 million the year before. they briefly wonder if that’s “right,” but dismiss the unwanted thought unanswered.
when emerson tells anxious youngsters that you “learn to spend what you have in your pocket” and that most of their money is gone, they are incredulous. he details his expenses for them, including $76,520 for prostitutes, alcoholic beverages, and dancers. the adulation of him only increases when he admits that he claimed most of it as entertainment expenses.
Later, when Seth laments the fact that normal people will be hurt by his actions, Emerson’s fiery response is shocking in both its amorality and its essence of truth.
“if you really want to do this with your life, you have to believe that you are necessary. and you are. people want to live like this in their cars and in their big fucking houses that they can’t even afford.” then you are needed. the only reason everyone can continue to live like kings is because we have our fingers in the balance in their favor. I take my hand off and the whole world becomes fucking fair, fucking fast and nobody really wants that. They say yes, but they don’t want to. they want what we have to give them, but they also want to play innocent and pretend they have no idea where it came from. That’s more hypocrisy than I’m willing. to swallow to hell with them. fuck normal people.”
Facing the pile of excrement on the books, the misnamed Tuld (Lehman Brothers’ CEO was Dick Fuld) decides the bank needs to get rid of them, and quickly, before the customers know it. At this point, the movie could just as easily be called “Damage Control: When Greed Turns into Fear.”
Sam tries to talk Tuld out of his plan. “If you do this, you’ll kill the market for years. It’s over. And you’re selling something you know is worthless,” he says.
tuld responds with the excuse every wall street executive used when investigators called after the shit hit investors: “we’re selling to willing buyers at the current fair market price so we can survive.”
In the real world, buyers were not as sophisticated and deals were not as transparent as bankers claimed.
the house always wins, emerson tells his young protégés. the corollary is that the whole world is for sale. in fact, anyone who has any qualms about the film finds a fair price for their acquiescence. In this world, merchants earn bonuses for screwing over their customers. Tucci’s character is told that he can lose his medical care and stock options, or keep them while he sits quietly in a room for a day at $176,476 an hour. “It didn’t seem like a great choice,” he says.
Beyond the film’s sheer entertainment value, chandor’s greatest achievement is his willingness to blame a system rather than simply blame the people within it. Ultimately, Margin Call is the story of Wall Street turning from economic helper to economic predator.