(Jake Zamansky’s post from The FORBES on 25 Oct 2011.)
The movie “Margin Call,” which opened this past
weekend, advertises that it was inspired by a true story.
The fictional head of a Wall Street firm “John
Tuld” (a composite character resembling Merrill Lynch’s John Thain and Lehman
Brothers’ Dick Fuld and played by the wonderfully villainous Jeremy Irons) is
told that the firm is drowning in toxic mortgage-backed securities.
Tuld orders his traders to rid the firm’s balance sheet of the junk by dumping it on unsuspecting counterparties and customers. Tuld is told: “You’re selling something you know has no value.” He replies: “Be first, be smarter or cheat.”
As the New York Times review of the movie noted:
“There are no hissable villains here, no operatic speeches condemning or
celebrating greed. Just a bunch of guys, and one woman, Demi Moore, in well
tailored clothes and a state of quiet panic trying to save themselves from a
global catastrophe of their own making.”
The movie doesn’t inspire fury, as documentaries
about the financial crisis do, but “rather a mix of dread, disgust, pity and
confusion,” the Times said.
Those powerful emotions inspire gut-churning
questions for the audience: Is this how Lehman Brothers crumbled? Is this how
Merrill was rescued from ruin by Bank of America? Are these just thinly veiled
depictions of Goldman Sachs, Citigroup and JP Morgan, who have paid combined
fines of over $1 billion for betting against their clients while selling them
these same worthless securities?
Unfortunately for investors, the answer is “yes” to
all of the above.
As the Times correctly noted, one of the running
jokes in “Margin Call” is that the higher up an executive is on the corporate
totem pole, the less likely he is to understand how the firm and its traders
cook up the toxic brew of mortgage-backed securities. Their ignorance seems
almost a point of pride for the executives. Various lords of Wall Street tell
us, “I don’t get any of this stuff,” at key points throughout the film.
That ignorance will be on view again if they make a
horrifying sequel. Call it “Bailout,” where the plotline has taxpayers footing
the bill to save risk-taking firms that were swirling the drain. And no one—not
even Jeremy Irons—goes to jail. The movie hasn’t even been written, and already
I’m filled with dread, disgust, pity and confusion.
