"Margin Call", Its Most Definitely Real!!

Inspired by a true story, Margin Call's fictional character 'John Tuld' resembles Merrill Lynches John Thain and Lehman Brother's Dick Fuld in a taut, sinewy drama set in a Wall Street Investment Bank on the night before worldwide financial meltdown. 

After John is informed that his firm is drowning in toxic mortgage backed securities, he demands all the traders under his power to wipe their balance sheet clean and dump all the worthless junk on unsuspecting customers. No, not just any customers, their most valued and loyal ones too. Ruthless! Not like any other movies/documentaries on the crisis I have watched, Margin Call conjured up feelings of disgust, pity and confusion as to why and how one person with all the power is allowed to sit there and potentially cause a global meltdown before they are stopped. It is those emotions indeed that get you thinking: Was this really how Lehman Brothers collapsed? Did the Bank of America save Merrill Lynches in the same way? Did Goldman Sachs and JP Morgan sell these same worthless securities to their clients?. My answer? Yes. 

 A dilemma arises with one of his co-workers, Sam who is unhappy about it all, but is unable to take it further as he risks losing everything if he opposes his boss's ways. Not only does he have to partake in this unethical activity, the entire firm are forced to fire off these securities at rock bottom prices, knowing in a few hours time they will be worthless to everyone! Unethical business at its finest!

  "Your selling something you know has no value!" 

           John - "Be first, be smarter....... or cheat!!" 

More so, analysts should have never let their books to be kept so that if there was a 25% decrease in value of their assets, the loss they would suffer would be greater than the market capitalisation of the whole firm! It is down to Johns ignorance, lack of knowledge and understanding that allowed the firm to cook up and package such toxic mortgage backed securities that ultimately made them crumble. 

The mistake he made was by placing all his eggs in one basket, he ran a huge risk and the company over leveraged itself. In my opinion, he should have invested more so in equity capital, spreading the risk, making failure less and less likely!