Margin Call: Fiction or Real?

Margin Call focuses on a financial institution (based on an unknown company but I have my suspicions) that supposedly is the first to discover the impending doom.  This comes in the form of a fired manager Eric (Stanley Tucci) handing down his work to a clever sub-ordinate Peter (Zachary Quinto) who carries on his boss’ work that very night to discover a flaw in their risk management.  

In finance, more specifically financial risk management, there is a calculation a firm can make to determine a possible maximum loss to a specific investment or portfolio on or over a specific time period.  It’s called VaR and stands for Value at Risk.  I believe Peter and Eric were using something similar and the volatility in the previous days or weeks trading were meeting the levels calculated using VaR.  Volatility mind you is just risk, the variance or standard deviation in returns.  How dissimilar are your returns from the previous day.  In finance you want your returns as stable and secure as possible with maximum returns possible for that given level of risk.

From this point in the movie onwards is about corporate governance, moral dilemmas and personal vendettas against work colleague.  That doesn’t really need much explaining.

 So, the board meeting arrived with Jeremy Irons as CEO.  They are the first to discover this problem, which I believe too by the way since firms are always trying to get the upper hand on their competitors.  That’s business.  They decide to offload the merchandise, the MBSs, much to the chagrin of upper manager Sam (Kevin Spacey).  The gravity of their situation is basically make or break, the losses were shadowing the market capitalization of the entire firm.  Meaning if the losses were actually realized one day, it would be bankruptcy tomorrow.  

Every financial institution across the globe was investing in these Mortgage-backed Securities.  They had to options, alert the world the calamity it faces and possibly go under them but contain and control this drama.  Or, unload the merchandise, survive but cause a global meltdown.  Jeremy Iron’s character was company survival with big bonuses Kevin Spacey’s character supporting  an ethical approach, save the world with the outcome to face his own demise (unemployment).

Based on this film despite the fact that is fictional, I can only reminince the housing bubble that create global crisis back in 2008 and it can be linked to those actions taken  by real firms during the housing industry crash. An example to be associated here can be without a doubt the Goldman Sachs, which they were kind of prepare before the crash with the act to hedge and reduce its position in mortgage-backed securities.

All in all, I have raised numerous concerns on whether is worth to study and want to follow a big career under the supervision of such bosses. It is evidently and not for argument that high position individuals in several companies prioritize their selves, their money and basically their survival without emotion and for sure not ethical and respectful to other, even the whole market.